Top of the News: It would be wrong to say that the Obama administration’s mortgage rescue plan is “too little, too late.” It’s a good start. It might have been more effective, however, if it could have been in the pipeline a year ago, before the self-reinforcing cycle of lost jobs and lost wealth from the 401(k) casino took hold. As it stands, the plan can at best aim to stanch the foreclosure bleeding by allowing for refinancing and more affordable terms. You can see the Treasury’s fact sheet on the rescue here.
The program faces some unknowns. For example, will the incentives offered by the government be enough to get lenders (and their puppet-masters in the shadow banking system) to modify the terms of mortgages. The biggest: How many people can be helped? The program aims at up to 9 million households. The Center for Responsible lending calculates that a new foreclosure happens every 13 seconds (using data from the Mortgage Bankers Association). It estimates 5,900 foreclosure in Washington state so far this year.
Meanwhile, a new study indicates that one in five homeowners with mortgages are “under water” — owing more on the loan than the worth of the house. As joblessness spreads, the ability to even keep making payments is eroded. An estimated 697,000 jobs were lost in February. So this is a big problem. Like TARP, this might be only the first installment of mortgage relief.
The Back Story: One of the best resources for understanding what’s really going on in the energy markets is The Oil Drum. I’ll call your attention to a report on Saudi oil production — a closely guarded secret in the kingdom with the world’s largest reserves — but data leak out. They indicate that Saudi production peaked in 2005 and is now headed down. This is Huge, as Donald Trump would say.
Most of the elephant fields in the world — the giant oilfields — are near, at, or post peak, Mexico’s Cantarell field being a prominent example. This doesn’t mean “we’re going to run out of oil.” It does mean a higher-cost energy future, and one that will put increasing stress on American-style autopia that is closely linked with the mortgage meltdown. Indeed, peak oil theorists long predicted something like the current financial crisis would accompany world peak.
Today’s Econ Haiku:
As Merrill Lynch failed
Top execs were paid millions
While clients got bull