A Democratic official says President-elect Barack Obama will name New Mexico Gov. Bill Richardson as commerce secretary.
The official says Obama plans to announce Richardson’s selection after Thanksgiving. The official spoke on condition of anonymity because the official was not authorized to speak publicly about the negotiations.
Richardson was energy secretary and U business card.N. ambassador under President Bill Clinton. Richardson would be the most visible Hispanic named to Obama’s Cabinet.
Richardson dropped out of the Democratic presidential contest in January and endorsed Obama.
U.S. voters are heading to the polls with stock and bond markets mired in the worst slump in three decades.
The Standard & Poor's 500 Index dropped farther and faster than any time since the administration of Gerald Ford, losing 38 percent from an all-time high last year. Corporate bonds slid the most last month in at least 32 years as bank losses topped $680 billion and consumer confidence hit an all-time low.
The winner between Democrat Barack Obama, who leads in national polls, and Republican John McCain will contend with an economy battered by declining corporate profits and the highest unemployment in five years. Concern growth is slowing sent the S&P 500 down 17 percent last month, the most since 1987.
“October was a slow-motion crash,'' said Joseph Keating, chief investment officer at RBC Private Asset Management in Birmingham, Alabama, who oversees $3 billion. “The economic reality is going to set in for whichever gentleman is elected. They'll both be looking at the worst recession since 1980.''
Stocks plunged since last year as a nationwide decline in U.S. home prices spurred record foreclosures and saddled banks with bad mortgage loans. Money markets seized up, sending the so-called TED spread, a gauge of credit-market stress, to 4.64 percentage points Oct. 10, the highest level on record.
The S&P 500's drop since its peak is the steepest for a comparable period since it declined 43 percent in the 13 months ended in October 1974, according to data compiled by Bloomberg.
Jobs, Futures
Shares fell as the U.S. unemployment rate held at 6.1 percent in September, the highest since September 2003.
Futures on the S&P 500 expiring in December gained 1.9 percent at 12:02 p.m. London time today. The benchmark for U.S. equities rose 14 percent since reaching a five-year low Oct. 27.
Investment grade corporate bonds lost 7.4 percent in October, their worst month as measured by Merrill Lynch & Co.'s bond indexes since the firm began compiling monthly data on the debt in 1976. The spread between investment grade company bonds and Treasury debt of similar maturity is the widest since 1932, according to Moody's Investors Service.
S&P 500 companies are on pace for their fifth straight quarter of declining profits, with companies from Texas Instruments Inc. to Freeport-McMoRan Copper & Gold Inc. reporting earnings and revenue that failed to meet analysts' estimates.
`Can't Do Much'
Earnings are down 8.9 percent for the 352 companies that have reported third-quarter results so far. The U.S. economy contracted 0.3 percent in the July-September period, and growth is expected to slow to 1.15 percent in 2009 from 1.6 percent this year, economists' estimates compiled by Bloomberg show.
“It's particularly likely that this new president can't do much, because they're going to get so saddled with the things they inherit,'' said Kenneth Fisher, who helps oversee over $32 billion as chief executive officer of Fisher Investments Inc cash till payday advance. in Woodside, California. “Presidents can only do so many things at once.''
Credit markets started to loosen up last month as Treasury Secretary Henry Paulson began deploying $700 billion to recapitalize banks and purchase mortgage-related securities.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars slid 15 basis points to 2.71 percent today, the lowest level in almost five months, data from the British Bankers' Association showed.
`Much More Optimistic'
“You're starting to work off a lot of the risk parameters,'' said Andrew Brenner, co-head of structured products in New York at MF Global Inc. “Having this election behind us, I think the country will be much more optimistic.''
After pulling ahead of Obama in some polls following the Republican National Convention in the first week of September, McCain's support slid as the financial crisis deepened, with voters considering Obama better able to manage the economy.
Obama has an average lead of 7 percentage points over McCain, according to surveys compiled by Real Clear Politics. Obama has been ahead between 5 and 8 points since the beginning of October, the political Web site said.
Should either party have an edge in reviving the stock market, history suggests it is the Democrats.
Democratic Difference
Since 1928, the S&P 500 climbed 9.3 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of six Democrats from Franklin D. Roosevelt to Bill Clinton.
