Archive for September, 2011

The World’s Most Incredible Bridges

September 27, 2011

Yahoo! Travel

Starting with simple logs from fallen trees or a few stones strategically placed across a stream, bridges and humans have had a long history. Many are designed exclusively for people on foot or on bike; others are for use by cars, boats or trains. Some bridges connect continents; others are known more for their histories and the cultural interest they inspire.

“Few man-made structures combine the technical with the aesthetic in such an evocative way as bridges” wrote David J. Brown, a bridge historian and author of Bridges: Three Thousand Years of Defying Nature. With the help of Brown, and Judith Dupré, a structural historian and bridge expert, we’ve searched the globe for incredible specimens of architecture that span physical obstacles — better known as bridges.

The Singapore Helix Bridge, Singapore

The almost 1,000 foot long curved Singapore Helix Bridge connects Singapore’s Youth Olympic Park with the new Marina Bay Sands integrated resort. Designed by architecture firms the Cox Group and Architects 61, and international engineering firm Arup, the Singapore Helix is the world’s first bridge in the form of an interlocking double helix, and also utilizes lights to highlight its unique structure, Brown said. The bridge has viewing platforms, and also serves as a gallery.

The Singapore Helix Bridge, Singapore

Ponte Vecchio, Florence, Italy

Florence’s Ponte Vecchio (which means “Old Bridge”), crosses the Arno River, and is an inhabited bridge, common in Europe during the Middle Ages when merchants and residences occupied the space. “The Ponte Vecchio is more than a bridge. It is a street, a marketplace, a public square, and an enduring icon of Florence,” Dupré writes. Today, she said, the bridge houses gold shops and, on the top level, the “secret” Vasari Corridor that Renaissance nobility once used to cross between the Pitti and Vecchio palaces. The bridge is considered to be the first segmental arch bridge built in the West, according to the Encyclopaedia Britannica and “is an outstanding engineering achievement of the European Middle Ages.” Built in 1345, it required fewer piers than the Roman semicircular-arch design, as the shallower segmental arch offered less obstruction to navigation and freer passage to floodwaters. Its design is generally attributed to Taddeo Gaddi, better known as a painter and pupil of Giotto. During World War II, it was the only bridge in Florence spared from destruction by German bombs, because Hitler took a fancy to it.

Ponte Vecchio, Florence, Italy

Sundial Bridge, Redding, CA

Spanish architect and engineer Santiago Calatrava’s Sundial Bridge stretches across the Sacramento River in Redding, California, linking the two campuses of Turtle Bay Exploration Park. Opened in 2004, the bridge for pedestrians and bicyclists also serves as a gateway to the Sacramento River Trail system, and its soaring backward-leaning mast with cables stretched like the strings of a harp, is a working sundial, said David J. Brown, a bridge historian and author of Bridges: Three Thousand Years of Defying Nature. The bridge is also environmentally sensitive to its setting. The free-standing construction allows the bridge to avoid impacting the nearby salmon-spawning habitat, as there are no supports in the water, yet its glass-bottom encourages public appreciation of the river, according to Turtle Bay Exploration Park. The Sundial Bridge is one of about fifty — and the first built in the United States — designed by Calatrava, writes Brown.

Sundial Bridge, Redding, California, United States

Leonardo’s "Golden Horn" Bridge, Aas (near Oslo), Norway

Designed in 1502 by Leonardo da Vinci to span the “Golden Horn,” the famous waterway in Istanbul that separates Europe and Asia, the stone bridge was never built because the Turkish sultan feared that it was not technically feasible. A scaled down, laminated wood and stainless steel version based on the famous artist’s original plan is now a footbridge near Oslo, Norway. “For 500 years the beauty and symbolism of this graceful bridge remained an obscure drawing in one of Leonardo’s notebooks, until it was brought into being in Norway in 2001 by the contemporary artist Vebjorn Sand,” according to the website of The Leonardo Bridge Project, a global public arts project. Built in collaboration with the Norwegian transportation ministry, the bridge was the first civil engineering idea by Leonardo to be realized.

