Monday, September 21, 2009
10 U.S. COMPANIES THAT ARE TEETERING TOWARD BANKRUPTCY
Date: Sunday, 20-Sep-2009 13:41:47 Here is a list of 10 major U.S. companies that have market caps in excess of $3 billion that are experiencing financial difficulties and could be on the verge of filing for bankruptcy in the foreseeable future, according to a study by Audit Integrity, an independent financial research and risk modeling firm based in Los Angeles:
1. Hertz (HTZ)
2. Textron (TXT)
3. Sprint/Nextel (S)
4. Macy's (M)
5. Mylan (MYL)
6. Goodyear (GT)
7. CBS (CBS)
8. Advanced Micro Devices (AMD)
9. Las Vegas Sands (LVS)
10. Interpublic Group (IPG)
1. Hertz (HTZ)
2. Textron (TXT)
3. Sprint/Nextel (S)
4. Macy's (M)
5. Mylan (MYL)
6. Goodyear (GT)
7. CBS (CBS)
8. Advanced Micro Devices (AMD)
9. Las Vegas Sands (LVS)
10. Interpublic Group (IPG)
Sunday, September 20, 2009
FHA (Federal Housing Administration) Cash Reserves Will Drop Below Requirement
by Dina ElBoghdady
The Federal Housing Administration has been hit so hard by the mortgage crisis that for the first time, the agency's cash reserves will drop below the minimum level set by Congress, FHA officials said.
The FHA guaranteed about a quarter of all U.S. home loans made this year, and the reserves are meant as a financial cushion to ensure that the agency can cover unexpected losses.
"It's very serious," FHA Commissioner David H. Stevens said in an interview. "There's nothing more serious that we're addressing right now, outside the housing crisis in general, than this issue."
Until now, government officials have warned that the agency could be forced to ask Congress for billions of dollars in emergency aid or charge borrowers more for taking out FHA-insured loans if the reserves fell below the required level, equal to 2 percent of all loans guaranteed by the agency.
Both options are politically unpalatable. Congress and the public are weary of bailouts after the government spent hundreds of billions of dollars rescuing banks; insurance companies; automakers; and the mortgage finance giants, Fannie Mae and Freddie Mac. Raising premiums for borrowers could increase the cost of buying a home just as a wounded housing market is showing signs of life.
Stevens said that such drastic actions are not needed. He said he is planning to announce Friday several measures that should help the reserves rebound quickly.
The FHA, which is part of the Department of Housing and Urban Development, insures home mortgages against losses, thus helping prospective borrowers obtain loans. It uses the insurance premiums paid by these borrowers to pay for mortgage defaults. Since its creation in 1934, it has never used taxpayer money to cover losses at its flagship home-buying program. But rapidly rising defaults have burned through the agency's reserves, raising the prospect that it would have to take dramatic action.
The reserves are meant to ensure that the agency remains solvent and can continue helping people get mortgages, which in turn supports the housing market and wider economy.
An independent audit due out this fall will show that the agency's reserves will drop below the 2 percent level as of Oct. 1, the start of the new fiscal year, Stevens said.
Although the reserves had remained well above the minimum required level during the housing boom, the audit last year showed they had shrunk to 3 percent as of Sept. 30, compared with 6.4 percent a year earlier. The fund's value was estimated at $12.9 billion, down from $21.2 billion the previous year.
'Not Going to Congress'
Earlier this year, HUD Inspector General Kenneth Donohue told a Senate panel that falling below the reserve's minimum threshold would require an "increase in premiums or congressional appropriation intervention to make up the shortfall."
But Stevens, who became FHA commissioner in July, said these options are not on the table. "We are absolutely not going to Congress and asking for money for FHA," he said. "We're not going to need a special subsidy or special funding of any kind."
He stressed that the agency plans to take other steps that will help beef up the reserves. Some of these measures address fraudulent loans that can contribute to FHA's losses.
For one, he will propose that banks and other lenders that do business with the FHA have at least $1 million in capital they can use to repay the agency for losses if they were involved in fraud. Now, they are required only to hold $250,000. Second, he will propose that lenders also take responsibility for any losses due to fraud committed by the mortgage brokers with whom they work.
In an effort to reduce the risks faced by the agency -- and thus the potential for losses -- Stevens said he plans to hire a chief risk officer by the end of the year. The agency has never had one in its 75-year-history.
