Home Construction Reaches New Lows

The U.S. Department of Commerce has reported that construction of new houses dropped more than 15 percent in December, to a seasonally adjusted annual rate of 550,000. The issuance of new building permits nationwide for residential projects also contracted–down 12.3 percent for single-family houses and 10.7 percent for apartments. These are the lowest figures since Commerce began keeping track of housing, and it’s playing as bad news, but considering how few houses are selling nationwide, that might be considered good news for the wider market, if not for homebuilders. The yo-yo week continued Thursday on Wall Street, with the indexes struggling toward positive territory much of the day, but ultimately falling back a bit. The Dow Jones Industrial Average ended down 105.3 points, or 1.28 percent. The S&P 500 was down 1.52 percent. The Nasdaq, taking its cue from a sour Microsoft, was down 2.76 percent. Former Merrill Lynch CEO John Thain has resigned from Bank of America. “So long suckers,” was not actually what Thain said upon departure, nor did he cite “creative differences” with the beleaguered bank, nor a desire to spend more time with his family. Not long ago Bank of America reported that Merrill lost $15.31 billion in the fourth quarter, just ahead of the finalization of the bank’s acquisition of the brokerage that used to be bullish on America. The House of Representatives voted today not to release the remaining $350 billion in TARP funds, perhaps as a collective expression of buyers’ remorse over what the first allotment bought the nation. No one, no even in Congress, is quite sure what that was. In any case, the vote was symbolic, since the Senate voted to release the funds last week, and under the original terms of the bailout, it takes both chambers nixing the funds to stop it. Soon the dosh will be available for Treasury Secretary Tim Geithner to spend, in an early test of just how transparent the Obama administration intends to be. What will it take to fix the U.S. financial system? One idea reportedly kicking around the highest levels of the new government is an “aggregator bank,” which would buy up those pesky bad loans and toxic assets from commercial banks. FDIC chief Sheila Bair is reportedly a proponent of the idea. “The Obama Treasury could put a floor under bank losses, through government guarantees on their bonds, or by creating an aggregator bank that purchases those securities from banks altogether,” wrote Peter Morici, professor at the Robert H. Smith School of Business of the University of Maryland in his latest newsletter. “An aggregator bank… could turn a profit,” Morici continues. “It could purchase all the commercial banks’ potentially questionable securities, at their current mark to market values, with its own common stock and funds provided by the TARP. Then the aggregator bank could balance profits on those securities whose loans pan out against losses on securities whose loans fail.”