Only once did the benchmark for American equities decline, after Jimmy Carter's victory in 1976.
Among the six newly elected Republicans, five — including Herbert Hoover, Richard Nixon and George W. Bush — preceded stock-market declines, with a median retreat of 4.3 percent for the group, data compiled by Bloomberg show. The data excludes incumbents that won re-election.
Overall, the S&P 500 generated a median 62 percent advance from the time a Democrat is elected in November or elevated from the vice presidency until the next president is chosen. For Republicans, the gain is 28 percent.
History may not be an accurate indicator this time.
“In a normal year, you would expect some kind of relief rally after the election is over with, just because we won't be talking about this anymore,'' said Brian Barish, the Denver- based president of Cambiar Investors LLC, which oversees about $6 billion. “But I would throw in that there's been nothing normal about 2008.''
Japan's inflation slowed in September and employment prospects worsened, giving the central bank more scope to cut interest rates.
Consumer prices excluding fresh food climbed 2.3 percent from a year earlier, after rising 2.4 percent in August, the statistics bureau said today in Tokyo. The unemployment rate fell to 4 percent from 4.2 percent as job seekers stopped looking for work amid the economic slowdown.
The Bank of Japan will probably halve the benchmark lending rate to 0.25 percent today, economists say, joining overseas counterparts in lowering borrowing costs to stave off a global recession. The government yesterday promised to pump 5 trillion yen ($51 billion) into the economy to help households and small businesses cope with the fallout from financial turmoil.
“To move and cut interest rates was already a done deal,'' said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo. “It's difficult for the Bank of Japan to disregard the need for coordination with the government and the international authorities.''
There is a 60 percent chance the central bank will lower its benchmark rate a quarter point today, according to calculations by JPMorgan Chase & Co. using overnight interest- rate swaps. Fifteen of 17 economists surveyed predict a reduction, which would be the first in seven years.
Bank of Japan Governor Masaaki Shirakawa and his board came under pressure to take action after the yen surged to a 13-year high last week, driving the Nikkei 225 Stock Average to the lowest level since 1982.
Stocks Drop
Japan's currency traded at 98.36 per dollar as of 10:44 a.m. in Tokyo from 98.73 before the economic data were released and as high as 90.93 a week ago. The Nikkei snapped a three-day winning streak, falling 2.4 percent.
Household spending fell for a seventh month in September and the ratio of jobs to applicants slid to a four-year low, separate reports showed. Any relief to consumers from slowing inflation may be outweighed as weakening global demand compels companies to fire workers and cut wages, economists said freecreditreport.com.
“Companies have no choice but to lay people off,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “Profit has already started to decline.''
Nissan Motor Co. will fire 780 temporary workers at two domestic factories for large vehicles shipped to the U.S., Jiji Press reported today, citing unidentified company officials.
The number of people in the workforce shrank by 200,000 from August, today's report showed, causing the decline in the jobless rate. The number of people employed fell by 110,000, the report said, the fourth drop in five months.
In a Recession
The government last week acknowledged Japan has probably entered its first recession in six years as exports, production and spending slow.
Governor Shirakawa and his colleagues are expected to deliver their rate decision early this afternoon in Tokyo, before issuing their twice-yearly outlook for the economy and prices at 3 p.m. Fallout from the financial turmoil will probably prompt the board members to cut their inflation and growth forecasts.
Data released this month show commodity-driven inflation is already peaking. Producer-price gains slowed for a second month in September and the costs companies pay for services cooled to the slowest in two years.
Crude oil prices have halved in the past three months, and soybeans, corn and wheat have slumped after climbing to records earlier in the year.
Core prices in Tokyo, where one in 10 Japanese lives, rose 1.5 percent in October from a year earlier, after climbing 1.7 percent in September, today's report showed. Price trends in the capital tend to indicate future changes in nationwide inflation.
The cost of borrowing in euros for three months fell to the lowest level since before Lehman Brothers Holdings Inc. collapsed as governments stepped up efforts to boost bank balance sheets and policy makers offered cash to revive lending.
The London interbank offered rate, or Libor, that banks charge each other for such loans dropped 3 basis points to 4.96 percent today, the British Bankers' Association said. That's the lowest level since Sept. 12, the Friday before Lehman failed. The overnight dollar rate slid 23 basis points to 1.28 percent, below the Federal Reserve's target for the first time since Oct. 3.