Though these changes were in the works before the FHA reviewed the new audit, he said the steps should help fatten up the FHA's loss reserves faster than projected.
The new audit shows that even without any new measures, the reserves will rebound to the required level within two or three years largely as the result of the recovery in the housing market, Stevens said. This calculation is based on projections of future home prices, interest rates and the volume and credit quality of FHA's business.
Agency's Financial Health
The audit appears especially dire because it offers a snapshot of the agency's financial standing at the depths of a severe recession, and it does not take into account the new loans FHA will insure and the new premiums it will collect, Stevens said. The borrowers receiving recent FHA-backed loans have, on balance, been more creditworthy than those the agency is used to catering to, he said.
And while the reserves are at a historic low, Stevens noted that they represent only part of the money the agency maintains to cover losses on insured mortgages. The agency, on an ongoing basis, pays for losses directly out of a second fund. The reserve fund is intended as a backup should losses exceed forecasts. In total, these two funds had $30.4 billion as of June 30, up from $28.3 billion on Sept. 30, 2008, according to Stevens.
The FHA's financial health is in the spotlight in part because of its key role in buoying the housing market.
The agency lost much of its relevance during the housing boom when home prices soared and borrowers raced to aggressive subprime lenders. But after the subprime market collapsed, borrowers flocked back to the FHA, the only option for those who lack stellar credit or hefty down payments. Its historic role in backing loans is more crucial now than ever.
The agency does not lend money; it insures lenders against losses. It has captured 23 percent of all new loans made so far this year, up from just 3 percent in 2006.
But the agency's sudden popularity has alarmed some lawmakers, who regularly question whether the FHA has the resources and expertise to handle its increased workload and avert an avalanche of new defaults.
The Federal Housing Administration has been hit so hard by the mortgage crisis that for the first time, the agency's cash reserves will drop below the minimum level set by Congress, FHA officials said.
The FHA guaranteed about a quarter of all U.S. home loans made this year, and the reserves are meant as a financial cushion to ensure that the agency can cover unexpected losses.
"It's very serious," FHA Commissioner David H. Stevens said in an interview. "There's nothing more serious that we're addressing right now, outside the housing crisis in general, than this issue."
Until now, government officials have warned that the agency could be forced to ask Congress for billions of dollars in emergency aid or charge borrowers more for taking out FHA-insured loans if the reserves fell below the required level, equal to 2 percent of all loans guaranteed by the agency.
Both options are politically unpalatable. Congress and the public are weary of bailouts after the government spent hundreds of billions of dollars rescuing banks; insurance companies; automakers; and the mortgage finance giants, Fannie Mae and Freddie Mac. Raising premiums for borrowers could increase the cost of buying a home just as a wounded housing market is showing signs of life.
Stevens said that such drastic actions are not needed. He said he is planning to announce Friday several measures that should help the reserves rebound quickly.
The FHA, which is part of the Department of Housing and Urban Development, insures home mortgages against losses, thus helping prospective borrowers obtain loans. It uses the insurance premiums paid by these borrowers to pay for mortgage defaults. Since its creation in 1934, it has never used taxpayer money to cover losses at its flagship home-buying program. But rapidly rising defaults have burned through the agency's reserves, raising the prospect that it would have to take dramatic action.
The reserves are meant to ensure that the agency remains solvent and can continue helping people get mortgages, which in turn supports the housing market and wider economy.
An independent audit due out this fall will show that the agency's reserves will drop below the 2 percent level as of Oct. 1, the start of the new fiscal year, Stevens said.
Although the reserves had remained well above the minimum required level during the housing boom, the audit last year showed they had shrunk to 3 percent as of Sept. 30, compared with 6.4 percent a year earlier. The fund's value was estimated at $12.9 billion, down from $21.2 billion the previous year.
'Not Going to Congress'
Earlier this year, HUD Inspector General Kenneth Donohue told a Senate panel that falling below the reserve's minimum threshold would require an "increase in premiums or congressional appropriation intervention to make up the shortfall."
But Stevens, who became FHA commissioner in July, said these options are not on the table. "We are absolutely not going to Congress and asking for money for FHA," he said. "We're not going to need a special subsidy or special funding of any kind."
He stressed that the agency plans to take other steps that will help beef up the reserves. Some of these measures address fraudulent loans that can contribute to FHA's losses.
