Just a few moments ago Associated Press released a story across the wires that's very disturbing, and an indicator of how serious the housing crisis is. It's fair to observe that there is no news on the horizon to balance or offset this latest indicator. It's a virtual certainty the problem will increase significantly before it shows any sign of improvement.

For many of us, the equity in our homes represents one of our largest single assets. Viewing this asset diminish in value to historic lows is not a comforting experience.

It's also fair and accurate to state that one of the individuals that's been the most influential in creating this crisis is Phil Gramm, former Republican Senator from Texas. During the years Republicans controlled the Senate and Congress he was a tireless advocate of de-regulating the banking and mortgage industry. From his powerful position as Chairman of the Senate Banking Committe he pushed through legislation titled the Gramm-Leach-Bliley Act, making changes in the banking, insurance and securities laws which Congress had kept a bay for sixty years. He also helped push through legislation that assisted Enron during their troubles, while his wife, Wendy, served as member of the Enron Board of Directors.

A year after the Gramm-Leach-Bliley Act repealed the old regulations, Swiss Bank UBS gobbled up brokerage house Paine Weber. Two years later, Gramm left the Senate and settled in as a vice chairman of UBS's new investment banking arm. Later, he became a major player in its government affairs operation. According to federal lobbying disclosure records, Gramm lobbied Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006. During those years, the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages.

For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS's American subsidiary. In the past year, UBS has written down more than $18 billion in exposure to subprime loans and other risky securities and is considering cutting as many as 8,000 jobs.

Phil Gramm remains tied to UBS, and he's also the general co-chairman of John McCain's presidential campaign, and his principal economic advisor. So, as your read the Associated Press story below, keep in mind the single most influential person that helped create this crisis, is now co-chairing the campaign of the Republican nominee for president, and is his source of economic advice.

Equity In American's Homes Falls to Historic Low
Drops to 46.2% in First Quarter
Level Not Since Since End of WWII

Associated Press - June 5, 2008

NEW YORK - The equity Americans have in their most important asset — their homes — has dropped to its lowest level since the end of World War II. Homeowners' portion of equity slipped to 46.2% in the first quarter from a revised 47.5% in the previous quarter. That was the fifth quarter in a row below the 50% mark, the Federal Reserve said Thursday.

The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans' total mortgage debt rose to $10.6 trillion from $10.53 trillion. A homeowner's equity is the market value of a property minus the mortgage debt. And homeowners' percentage of equity has declined steadily even as home values surged during the housing boom due to a jump in cash-out refinancing, home equity loans and an increase in 100% financing.

Experts expect equity to decline further as falling home prices erode the value of Americans' largest asset, dragging more homeowners "upside down" on their mortgages.

At the end of March, nearly 8.5 million homeowners had negative or no equity in their homes, representing more than 16 percent of all homeowners with a mortgage, according to Moody's Economy.com Chief Economist Mark Zandi. By June 2009, he estimates that will increase to 12.2 million, or almost one out of every four homeowners with a mortgage. But to put that number in perspective, one out of every three homeowners own their properties free and clear, with no mortgage at all. Still, Zandi said, "For most, their home is their key asset. If they have no equity in their home, likely their net worth is negative too. Their entire balance sheet will be underwater."

The report also showed that Americans' total net worth dropped to $55.97 trillion in the first quarter from $57.67 trillion.

Zandi expects prices to fall 24 percent from peak to trough. Last week, Standard & Poor's/Case-Shiller said its national home price index fell about 14% in the first quarter compared with a year earlier, the lowest since its inception in 1988. Prices nationwide are at levels not seen since the third quarter of 2004. Homeowners with no or negative equity are more likely to fall behind on their mortgage payments or, in frustration, mail the keys to the lender and walk away from their mortgages, a phenomenon more lenders are seeing. This will only increase foreclosures, which have been surging the last two years, and further exacerbate the housing downturn.

The Mortgage Bankers Association said Thursday the rate of new foreclosures and late payments in the first three months of this year were the highest on record going back to 1979.

Almost 1% of mortgages fell into foreclosure, surpassing the previous high of 0.83% in the last quarter of 2007. The percentage of Americans who have missed at least one mortgage payment jumped to 6.35%, up from 5.82% in the prior quarter. Jay Brinkmann, the association's vice president of research and economics, told The Associated Press he anticipates foreclosures and late payments to continue increasing in the months ahead as prices keep dropping as expected.

It's just one more reason why we need a real change in direction in our nation. One candidate, and only one, represents that change. One candidate, and only one, is permanently connected to the problems and cause of the problems. It's a simple choice. At least it's a simple choice for the intelligent side of America.

And so if we all vote Obama, the economy will magically get better because he's promising change. Hooray...

Some people simply need to realize that the president has nothing to do with the business cycle, and that it cannot be controlled.

In addition, the housing crisis is nearly over, and investors have started to get hopeful again (SEE, SEE, THEY CAN HAVE HOPE WITHOUT OBAMA). Eventually more people will be born and the price of housing will go back up. Any and all doomsday prophecies will be proven wrong.

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"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

--Murray Rothbard

Quote:

Originally Posted by Skinny. A liberal is just a libertarian who hasn't studied economics.