Former European Central Bank Executive Board member Lorenzo Bini Smaghi suggested Germany
Stocks are edging higher after their biggest loss this year as reassuring reports on productivity and hiring overshadow jitters about the Greek debt crisis.
The government said early Wednesday that U.S. workers were more efficient late last year, though productivity grew more slowly than in the summer. Slower productivity growth could boost hiring.
Payroll processor ADP said employers added 216,000 jobs last month, slightly more than economists had expected.
The Dow Jones industrial average dove 203 points on Tuesday, raising doubts about the momentum behind stocks’ strong rally this year. Investors fretted about the latest deadline in Greece’s debt crisis.
The Dow is up 21 points at 12,780 in the first ten minutes of trading. The S&P 500 is up 4 at 1,347. The Nasdaq is up 14 at 2,924.
Home prices fell to their lowest point in more than a decade in January, which helped to lift the pace of home sales, according to a report from an industry trade group.
The National Association of Realtors reported that the median home price in January fell 2% from December to $154,700. That’s the lowest price reading since November 2001, before the run-up in home prices that became known as the housing bubble.
The median price is the point at which half of homes are sold for a higher price, and half are sold at a lower price. (Multi-million dollar foreclosures)
Serving as a drag on existing home prices is a large inventory of homes in foreclosure. Distressed home sales, which includes homes in foreclosure and so-called short sales in which the home is sold for less than what is owed on the mortgage, made up 35% of sales in January.
"Prices will continue to fall through the first half of 2012 due to the high share of distressed sales," said Stuart Hoffman, chief economist with PNC Financial. "The recent agreement between the big mortgage servicers, state attorneys general and the Obama administration will also result in more homes going to foreclosure over the next few months, adding to downward pressure on prices."
But the pace of sales rose to the highest level since May of 2010, helped by the low prices and rock-bottom mortgage rates. The seasonally-adjusted annual sales pace of 4.57 million homes was up slightly from the revised 4.38 million in December. The last time homes sold at that pace, buyers were rushing to qualify for an $8,000 homebuyer’s tax credit that was about to expire. The latest reading was roughly in line with the expectations of economists surveyed by Briefing.com.
"The uptrend in home sales is in line with all of the underlying fundamentals — pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents," said Lawrence Yun, chief economist for the Realtors.
The housing market has been showing signs of recovery in recent months. The combination of low mortgage rates and a decline in home prices means homes are more affordable than they’ve been in decades. PNC’s Hoffman agreed that the report is a further sign of recovery in the market, although he cautioned "it will remain a long process."
New home starts by builders have been rising, along with their confidence and customer traffic, according to an industry survey.
The supply of existing homes on the market tightened slightly in the Realtors’ latest report, slipping 0.4% to 2.3 million homes, roughly a 6 month supply. That is down 20% from the supply of homes a year ago.
Millions of borrowers who suffered financial losses because their mortgage lenders played fast and loose while processing their foreclosures now have two ways of getting a payback.
They can tap the $26 billion settlement between the state attorneys general and the nation’s five biggest banks that was inked two weeks ago.
Foreclosure Fiasco
The other foreclosure settlement: Millions of homeowners eligible Foreclosures climbed in January What the foreclosure settlement means for you Mortgage deal could bring billions in relief Foreclosure deal has 40 states, but others balk
But there is also an earlier settlement that has been nearly forgotten — and that could lead to an even bigger payoff, in some cases.
As part of an enforcement action by federal authorities last April, 14 mortgage servicers, including Bank of America (, Fortune 500), Chase (, Fortune 500), Citibank (, Fortune 500), HSBC (), MetLife Bank (, Fortune 500), PNC Mortgage (, Fortune 500) and Wells Fargo (, Fortune 500), agreed to hire independent consultants to investigate foreclosure abuses and compensate those who suffered financial harm.
As a result of the program, up to 4.3 million mortgage borrowers who were foreclosed on in 2009 and 2010 will have a chance to request an independent review of how their foreclosure was handled.