For one, he will propose that banks and other lenders that do business with the FHA have at least $1 million in capital they can use to repay the agency for losses if they were involved in fraud. Now, they are required only to hold $250,000. Second, he will propose that lenders also take responsibility for any losses due to fraud committed by the mortgage brokers with whom they work.
In an effort to reduce the risks faced by the agency -- and thus the potential for losses -- Stevens said he plans to hire a chief risk officer by the end of the year. The agency has never had one in its 75-year-history.
Though these changes were in the works before the FHA reviewed the new audit, he said the steps should help fatten up the FHA's loss reserves faster than projected.
The new audit shows that even without any new measures, the reserves will rebound to the required level within two or three years largely as the result of the recovery in the housing market, Stevens said. This calculation is based on projections of future home prices, interest rates and the volume and credit quality of FHA's business.
Agency's Financial Health
The audit appears especially dire because it offers a snapshot of the agency's financial standing at the depths of a severe recession, and it does not take into account the new loans FHA will insure and the new premiums it will collect, Stevens said. The borrowers receiving recent FHA-backed loans have, on balance, been more creditworthy than those the agency is used to catering to, he said.
And while the reserves are at a historic low, Stevens noted that they represent only part of the money the agency maintains to cover losses on insured mortgages. The agency, on an ongoing basis, pays for losses directly out of a second fund. The reserve fund is intended as a backup should losses exceed forecasts. In total, these two funds had $30.4 billion as of June 30, up from $28.3 billion on Sept. 30, 2008, according to Stevens.
The FHA's financial health is in the spotlight in part because of its key role in buoying the housing market.
The agency lost much of its relevance during the housing boom when home prices soared and borrowers raced to aggressive subprime lenders. But after the subprime market collapsed, borrowers flocked back to the FHA, the only option for those who lack stellar credit or hefty down payments. Its historic role in backing loans is more crucial now than ever.
The agency does not lend money; it insures lenders against losses. It has captured 23 percent of all new loans made so far this year, up from just 3 percent in 2006.
But the agency's sudden popularity has alarmed some lawmakers, who regularly question whether the FHA has the resources and expertise to handle its increased workload and avert an avalanche of new defaults.
Saturday, September 19, 2009
75 Percent of Oklahoma High School Students Can't Name the First President of the U.S.
C-J
Blaming the students? Don't!! It's not their fault that their teachers don't teach history or the Constitution. Do YOU know that the Eighth Amendment to the Constitution says the Government can NOT use cruel or unusual punishment. "torture" 1 : disposed to inflict pain or suffering : devoid of humane feelings 2 a : causing or conducive to injury, grief, or pain b : unrelieved by leniency. I wonder if John Yoo and Jay Bybee ever understood the Constitution? I doubt it!!
C-J
OKLAHOMA CITY -- Only one in four Oklahoma public high school students can name the first President of the United States, according to a survey released today.
The survey was commissioned by the Oklahoma Council of Public Affairs in observance of Constitution Day on Thursday.
Brandon Dutcher is with the conservative think tank and said the group wanted to find out how much civic knowledge Oklahoma high school students know.
The Oklahoma City-based think tank enlisted national research firm, Strategic Vision, to access students' basic civic knowledge.
"They're questions taken from the actual exam that you have to take to become a U.S. citizen," Dutcher said.
A thousand students were given 10 questions drawn from the U.S. Citizenship and Immigration Services item bank. Candidates for U.S. citizenship must answer six questions correctly in order to become citizens.
About 92 percent of the people who take the citizenship test pass on their first try, according to immigration service data. However, Oklahoma students did not fare as well. Only about 3 percent of the students surveyed would have passed the citizenship test.
Dutcher said this is not just a problem in Oklahoma. He said Arizona had similar results, which left him concerned for the entire country.
"Jefferson later said that a nation can't expect to be ignorant and free," Dutcher said. "It points to a real serious problem. We're not going to remain ignorant and free."
Blaming the students? Don't!! It's not their fault that their teachers don't teach history or the Constitution. Do YOU know that the Eighth Amendment to the Constitution says the Government can NOT use cruel or unusual punishment. "torture" 1 : disposed to inflict pain or suffering : devoid of humane feelings 2 a : causing or conducive to injury, grief, or pain b : unrelieved by leniency. I wonder if John Yoo and Jay Bybee ever understood the Constitution? I doubt it!!
C-J
OKLAHOMA CITY -- Only one in four Oklahoma public high school students can name the first President of the United States, according to a survey released today.
