Economy Watch: FBI Kicks Off Foreclosure Probe
- Oct 21, 2010
By Dees Stribling, Contributing Editor
The foreclosure fiasco has attracted the attention of yet another well-known federal agency, namely the FBI. There now seem to be more agencies, organizations and other entities investigating bum residential foreclosure documents than people in Groucho Marx’s stateroom.
Since the FBI tends to undertake criminal investigations, its involvement in the mess means that someone in the organization believes that more than sloppy paperwork was involved in robo-signing. The robo-signers themselves were probably mere pawns. But what of their bosses? The agency will be looking for criminal intent.
Even if no evidence of criminality is found, incompetence on the part of banks might be enough to slow down the housing market by hampering the sale of foreclosed properties, which account for as much as half of sales in the worst-hit markets. Another question worth asking: will the fiasco also bring a halt to the securitization of mortgages and other kinds of loans, a market only now getting back on its feet?
Beige Book Sees Patchy U.S. Growth
In the latest Federal Reserve Beige Book, which surveys the 12 districts of the central banking system, there’s good news and bad news. The good news: a slip back down into recession isn’t very likely for the economy as a whole. The bad news: only some of the Fed’s districts are clawing their way out of the pit, slowly but distinctly, while the others are making little progress toward experiencing growth.
The Beige Book reported that housing markets remained weak, with most districts reporting sales below year-ago levels. Reports on prices suggested stability, however, and there were scattered reports of improvement in a few districts. Philadelphia noted an increase in sales of existing homes, while Richmond, Kansas City and Dallas reported upticks in sales of higher-priced homes. Sales reports were mixed in the St. Louis and Minneapolis districts, with increases in some metro areas and declines in others. Single-family construction activity was at very low levels, but has improved somewhat in the Chicago, St. Louis and Kansas City districts.
In a masterful example of understatement, the Federal Reserve said that conditions in the commercial real estate sector were “subdued,” and added that construction was expected to remain weak. Lending activity was stable in most districts, so at least that isn’t getting worse.
China Cools Down a Little
China’s not-entirely-reliable official economic numbers for 3Q10 were out on Wednesday, and whatever else is going on between that country and the rest of the world–currency squabbles, rare-earth mineral disputes–the relatively low 9.6 percent growth rate offers the world at least some assurance that the putative Chinese real estate bubble won’t pop just yet.
Average Chinese property prices were increasing as much as an annualized 25 percent in early 2010, a number that had bubble written all over it. Since then, however, that rate has dropped significantly. In September, Chinese property prices were up at an annualized 6.2 percent.
Wall Street yo-yoed back into positive territory on Wednesday, with the Dow Jones Industrial Average up 129.35 points, or 1.18 percent. The S&P 500 gained 1.05 percent and the Nasdaq rose 0.84 percent.