So far, only 90,000 eligible homeowners have submitted claims, prompting the feds to extend the deadline for applications by three months to July 31.
The exact amount of money borrowers will receive has yet to be determined. But if a review finds that "financial injury" occurred — say a bank charged inappropriate fees or it went forward with a foreclosure without a valid claim to the property — a homeowner could be repaid in full for their losses.
Borrowers who were improperly charged even just a single fee could be repaid for it, according to Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency, one of the federal regulatory agencies that negotiated the agreement.
And borrowers who suffered much larger losses could be in line for much bigger repayments than promised by the AG’s settlement, which will pay up to $2,000 to the estimated 750,000 who lost their homes to foreclosure between 2008 and 2011.
The compensation could even repay the cost of regaining a wrongfully lost home if warranted by the facts of the case, according to Hubbard.
The Independent Foreclosure Review was sparked by the robo-signing scandal that exposed the bank’s treatment of borrowers in the foreclosure process. The lenders lost documents and recreated them, had low-level employees with no knowledge of what they were attesting to sign legal papers and bent the rules requiring them to halt foreclosures if borrowers sought mortgage modifications.
What the $26B foreclosure settlement means for you
Unlike the $26 billion settlement with the state attorneys general, borrowers didn’t have to lose their homes in order to receive compensation, according to Hubbard.
"It could be anyone who suffered financial loss because of errors made in the foreclosure process," he said.
Since the settlements are completely independent of one another, claimants can double-dip, filing for compensation under both settlements. (To seek compensation under the state attorneys general settlement, contact your lender or servicer and ask them to review your case).
To make a claim for the Independent Foreclosure Review, borrowers have to fill out a five-page form that identifies some examples of situations that may have led to financial injury. Borrowers do not have to provide documentation. That will be handled by an independent agency.
No reviews have been completed yet, according to Hubbard. And individual cases may take months to come to decision.
For more information on the forms, go to the website set up by the servicers. And for a full list of the mortgage services involved in the Independent Foreclosure Review, go to the Federal Reserve website
Greece
Federal Reserve regional bank presidents provided unprecedented disclosure of their wealth, revealing assets ranging from a Missouri farm and Texas ranchland to stocks and Treasury Inflation Protected Securities.
The officials, who oversee Fed operations ranging from bank supervision to emergency lending, disclosed the documents today in response to requests from Bloomberg News under the Freedom of Information Act. The regional banks said they weren
Valuations for U.S. equities have been stuck below the five-decade average for the longest period since Richard Nixon
China
Germany will keep its AAA rating at Standard & Poor
The European Central Bank is likely to hold interest rates at its monthly meeting after two straight months of cuts, analysts believe, with some expecting Europe’s debt crisis and a deteriorating economy to push the bank soon to take its key rate below the current 1 percent level.
President Mario Draghi’s remarks at his post-decision news conference Thursday will be scrutinized for clues about how fast the bank thinks the European economy is slowing _ and what further steps it might deploy against the crisis caused by too much debt in the 17 countries that use the euro as their currency.
The bank lowered its key rate by a quarter point at the November and December meetings, the first chaired by Draghi after he replaced Jean-Claude Trichet, in a move that was seen as a signal of a more flexible approach to fighting the crisis. It also made unlimited amounts of cheap, three-year loans available to banks to steady the banking system.
Economists point to recent stabilizing economic indicators as reasons the 23-member governing council might wait before cutting again. Also, they note that Draghi indicated last month that some members of the council wanted to postpone the December rate cut.
Surprise decisions, however, cannot be ruled out, especially given recent big changes in top ECB leadership.
In addition to Draghi replacing Trichet in November, former Germany deputy finance minister Joerg Asmussen and former deputy director general of the French Treasury Benoit Coeure took seats on the six-member executive board that runs the bank day to day. Additionally, the job of supervising the ECB’s staff economists last week was assigned to Belgian executive board member Peter Praet _ the first time a non-German has held the post since the bank was founded in 1998.