The survey was commissioned by the Oklahoma Council of Public Affairs in observance of Constitution Day on Thursday.
Brandon Dutcher is with the conservative think tank and said the group wanted to find out how much civic knowledge Oklahoma high school students know.
The Oklahoma City-based think tank enlisted national research firm, Strategic Vision, to access students' basic civic knowledge.
"They're questions taken from the actual exam that you have to take to become a U.S. citizen," Dutcher said.
A thousand students were given 10 questions drawn from the U.S. Citizenship and Immigration Services item bank. Candidates for U.S. citizenship must answer six questions correctly in order to become citizens.
About 92 percent of the people who take the citizenship test pass on their first try, according to immigration service data. However, Oklahoma students did not fare as well. Only about 3 percent of the students surveyed would have passed the citizenship test.
Dutcher said this is not just a problem in Oklahoma. He said Arizona had similar results, which left him concerned for the entire country.
"Jefferson later said that a nation can't expect to be ignorant and free," Dutcher said. "It points to a real serious problem. We're not going to remain ignorant and free."
The U.S. Balance Sheet: Households See Net Worth Down by $12 Trillion Since Peak and Total Debt Floating in the Market of $33 Trillion.
The Federal Flow of Funds report was released on Thursday with an expected jump in household net worth. When we did our last report, we stated that with the $13.89 trillion in wealth that evaporated to the trough, we would expect a jump in net worth to come from the massive stock market rally. The report shows this paper wealth gain that started at the end of Q1. Household net worth increased by $2 trillion from the first quarter to the end of the second quarter of 2009. Much of the increase came from the $1.36 trillion increase in corporate equities and mutual funds. Real estate grew by $139 billion. Yet this increase is merely a reflection of all the liquidity being flushed into the equity markets by the Federal Reserve.
Keep in mind that American households are still down by $12 trillion from the peak reached in 2007. This quarterly move would be more significant if unemployment and government funds were less of a short-term mover. If anything, what this report tells us is that the only thing that is rallying from the bottom is equities. It is gathering massive steam and price/earnings ratios are not being reflected in the real world.
What we see in the current report is merely the reflection of the 60 percent stock market rally. From April to June, the market rallied significantly:
Since then, the third quarter has also seen another increase in the trend upward. So we should expect that when the Q3 report is released that household net worth will increase again driven by equities again. As you can tell, real estate is no longer the driving force even though it is the largest line item for U.S. households.
Current U.S. household net worth: $53 trillion
U.S. household real estate: $20 trillion
So real estate makes up nearly 40 percent of household net worth. Keep in mind that $20 trillion in real estate is secured by $10.4 trillion in mortgages many that are now going bad. Interestingly enough, if you look at the mortgage data it peaks around $10.54 trillion and has fallen to $10.4 trillion. Do we really think that only a few hundred billion in mortgages have gone bad? This is simply a reflection of banks not writing down option ARMs and other questionable assets.
The commercial real estate debt is going to hit and cause more losses in the years to come. Yet this is part of the trend that we will not be seeing in the Q3 report. And if you really want to see something frightening in the report, just look at total debt outstanding:
If you add it up, American households have $13.74 trillion in debt. But look at what American business have in debt. That is another $11.2 trillion and you can rest assured much of that commercial real estate is sitting there. State and local governments are saddled with $2.2 trillion in debt and we all know how tough things are for state governments. Unlike the Federal government, states do not have access to the printing press known as the U.S. Treasury so they have to operate in a financial reality that the Federal government seems to ignore.
The debt is coming out of everywhere. Much of this debt is secured by real estate and commercial properties that are still being valued at peak prices. Stocks reflect optimistic scenarios. So we will see another leg down in 2010 possibly as early as Q4 of 2009 since we are starting to see already some weakness of the $13 trillion in financial bailouts and backstops.
And if anyone thinks that we will ever payoff some $33 trillion in debt they are out of their minds. I’ll let you run the math on that one so you can see how laughable this is. Think about it. If our GDP is $14 trillion or so, it would take us over 2 years of full U.S. productivity to pay off this debt. That will never happen because we are spending along the way. This is like a household making $30,000 a year needing to pay off a $3 million loan. As long as the monthly payment is low, not a big deal right? But we’ll be paying this stuff off for centuries.