“The initiatives that governments have taken are beginning to work,'' said Laurence Mutkin, the London-based head of European fixed-income strategy at Morgan Stanley. “We're seeing a lot of improvement.''
Governments worldwide have introduced measures to shore up bank balance sheets after money markets seized up following the Lehman bankruptcy on Sept. 15. The French government will inject 10.5 billion euros ($14 billion) into BNP Paribas SA, Societe Generale SA and four other domestic banks as they tap for the first time the 360 billion-euro rescue package unveiled this month.
Interbank rates have tumbled in the past week after policy makers in Europe offered lenders unlimited dollar funding. The European Central Bank and the Bank of England today made available as much U.S. currency as required. The ECB allotted $101.93 billion of 28-day cash at a fixed rate of 2.11 percent, while U.K. policy makers loaned $26 billion.
Libor-OIS
The Libor-OIS spread, which measures the difference between the three-month dollar rate and the overnight indexed swap rate, was at 274 basis points, down from 290 basis points yesterday and 364 basis points on Oct. 10.
Overnight indexed swaps are over-the-counter traded derivatives in which one party agrees to pay a fixed rate in exchange for the average of a floating central-bank rate during the life of the swap. For dollar swaps, the floating rate is the daily effective federal funds rate.
Treasury three-month bills fell for a fourth day, the longest sequence of declines in 10 weeks, as investor appetite for the safest assets dwindled on speculation concerted global action will ease the turmoil in the credit markets. The yield rose 14 basis points to 1.22 percent, the highest in about a month.
The three-month dollar Libor slid 23 basis points to 3.83 percent today. That's still 233 basis points more than the Fed's target rate for overnight loans of 1.5 percent, up from 120 basis points about a month ago. At the start of the year, the spread was 43 basis points. A basis point is 0.01 percentage point.
`Slight Improvement'
“We see a slight improvement on the interbank market, but no breakthrough yet,'' European Central Bank Executive Board member Juergen Stark said in an interview with German radio station Deutschlandfunk payday loan cash advance loan. “There's a high risk that we'll see another incident'' in the banking sector.
The Libor is used to determine rates on $360 trillion of financial products worldwide, from mortgages to company loans and derivatives.
Barclays Plc, the U.K.'s second-biggest bank, confirmed a report by Cazenove that the lender's ability to issue unsecured funding has improved since Oct. 8, when the government announced a rescue package for financial institutions.
Rates for one-month asset-backed commercial paper fell to the lowest level in a month today. Yields on the highest-rated ABCP placed by dealers and due in 30 days dropped 30 basis points, the fourth-straight decline, to 3.45 percent, the lowest since Sept. 22, according to data compiled by Bloomberg.
TED Spread
Commercial paper is used by companies to meet short-term financing requirements.
The Fed invoked emergency authority today to purchase assets from money-market mutual funds that are having difficulty meeting redemptions from their investors. The central bank will lend to a series of special units that will buy certificates of deposit, bank notes and commercial paper with a remaining maturity of 90 days or less.
“There's plenty of cash on the table and there's plenty of money coming into the banking sector,'' said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking arm of Credit Agricole SA. “What we're finding is that confidence has been improving.''
The difference between what banks and the U.S. Treasury pay to borrow for three months, the so-called TED spread, was 261 basis points today, down from 298 basis points yesterday.
The demise of Lehman deepened a global credit crisis that froze the commercial paper and money markets, led to Goldman Sachs Group Inc. and Morgan Stanley turning themselves into commercial banks and sent the TED spread on Oct. 10 to 464 basis points, the highest level since Bloomberg began compiling the data in 1984.
The overnight Libor for dollars doubled to 6.44 percent on Sept. 16, a day after the Lehman bankruptcy filing, as banks balked at lending to each other on speculation more would fail.
In Asia, the three-month interbank lending rate for Hong Kong dollars, or Hibor, dropped for a third day, sliding 31 basis points to 3.35 percent, its longest run of declines in more than a month. Singapore's three-month rate for U.S. dollar loans slid for a sixth day, to 3.92 percent.
The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure following its rejection of an earlier version.
The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
The bill's proponents cited the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. They suggested that the market reaction may spur some House Republicans to change their minds when the bill comes to a vote, likely tomorrow afternoon.
