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Yet another economist who dines at the restaurant of the free lunch: David Greenlaw of the US Economics Team at Morgan introduces what he calls a “Slam Dunk Stimulus” of sorts:

“If it were possible to inject a significant amount of stimulus into the US household sector, and this stimulus had zero impact on the budget deficit, did not require an exit strategy, did not distort the markets, and took effect almost immediately, wouldn’t it seem like a slam dunk? Such an option actually exists in the form of a change to mortgage refinancing requirements.”

His proposal? Change the Loan-to-Value requirements of homeowners applying for a refinancing.

In other words: The solution to poor lending standards and ultra low rates is to reduce the lending standards further to take advantage of even lower rates.

WTF? If that sounds absurd, it probably is because it is.

The best rationale that Greenlaw musters for doing this is that Uncle Sam is already on the hook for the existing debt, so why the hell not do the refis: “The Federal government stands alone as the guarantor of the principal value of agency-backed mortgages.”

But that leads to such absurd conclusions as Greenlaw’s argument for a streamlined refi process for agency mortgages. In his final sentence, he states: “Quite simply, there is no need for a case-by-case credit analysis when the principal value of the mortgage is already backed by the government.”

I’m sure that will work out just fine . . .

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Source:
Slam Dunk Stimulus
David Greenlaw
Morgan Stanley, July 27, 2010
US Economics
http://www.morganstanley.com/views/gef/team/index.html

Back in 2008, I ran this updated chart of the Case Shiller Housing Price Index by BP reader Steve Barry.   It was widely reproduced around the web. (Unfortunately, some unscrupulous folks striped Steve’s authorship off of it, and passed it off as their own).

I asked Steve to update Shiller’s NYT chart, now that much of the government intervention has run its course. There is still massive Federal Reserve subsidies in the form of record low rates. But the short term bounce caused by HAMP, Foreclosure abatements and first time home buyers tax credits are mostly over.

Here is Steve’s chart:
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click for ginormous graphic

Chart courtesy of the NYT, as modified by Steve Barry

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Previously:

Classic Case Shiller Housing Price Chart, Updated (December 30th, 2008)

A Closer Look at the Second Leg Down in Housing (June 24th, 2010)

Goldline International is under investigation by the Santa Monica City Attorney’s office, jointly with the Los Angeles County District Attorney’s office, as well as being the subject of a separate investigation by Congress into the possible criminal practices. The firm has been the subject of an ABC Nightline News Exposé, as well as an investigation by NY Congressman Weiner).

Jess Bachman, who did several of the fantastic illustrations for Bailout Nation, turns his graphic expertise to the Glenn Beck/Goldline endorsement scheme:

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click for ginormous version

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FREE: add this infographic to your website!

Embeddable Graphic

600 Pixel Wide Version

</p> <p><a href="http://www.ritholtz.com/blog/2010/07/glenn-beck-goldline/" target="_blank"><img class="alignnone size-full wp-image-57807" title="Fools Gold thumb" src="http://www.ritholtz.com/blog/wp-content/uploads/2010/07/Fools-Gold-thumb.png" alt="" width="265" height="831" /></a></p> <p>Infographic by <a href=" http://www.ritholtz.com/blog/2010/07/glenn-beck-goldline/">The Big Picture</a></p> <p>

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June Durable Goods unexpectedly fell both headline and ex transports. Orders fell 1% vs an expected gain of 1% and fell .6% ex transports vs an expected gain of .4%. The core cap ex figure, non defense capital goods ex aircraft, though was a bright spot as they rose .6% after a 4.6% rise in May. Dragging down the ex transport # was a 2% drop in primary metals orders, 1.9% fall in computers/electronics and .7% decline in machinery. Electrical equipment orders rose 3.7% and fabricated metals gained 1.2%. Shipments, which get directly plugged into GDP, fell .3% after a .7% drop in May. Because inventories rose .9%, the inventory to shipments ratio rose to 1.58 from 1.56, the highest since Nov ’09. Net-net, core cap ex is now up 15.2% y/o/y on easy comparisons but it’s clear that manufacturing has been the bright spot in the economic recovery. However, as the headline # shows, including volatile aircraft, the improvement is still lumpy and not consistent.