Keep in mind that American households are still down by $12 trillion from the peak reached in 2007. This quarterly move would be more significant if unemployment and government funds were less of a short-term mover. If anything, what this report tells us is that the only thing that is rallying from the bottom is equities. It is gathering massive steam and price/earnings ratios are not being reflected in the real world.
What we see in the current report is merely the reflection of the 60 percent stock market rally. From April to June, the market rallied significantly:
Since then, the third quarter has also seen another increase in the trend upward. So we should expect that when the Q3 report is released that household net worth will increase again driven by equities again. As you can tell, real estate is no longer the driving force even though it is the largest line item for U.S. households.
Current U.S. household net worth: $53 trillion
U.S. household real estate: $20 trillion
So real estate makes up nearly 40 percent of household net worth. Keep in mind that $20 trillion in real estate is secured by $10.4 trillion in mortgages many that are now going bad. Interestingly enough, if you look at the mortgage data it peaks around $10.54 trillion and has fallen to $10.4 trillion. Do we really think that only a few hundred billion in mortgages have gone bad? This is simply a reflection of banks not writing down option ARMs and other questionable assets.
The commercial real estate debt is going to hit and cause more losses in the years to come. Yet this is part of the trend that we will not be seeing in the Q3 report. And if you really want to see something frightening in the report, just look at total debt outstanding:
If you add it up, American households have $13.74 trillion in debt. But look at what American business have in debt. That is another $11.2 trillion and you can rest assured much of that commercial real estate is sitting there. State and local governments are saddled with $2.2 trillion in debt and we all know how tough things are for state governments. Unlike the Federal government, states do not have access to the printing press known as the U.S. Treasury so they have to operate in a financial reality that the Federal government seems to ignore.
The debt is coming out of everywhere. Much of this debt is secured by real estate and commercial properties that are still being valued at peak prices. Stocks reflect optimistic scenarios. So we will see another leg down in 2010 possibly as early as Q4 of 2009 since we are starting to see already some weakness of the $13 trillion in financial bailouts and backstops.
And if anyone thinks that we will ever payoff some $33 trillion in debt they are out of their minds. I’ll let you run the math on that one so you can see how laughable this is. Think about it. If our GDP is $14 trillion or so, it would take us over 2 years of full U.S. productivity to pay off this debt. That will never happen because we are spending along the way. This is like a household making $30,000 a year needing to pay off a $3 million loan. As long as the monthly payment is low, not a big deal right? But we’ll be paying this stuff off for centuries.
The hypocrisy of the Fed
C-J
As we speak the typical debt to income ratio acceptable to major big bank loan underwriters is 45/100. In the realistic world 33/100 is a tried and true ratio. Anything above 33/100 is considered "risky". I wonder if Fitch, S&P and Moody's are taking this into their calculations? I doubt it!!! For every credibility gap there is always a gullibility fill!
C-J
The Fed is reportedly looking to monitor banker pay in order to discourage excessive risk-taking. But aren't the Fed's easy money policies encouraging risk?
NEW YORK (CNNMoney.com) -- Are there any mirrors in the headquarters of the Federal Reserve? If so, I think it's time for Ben Bernanke and his colleagues to look into one.
The Fed, according to a Wall Street Journal report Friday, is said to be considering a plan that would allow regulators to closely monitor and even change the pay practices at financial firms in order to make sure that these companies aren't encouraging excessive risk-taking.
Considering that the mess that we find ourselves in is partly due to big banks and insurance firms failing to recognize the many subprime warning signs in order to satisfy Wall Street's myopic focus on quarterly profits, reining in bonuses and other compensation tied to stock performance may not sound like a bad idea.
But riddle me this Bat-readers: Isn't it more than a tad hypocritical for the Fed to be trying to tell banks that too much risk is a bad thing?
After all, the Fed has kept its key overnight bank lending rate near 0% since December and has shown no indication that it will raise this rate anytime soon.
And the Fed has pumped trillions of dollars into the financial system through a variety of programs in order to try and get banks to loan more again. The business of lending is inherently risky. So what kind of message is the Fed trying to send here?
"It makes absolutely no sense at all. It is completely counterintuitive," said Haag Sherman, managing director with Salient Partners, an investment firm in Houston. "The government wants to impose more regulations and put shackles on compensation but in the next breath everybody is screaming about banks not lending."
It's hypocritical plain and simple. Isn't all this cheap money designed to push banks to take on more risks? The Fed wants to slap banks on the wrist for paying its employees too much because that might encourage them to get reckless. But at the same time, the Fed is tempting banks to lapse into bad habits with what may be an overly accommodative monetary policy.
