4 minute readA look at stories across HousingWire’s weekend desk … with more coverage to come on bigger issues:
Federal Reserve Chairman Ben Bernanke said it may take years before the unemployment rate reaches improved levels of 5% to 6%, in an interview with 60 Minutes, which aired Sunday.
“At the rate we’re going it could take four to five years,” Beranke said.
The unemployment rate grew to 9.8% in November. Bernanke said the recent decision to stimulate the economy, known as QE2, to purchase $600 billion in long-term Treasurys over the next two quarters was a matter of boosting employment and thwarting a danger of deflation, which would lead to falling prices and deeper cuts to wages.
Critics point out that government policy may do the opposite and send the economy into crippling inflation, pushing prices skyward.
“I think this danger is way overstated. We can raise rates in 15 minutes if we have to,” Bernanke said. “So there really is no problem with tightening monetary policy, slowing the economy, and reducing inflation at the appropriate time. That time is not now.”
Bernanke also said it seemed unlikely that the economy would slip back into a double-dip recession, saying struggling industries such as housing, could not get much weaker.
When asked what he would have done differently over the next two years and what the economy would currently look like had the Fed not reacted as aggressively to the financial crisis as it did, Bernanke said things would look very much like the Great Depression with unemployment as high as 25%.
Still, Bernanke admitted he did not see the impending threat before it was too late.
“I wish I had been omniscient and seen the crisis coming,” Bernanke said. “I didn’t.”
Bernanke also mentioned in the interview that a recent proposal to reduce the deficit by cutting spending and limiting tax breaks would have been poorly timed — had the commission created by President Obama approved the proposal for Congress Friday.
The proposal would have limited the mortgage interest tax deduction, which many industry voices said would have hampered an already weak housing market.
John Barone, principal of JJB Investments, a lender and real estate developer based in San Diego, Calif. said the proposal was “a terrible idea” and would have devastating impacts on higher-end areas. Barone made a proposal of his own over the weekend: Phase in the limitations on a state-by-state basis for new purchases only and over the next several years.
“Unlike spending or income based scenarios which at least are based upon ability to pay, this adjustment is purely arbitrary,” Barone said.
The American Federation of Government Employees urged Congress Friday to not give any further consideration to the proposal to cut the deficit. The AFGE is the largest federal employee union in the U.S.
The AFGE is concerned that most of the cuts would come from federal programs and services Americans depend on.
“It would do nothing to spur job growth and energize the economy,” AFGE President John Gage said.
Moody’s Investors Service downgraded $44.4 billion in residential mortgage-backed securities backed by Option-ARM and Alt-A mortgages.
The most came against 26 RMBS transactions from Harborview worth $20.2 billion, followed by the $16.3 billion in 23 transactions issued by Washington Mutual. Another $4.5 billion in seven transactions from a Deutsche Bank trust was downgraded, and $3.4 billion in 12 transactions issued by Countrywide received downgrades.
In a release announcing the Countrywide downgrades, Moody’s said the actions came because of deteriorating loan performances.
A bottom for the Nevada housing market, one of the worst-hit by the foreclosure crisis, continues to be “undefined” as total home sale closings dropped 18% from a year ago to roughly 2,500 in November, according to data from the Nevada Title Company.
The median price in Nevada was $135,000, a $5,000 drop from the year before.
“Because of this persistent display of total weakness, market bottom in terms of median price continues to be undefined. Overall, prices continue to sink at a slowing pace. All types of sales (REO, Short and Standards) are demonstrating weakness,” according to the Nevada Title Company.
The supply of homes on the Nevada market has increased to 13,000 units in November from roughly 7,500 in the summer.
Regulators close no banks over the weekend for the second week in a row. So far, through 2010, however, 149 banks have failed, passing the 140 the year before.
Write to Jon Prior.