“The big drop'' in the Dow Index “really had a chilling effect on a lot of our members and a lot of their constituents,'' House Republican Leader John Boehner said on Fox News. With changes made by the Senate, the legislation “has a much better chance'' of passage this time, he said.
`Signal to Markets'
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hoped the vote “will send a very strong signal even to the Asian markets and others.''
The dollar rose against the euro, approaching a one-year high, after the Senate approval, bolstering expectations the U.S. will act faster than Europe to address the seizure in credit markets. The dollar advanced to $1.3883 per euro at 12:46 p.m. in London, from $1.4009 late yesterday in New York.
Asian stocks and U.S. futures fell on concern the package won't be enough to avert a recession, with futures on the Standard & Poor's 500 Index falling 1.1 percent and the MSCI Asia Pacific Index lost 1.3 percent. Europe's Dow Jones Stoxx 600 Index added 1.2 percent to 260.75 as of 12:46 p.m. in London.
The extra measures may help sway some Republicans.
“They only need 12 votes,'' Kansas Representative Todd Tiahrt, who voted against the bailout, said in an interview with Bloomberg Television. “If they put these few fundamental reforms in there,'' congressional leaders “would easily get enough votes to pass the legislation'' he said before the Senate included those provisions in the package.
Targeting Lawmakers
Democratic supporters of the bill are targeting lawmakers such as Illinois Representative Bobby Rush, who twice changed his vote in the House roll call. Rush ended up being among the 21 members of the Congressional Black Caucus to oppose the legislation. The caucus scheduled a meeting today to discuss the changes made by the Senate. Rush wasn't available to comment on his vote.
Still, House passage is far from certain.
House Majority Leader Steny Hoyer told MSNBC News yesterday that no Democrats who opposed the measure earlier this week have pledged to back it. “We don't have any more Democrats at this hour,'' he said.
Some Republicans said they also weren't budging.
“The bill that they are going to send back is the same bill that I voted against two days ago,'' Representative Joe Barton of Texas told Bloomberg Television. “Why would I turn around and vote for it tomorrow evening or Friday?''
Bush Presses for Passage
President George W no fax payday loans paydayloans.com. Bush said in a written statement after the vote that “the bill the Senate passed is essential to the financial security of every American.'' He said the House should follow suit in approving the proposal.
Bush is slated to meet with U.S. business representatives this morning, including members of the Chamber of Commerce and the National Association of Manufacturers, to urge their support in pushing for House passage, the White House press office said.
The bill was a bipartisan effort, with 40 Democrats, 33 Republicans and independent Joe Lieberman of Connecticut voting for it. The two presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote for the plan.
The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.
Yet Hoyer warned there was a possibility that some additional Democrats may oppose the legislation because of the tax breaks, which aren't offset with spending cuts.
“There are people who are upset that we are making the deficit worse as we try to stabilize the economy,'' he told reporters. Hoyer said he was “personally disappointed' by the Senate's decision to include the tax legislation in the package.
Blue Dogs
Twenty-four of the 44-member Blue Dog Coalition of fiscally conservative Democrats voted for the rescue package on Sept. 29. Four of them said yesterday they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible as recently as Monday.
“I will vote for the package coming from the Senate,'' said Oklahoma Representative Dan Boren. Other members of the coalition who voiced support included Representative Jane Harman of California, Representative Jim Marshall of Georgia and Representative Jim Cooper of Tennessee.
Added to the rescue plan this week is a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000 aimed at discouraging people from pulling their money out of banks.
The Senate bill also reiterates the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
Ease the Rule
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Representative Rahm Emanuel of Illinois, the No. 4 House Democrat, said it was likely the Democratic vote total in the House will change.
“At the end of the day, I doubt we lose Democratic votes in total,'' Emanuel said. “We lose some and will pick up others. The question now will be how many Republicans come to the table to help solve this crisis.''
Consumer confidence unexpectedly rose in September in a survey taken before the recent worsening of the credit crisis and plunge in stocks.
The Conference Board's confidence index increased to 59.8, a third consecutive increase, from 58.5 the prior month, the New York-based group said today. A separate report showed home prices fell in July at the fastest pace on record from a year earlier.