This is the equivalent of your doctor telling you that he wants to approve every meal you eat for the next few months so you don't gain a lot of weight -- while handing you coupons for McDonald's and Krispy Kreme on your way out of the office.
Now of course, many big financial firms are guilty of helping to bring about the financial crisis as the promise of fantabulous bonuses undoubtedly caused them to put on blinders and ignore risk.
"There was no acknowledgment that the derivatives they were writing had a risk. The biggest issue with compensation at financial firms is that it was like paying people before the roulette wheel stopped spinning," said Barry Ritholtz, CEO and director of equity research at research firm Fusion IQ in New York.
But there is a lot of blame to go around.
Consumers got suckered into thinking that the American dream wasn't just owning a home but owning a home with as little money down as possible so they could quickly flip it and buy another one. Greedy mortgage brokers and appraisers helped indulge this.
But many believe the the root cause of the housing bubble is that interest rates were extremely low for an extended period of time. And that's mainly the Fed's fault. During the 2001 recession, the Fed slashed interest rates, bringing them down to 1% by June 2003. And it held them at 1% for a year.
As we speak the typical debt to income ratio acceptable to major big bank loan underwriters is 45/100. In the realistic world 33/100 is a tried and true ratio. Anything above 33/100 is considered "risky". I wonder if Fitch, S&P and Moody's are taking this into their calculations? I doubt it!!! For every credibility gap there is always a gullibility fill!
C-J
The Fed is reportedly looking to monitor banker pay in order to discourage excessive risk-taking. But aren't the Fed's easy money policies encouraging risk?
NEW YORK (CNNMoney.com) -- Are there any mirrors in the headquarters of the Federal Reserve? If so, I think it's time for Ben Bernanke and his colleagues to look into one.
The Fed, according to a Wall Street Journal report Friday, is said to be considering a plan that would allow regulators to closely monitor and even change the pay practices at financial firms in order to make sure that these companies aren't encouraging excessive risk-taking.
Considering that the mess that we find ourselves in is partly due to big banks and insurance firms failing to recognize the many subprime warning signs in order to satisfy Wall Street's myopic focus on quarterly profits, reining in bonuses and other compensation tied to stock performance may not sound like a bad idea.
But riddle me this Bat-readers: Isn't it more than a tad hypocritical for the Fed to be trying to tell banks that too much risk is a bad thing?
After all, the Fed has kept its key overnight bank lending rate near 0% since December and has shown no indication that it will raise this rate anytime soon.
And the Fed has pumped trillions of dollars into the financial system through a variety of programs in order to try and get banks to loan more again. The business of lending is inherently risky. So what kind of message is the Fed trying to send here?
"It makes absolutely no sense at all. It is completely counterintuitive," said Haag Sherman, managing director with Salient Partners, an investment firm in Houston. "The government wants to impose more regulations and put shackles on compensation but in the next breath everybody is screaming about banks not lending."
It's hypocritical plain and simple. Isn't all this cheap money designed to push banks to take on more risks? The Fed wants to slap banks on the wrist for paying its employees too much because that might encourage them to get reckless. But at the same time, the Fed is tempting banks to lapse into bad habits with what may be an overly accommodative monetary policy.
This is the equivalent of your doctor telling you that he wants to approve every meal you eat for the next few months so you don't gain a lot of weight -- while handing you coupons for McDonald's and Krispy Kreme on your way out of the office.
Now of course, many big financial firms are guilty of helping to bring about the financial crisis as the promise of fantabulous bonuses undoubtedly caused them to put on blinders and ignore risk.
"There was no acknowledgment that the derivatives they were writing had a risk. The biggest issue with compensation at financial firms is that it was like paying people before the roulette wheel stopped spinning," said Barry Ritholtz, CEO and director of equity research at research firm Fusion IQ in New York.
But there is a lot of blame to go around.
Consumers got suckered into thinking that the American dream wasn't just owning a home but owning a home with as little money down as possible so they could quickly flip it and buy another one. Greedy mortgage brokers and appraisers helped indulge this.
But many believe the the root cause of the housing bubble is that interest rates were extremely low for an extended period of time. And that's mainly the Fed's fault. During the 2001 recession, the Fed slashed interest rates, bringing them down to 1% by June 2003. And it held them at 1% for a year.
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