Praet’s appointment is significant because German predecessors Otmar Issing and Juergen Stark represented their country’s conservative economics tradition stressing low inflation _ and were seen as strong voices to keep rates higher.
Now economists are trying to gauge whether the bank will make more cuts in the coming months. A number think the bank could take its refinancing rate as low as 0.5 percent by the end of the first quarter. That would put it in territory now occupied by the U.S. Federal Reserve, whose key rate is 0-0.15 percent, and the Bank of England, which is also to set its rates Thursday, where the benchmark rate is 0.5 percent.
Much depends on how the bank sees the economy. Many economists predict that fourth-quarter figures will show the eurozone shrank in the last three months of the year when they are published next month. Rate cuts can spur growth by making borrowing cheaper for businesses and consumers.
Analysts at Bank of America-Merrill Lynch think sagging growth will lead the ECB to cut quickly by a quarter point both Thursday and at the February meeting to “take preventive action against economic deterioration.”
Not all agree. Marco Valli, chief eurozone economist at UniCredit, sees the refinancing rate “steady at 1 percent throughout the year.” That could change, Valli cautioned, if growth slips more sharply than expected or if market turmoil from the debt crisis increases.
The bank is not expected to change its position on one of its key anti-crisis measures _ its program to buy government bonds. That helps keep down the elevated borrowing costs for indebted governments that have been a key force in worsening the debt crisis Same day payday loans. The purchases drive down interest yields on bonds in the secondary market. That means the governments face lower borrowing costs when they sell bonds to pay off older bonds that are maturing.
Fears of a default drove borrowing costs so high for Greece, Ireland and Portugal that they could no longer afford to borrow. They needed bailout loans from other eurozone governments to avoid defaulting on their bonds.
Yet the ECB has stayed with its firm line that the program is limited in size and duration, and that it remains the job of governments to reduce their budget deficits and show the investors that buy their bonds that they are creditworthy _ and should be able to continue borrowing at affordable rates. Italy’s new Prime Minister, Mario Monti, has made new cuts and promised steps to improve growth. But the interest yield on the country’s 10-year bonds remained at an elevated 7.13 percent _ the kind of levels that led Greece, Ireland and Portugal to give up and take bailouts.
The program _ which has bought some euro211 billion ($270 billion) in bonds _ has been a key backstop in the absence of more robust eurozone bailout funds. The current funds have some euro500 billion ($640 billion) in financing available. But some of that is already committed to Greece, Ireland and Portugal, and Italy _ the recent focus of the crisis _ is too big for the fund to bail out for more than a short time. Eurozone officials are also seeking another euro150 billion ($192 billion) in funding from governments for the International Monetary Fund, which could then use it to backstop indebted governments.
Some analysts think a worsening of the crisis will eventually force the ECB to use its power to create new money and buy much larger amounts of government bonds. That, the reasoning goes, could convince markets that borrowing rates will stay down and not result in government defaults.
Jennifer McKeown, senior European economist at Capital Economics, said a deteriorating economy could push the ECB to engage in what is called quantitative easing. That means buying financial assets across the eurozone as a way of pushing newly created money into the economy and promoting growth. It is an additional tool that central banks can use when interest rates are about as low as they can go. Both the U.S. Federal Reserve and the Bank of England engaged in it but there are disputes over whether the ECB’s anti-inflation mandate permits it; Lorenzo Bini Smaghi, a former top ECB official, indicated in an interview last month before he left the bank that quantitative easing would be possible to combat deflation, or a crippling fall in prices. That would be in line with the ECB’s mandate from the EU treaty to pursue price stability as its first goal.
“They might not go below 1 percent in this cycle, in fact they might choose to do more unconventional measures, even quantitative easing, rather than cutting the interest rate below 1 percent,” McKeown said.
While further rate cuts are possible, “it’s not clear how much difference a reduction from 1 percent to 0.75 percent or even 0.5 percent would make,” she said. “If the economy really needs more support and the ECB believes that is the case, I think it would need to move into quantitative easing to really help matters.”
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