Since the confidence survey's Sept. 23 cutoff, the odds have risen that consumers will retrench in the wake of failing banks, evaporating wealth and paychecks that aren't keeping up with inflation. Stocks tumbled yesterday after the government failed to approve a financial-rescue plan.
“The environment has become pretty negative,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who had forecast confidence would rise. “The momentum has certainly turned down. If the turmoil continues, the risk of a severe recession goes up.''
Americans are likely to lose confidence heading into the presidential election on Nov. 4. Today's report is the next-to- last Conference Board sentiment reading before the vote.
Another report showed business activity slowed less than forecast this month. The National Association of Purchasing Management-Chicago's index fell to 56.7 in September from 57.9 the prior month. Fifty is the dividing line between growth and contraction.
Stocks Up
Stocks extended earlier gains following the reports and Treasury securities fell. The Standard & Poor's 500 index was up 3.2 percent to 1,142 at 10:15 a.m. in New York. The yield on the benchmark 10-year note rose to 3.69 percent from 3.58 percent late yesterday.
Equities rallied on expectations lawmakers would salvage the bank rescue package. The House of Representatives yesterday voted down a $700 billion plan intended to restore confidence in U.S. banks, sending the S&P 500 Index tumbling almost 9 percent.
The confidence gauge was forecast to drop to 55 from an originally reported 56.9 in August, according to the median forecast in a Bloomberg News survey of 62 economists. Projections ranged from 48 to 66. The index reached a 16-year low of 51 in June and averaged 103.4 last year.
Since the cutoff date, Washington Mutual Inc. joined Lehman Brothers Holdings Inc. in bankruptcy, Citigroup Inc. acquired Wachovia Corp. to prevent the collapse of the sixth-biggest U.S. bank by assets, and stocks suffered their biggest drop since 1987.
Home Values Drop
Earlier today, the S&P/Case-Shiller home-price index of 20 U.S. metropolitan areas dropped 16.3 percent in July from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
“The fact that house prices quickened their slide before the worst point in credit markets hit this month does not bode well,'' said Derek Holt, an economist at Scotia Capital Inc payday loan http://us-no-fax-payday-loans.com. in Toronto.
The Conference Board's measure of present conditions dropped to 58.8, the lowest since 1993, from 65 the prior month. The gauge of expectations for the next six months increased to 60.5 from 54.1.
“These results did not capture all of the tumultuous events in the financial sector this month,'' Lynn Franco, director of the Conference Board's confidence survey, said in a statement. “Until the dust settles a bit more, we will not know the full impact.''
Jobs Outlook
Temporary shocks usually have a detrimental effect on confidence for two to four months unless they are accompanied by job losses, she said.
The share of consumers who said jobs are plentiful dropped to 12.2 percent, the fewest in five years, from 13.5 percent last month, today's report showed. The proportion of people who said jobs are hard to get increased to 32.8 percent from 31.7 percent.
Compared with other sentiment measures, the Conference Board's index tends to be more influenced by consumer attitudes about the labor market, economists said. So far this month, 466,000 Americans a week on average filed first-time claims for unemployment benefits, up from 443,000 in August and 363,000 in the first six months of the year.
A report last week showed the Reuters/University of Michigan final sentiment reading for this month declined from a preliminary figure issued in early September as the credit crisis deepened. The reading was still up from August, reflecting the decline in gasoline prices, economists said.
Payroll Forecast
The economy probably lost another 105,000 jobs in September, the ninth consecutive monthly decline, according to the median estimate in a Bloomberg survey ahead of a Labor Department report due Oct. 3. Payrolls dropped by 605,000 workers in the first eight months of the year.
Job cuts may swell as the effects of the financial meltdown ripple through other industries. Fewer jobs and less-available credit indicate consumer spending, which accounts for more than two-thirds of the economy, will weaken further.
Fewer Americans were able to obtain an auto loan this month, according to CNW Marketing Research in Bandon, Oregon, which analyzes auto-industry data.
“Given the relatively weak state of the economy, that's obviously impacting the consumer's ability or willingness to come out and buy a new car,'' General Motors Corp. Chief Executive Officer Rick Wagoner said in a Bloomberg Radio interview on Sept. 25 from Flint, Michigan.
Consumer spending this quarter will be unchanged, the weakest performance since 1991, according to the median estimate in a Bloomberg survey earlier this month.