Following the 5 mo low in the Conference Board Consumer Confidence index where the survey cutoff date was July 21st, the weekly ABC confidence poll fell 3 pts to -48, the lowest since Apr and is now below the 1 yr average of -46. The drop was led by the Personal Finance component which now matches the lowest since Nov ’09. With a 10 bps rise in mortgage rates, the MBA said refi’s fell 5.9% off the highest level since May ’09 but purchases rose for a 2nd week by 2%. Southern European bonds continue to rally after Portugal successfully sold 4 yr and 13 yr notes, sending their 10 yr yield back below 5% for the 1st time since June 2nd and their 2 yr yield is down a sharp 52 bps to the lowest since mid May. The fly in the European ointment continues to be the daily rise in interbank lending rates as 3 mo Euribor rose to a 1 yr high and hasn’t fallen since Apr 20th. This is a de facto tightening of policy. Chinese stocks closed at a 9 week high.

“The answer is yes, it does. If it didn’t, I wouldn’t be able to justify getting out of bed in the morning and charging the outrageous fees that we charge our clients, which they willingly pay.”

-A former regulator, now corporate lobbyist, as to whether he had an inside edge in lobbying his ex-colleagues

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Well, don’t let it be said that this Congress isn’t creating jobs: The 2,300 page financial reform bill seems to be generating demand for more of what we surely don’t need: Corporate Lobbyists.

150 lobbyists that used to work in the executive branch — lawyers for the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Reserve bankers, and other regulatory agencies — have registered as lobbyists. Add to that 100s of attorneys “scouring the financial regulations” on behalf of corporate clients, and you have the makings of a small army of former Federal employees. They are now working for the firms they used to regulate.

The lobbyist’s goal? Now that finreg legislation has passed, they seek to influence the future rule making that has been written into the new law. According to a NYT:

• The law firm of Davis Polk determined that 243 new financial rules and 67 new studies are required by the legislation.

• The S.E.C. must developing 95 rules (derivative trading, credit rating agencies standards, executive bonus disclosure).

• The Commodity Futures Trading Commission must develop 61 rules.

• Federal Reserve is required to develop 54 specific rules.

• The 2 new agencies created by Congress — Consumer Financial Protection Bureau and the Financial Stability Oversight Council — will create 80 new financial oversight and disclosure rules.

The firms that will be covered by these rules are seeking to influence them before they are even written: Water them down, reduce disclosure requirements, soften oversight, neuter penalties.

As we previously discussed, the bang these firms get for their bucks is extraordinary.

The battle continues . . .

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Previously:
Government for Sale: 2009 Lobbying $3.49 Billion (July 14th, 2010)

Source:
Ex-Regulators Get Set to Lobby on New Financial Rules
ERIC LICHTBLAU
NYT, July 27, 2010   
http://www.nytimes.com/2010/07/28/business/28lobby.html

Worth your time:

• Study: Boards Use Peers to Inflate Executive Pay (Dealbook)

• How hunger affects our financial risk taking  (BPS Research)

• ‘Systemic risk’ theory gains in stature as way to prevent the next bubble (Washington Post)

• Apartment Rentals Surge in U.S. on Foreclosures, Jobs (Bloomberg)

• Bruce Bartlett:  Sweden imposes a penalty rate on excess reserves while the Fed subsidizes banks for not lending.  (Fiscal Times)

• Credit Cards Take From Poor, Give to the Rich (WSJ)

• Another Way to Look at HAMP (The Mess That Greenspan Made)

• Who Killed the Climate Bill?  (Foreign Policy)

• Pols Cope With Fiscal Cognitive Dissonance (Barron’s)

• The Best Magazine Articles Ever (kk)

What are you reading?

You know I am a sucker for these sorts of infographics:

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Chart courtesy of NYT

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Source:
The War: A Trillion Can Be Cheap
ELISABETH BUMILLER
NYT, July 24, 2010
http://www.nytimes.com/2010/07/25/weekinreview/25bumiller.html

Via Mint, we get today’s dose of infoporn:

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GMO Montier 26Jul