Package delivery company FedEx Corp. said Tuesday it expects its fiscal first-quarter results will exceed expectations, but it affirmed its fiscal 2009 outlook and cut its capital spending plan.
Investors sent shares up $4.55, or 5.4%, to $89.30 during aftermarket electronic trading, after closing at $84.75.
The company now expects net income for the quarter ended Aug. 31 will total $1.23, ahead of previous guidance of 80 cents to $1 per share.
Analysts polled by Thomson Reuters, on average, expect a profit of 95 cents per share.
The increase is due to lower-than-expected fuel costs late in the quarter as well as "stringent" cost-cutting, the company said.
However, FedEx (FDX, Fortune 500) did not raise fiscal 2009 guidance and instead affirmed its outlook of $4.75 to $5.25 per share, while analysts expect earnings of $4.98 per share.
Weaker macroeconomic conditions offset better-than-expected first-quarter results, the Memphis, Tenn.-based company said.
"While sustained declines in fuel prices could improve our full-year outlook, the slowing economic growth trends in the United States pay day advance instant payday loan. are now extending to other areas of the global economy," said Alan B. Graf Jr., executive vice president and chief financial officer, in a statement. "As a result, we have reduced our planned capital investments by $400 million, to $2.6 billion for fiscal 2009."
Oil prices closed below $104 a barrel Tuesday for the first time since early April, and prices are now down about 30% since peaking at $147.27 a barrel in July.
FedEx will also shift its meeting with investors and lenders from Oct. 2, to April 1-2, 2009, in China, where it will unveil its Asia-Pacific hub.
The federal government’s takeover of Fannie Mae and Freddie Mac may save the battered real estate market from a complete meltdown. But financial experts say the bailout won’t lead to a housing recovery just yet.
Instead, some on Wall Street said the housing sector is in as tough shape today as it was before Sunday’s rescue by the Treasury Department.
"This isn’t curing the patient. This is preventing the patient from developing a new problem he can’t survive," said Barry Ritholtz, CEO and director of equity research, Fusion IQ.
Ritholtz and others pointed to a series of problems plaguing housing that the bailout of Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) does little, if anything, to address.
In particular, there is still a large supply of unsold homes on the market and an increasing number of foreclosures that threatens to add to the glut.
What’s more rising unemployment and increased job losses should add to the woes for lenders, brokers, builders and others tied to the housing sector.
"Now we have a recession,’" said Dean Baker, co-director of the Center for Economic and Policy Research.
Baker added that even with home prices declining at a rate not seen since the Great Depression, the housing bubble hasn’t completely deflated yet.
In fact, some argue that considering the rise in home prices during 1996 to 2006 when compared to inflation, incomes and rents during the same period, home values need to fall another 50% in order to get back to normal.
Still, the Fannie and Freddie rescue is likely to help bring mortgage rates down.
That’s because it should help lower the gap between mortgage rates and Treasury bills, a spread that had risen in recent months on investor concerns about the firms and the rising mortgage defaults.
Fannie and Freddie also warned last month that they would cut back on the growth of their mortgage loan portfolios as they tried to preserve the capital they would need to cover rising losses payday loans $1500 payday loan.
With the Treasury Department now standing behind the firm, most experts expect additional money will be made available to mortgage lenders.
Those two factors prompt some to believe that the rescue will be a significant help for housing markets, even if it doesn’t solve all the problems.
"You’re going to have to work through all those other issues in order for there to be a meaningful recovery," said Timothy Speiss, head of the wealth management arm of accounting firm Eisner LLP. "But this is a significant step in the right direction: improving credit availability and affordability."
Lawrence Yun, chief economist for the National Association of Realtors, said his group’s members are hoping lower rates will help change the attitude of potential buyers about whether it’s a safe time to re-enter the market.
"Whether it’s a game changer or not, we can’t say. We have to see how far rates fall, or whether or not they continue to lack confidence even with these low rates," he said.
Thus, even if the bailout does have a positive impact on the real estate market, one economist said it will probably be limited and relatively slow to take effect.
"By no means is this a magic wand to rejuvenate the housing recession that has just entered its fourth year," said Rich Yamarone, director of economic research at Argus Research.
Former Bank of England policy maker DeAnne Julius said Prime Minister Gordon Brown shouldn't try to shore up Britain's housing market even though property prices are likely to fall further.
“It would be counterproductive at this point for the government to step in and try to prevent that correction from continuing,'' said Julius in an interview with BBC Radio 4's Today program today. Home values “will probably have to fall further.''
Brown's government is considering proposals on how to revive the country's mortgage market as falling house prices erode support for the ruling Labour Party. A Treasury-commissioned report said in July that the Bank of England could extend its Special Liquidity Scheme helping banks hurt by the credit crisis, or Brown could guarantee mortgage-backed securities.
Chancellor of the Exchequer Alistair Darling is scheduled to make a decision on the proposals, made by former HBOS Plc Chief Executive Officer James Crosby, in coming weeks. His U.S. counterpart, Henry Paulson, was forced on Sept. 7 to seize control of Fannie Mae and Freddie Mac after the housing slump threatened to topple the companies making up almost half of the U.S. home- loan market.
British house prices are falling as banks stung by the credit market rout hold onto their cash, making it harder for potential homebuyers to find mortgages. The Royal Institution of Chartered Surveyors said today that sales fell to a record in August, with some respondents saying they had sold less than one home per week.
Recession Risk
The housing-market slump has helped push the economy towards a recession. The U.K. statistics office said today manufacturing production declined in July to the lowest level in 1 1/2 years. The pound, which was little changed after today's reports, has dropped 11 percent against the dollar in the past month.
Julius said she expects the U.K cash till payday 1500 payday loans. economy to be “slow or flat'' for the next 12 to 18 months, though it will probably avoid the “deep recession'' experienced in the early 1990s.
While Brown is under pressure from his own party to turn around the government's fortunes, further efforts to rescue the housing market may face opposition from Bank of England Governor Mervyn King.
He has already rejected any government support for mortgages, saying last month “the last thing we want to do is to tell lenders it doesn't matter if they monitor the riskiness, the government will guarantee it.'' Crosby also warned in his report, which weighed the pros and cons of the various options, that such a move risks creating “moral hazard.''
`Trade Off?'
“Government intervention has its own weaknesses and its own risks,'' said Julius. It involves a “trade-off'' between taxpayers and special interests, she said.
The Crosby report said one option would be for the central bank to expand its Special Liquidity Scheme, due to expire next month, by accepting mortgage-backed securities issued this year. The Bank of England in April only agreed to accept securities issued before 2008 in return for government bonds.
Willem Buiter, another former Bank of England policy maker, argued today that Brown's government must do something to help unfreeze the mortgage market.
Policy makers should offer a “liquidity-support facility even for newly issued mortgage-backed securities, but do it at a price that makes banks and other mortgage lenders wince,'' Buiter said in an interview with CNBC television. “They have to actively try to reinvigorate the securities market for mortgage finance.''
On the cracked grey clay of an ancient lake bed on the edge of Australia’s outback, Guy Kingwill is at the frontier of a global rush to commercialize water.
Despite a long-running drought, Kingwill, who runs the vast Tandou farm, 142km southeast of the mining town of Broken Hill, has just sold his property’s critical water on a national market rather than pump it into irrigated cereal crops.
“The return on the water is higher,” Kingwill told Reuters. “Where we are it’s broadacre cropping. But the market now is driving significantly more per megaliter from horticulture than you can get a profit margin out of wheat and barley,” he says.
Across the world, speculators are increasingly looking to water as a new profit engine as supplies dwindle, caught between booming populations demanding more access and climate warming threatening its very availability.
Australia, the most parched inhabited continent, has for 25 years had an internationally unique water market to better share supplies among farmers and reverse years of allocating more water than the country’s rivers and dams could spare http://payday-badcredit.com no fax payday loan.
That market last year traded $1.1 billion in permanent and seasonal water rights, according to Mark Siebentritt, the Operations Manager for national water broker Waterfind, who says business last year grew by 20 percent.
But Kingwill, whose corporatized farm lists on the Australian Stock Exchange, says prices are being pushed up by a metaphorical gold rush, luring bankers and speculators both at home and internationally to a new and waterlogged Elysian field.
With drought gripping some areas for a decade, prices for one megaliter of seasonal water — enough for an Olympic-size pool — are peaking at A$600 ($517), while permanent water entitlements are less volatile, but still pricey at up to A$2,500 a megaliter.
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