Leonardo's 'Golden Horn' Bridge, Aas (near Oslo), Norway

Millau Viaduct, Millau, France

Rising above the clouds, the Millau Viaduct is the tallest road bridge in the world, said Brown, a bridge historian and author of Bridges. With its loftiest pier higher than the Eiffel Tower, it was financed by the same company that built the famous French monument. Conceived by engineer Michel Virlogeux and designed by architect Sir Norman Foster, the cable-stayed bridge (in which the deck is supported from towers by a series of cables), comprises seven concrete piers and a steel deck, and spans more than one-and-a-half miles across the valley of the river Tarn near Millau in southern France. Completed in 2004 after only three years’ construction, the Millau Viaduct was created to have the "delicacy of a butterfly," said Foster in news reports. "A work of man must fuse with nature. The pillars had to look almost organic, like they had grown from the earth," said the English architect, who was interviewed by a regional paper and quoted in a BBC news report.

Millau Viaduct, Millau, France

Ponte Sant’ Angelo, Rome, Italy

Ponte Sant’Angelo spanning the Tiber in Rome, one of the eight stone bridges the Romans are known to have built over the Tiber between 200 B.C. and A.D. 260, is the most celebrated of the six “massive beauties” still in use, said Judith Dupré, author of Bridges. “The Romans perfected the masonry arch,” she said, allowing them to span much greater distances than previously. “Much of Roman engineering genius is underwater, hidden from view, but their inventions — including the cofferdam, cutwater piers that divide water current, and pozzolano, a type of waterproof concrete—are still used today,” Dupré said. Ponte Sant’ Angelo, originally named for Hadrian, the emperor who reigned during its construction, leads to his mausoleum, Castel Sant’ Angelo, a popular tourist attraction in Rome.

Ponte Sant' Angelo, Rome, Italy

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Senate leaders announce bipartisan agreement to avert government shutdown

September 27, 2011

The Washington Post

Senate leaders agreed to a deal Monday evening that is almost certain to avert a federal government shutdown, a prospect that had unexpectedly arisen when congressional leaders deadlocked over disaster relief funding.

After days of brinkmanship reminiscent of the budget battles that have consumed Washington this year, key senators clinched a compromise that would provide less money for disaster relief than Democrats sought but would also strip away spending cuts that Republicans demanded. The pact, which the Senate approved 79 to 12 and the House is expected to ratify next week, is expected to keep federal agencies open until Nov. 18.

“It will be a win for everyone,” said Majority Leader Harry M. Reid (D-Nev.).

Minority Leader Mitch McConnell (R-Ky.) called the plan “a reasonable way to keep the government operational.”

Aides to House Speaker John A. Boehner (R-Ohio) said he will support the compromise.

The spending battle marked the third time this year that congressional acrimony has brought the government to the edge of calamity. In April, Boehner and President Obama reached a deal on funding for 2011 about 90 minutes before a government shutdown was to begin. On Aug. 2, just hours before the deadline, Congress gave final approval to legislation lifting the government’s borrowing authority, averting a partial shutdown and the potential for a default on the federal debt.

Although this week’s fight ended with days, rather than hours, to spare, it drained many in Congress, who thought it was a senseless fight. Reid summed up the feeling of many lawmakers when he quoted Sen. Johnny Isakson (R-Ga.), who said there was too little money in dispute to raise the specter of a shutdown and to halt payments to those affected by natural disasters.

“Let’s fight when there’s something to fight about,” Reid quoted Isakson as saying during a speech on the Senate floor.

At issue was a dispute over how to fund disaster relief, a concern that was heightened in late August after an earthquake struck central Virginia and Hurricane Irene caused flooding in the Northeast.

Although Democrats said the Federal Emergency Management Agency needed more funding, they agreed to accept a Republican plan to spend $3.65 billion in disaster relief money, $1 billion of which would have gone toward the budget for the current fiscal year, which will end Friday. Republicans, concerned about adding to the budget deficit, refused to support the funding without $1.6 billion in accompanying cuts. Their largest target was an auto loan program popular with Democrats, leading to the standoff.

The showdown between the two sides was averted on Monday, when FEMA said it could make ends meet through the end of the week. That led to an agreement that calls for the agency and other government disaster relief programs to forgo the $1 billion in proposed funding for this week. Beginning Saturday and running to Nov. 18, FEMA can begin to tap the remaining $2.65 billion for ongoing efforts.

With the House out of session this week, the Senate approved a resolution that will keep the government open through next Tuesday. The House is expected to approve that extension in a voice vote Thursday, which does not require all members to be present, and then approve the longer-term bill next Tuesday.

Some lawmakers from hard-hit states are unhappy with the compromise, saying that it would result in a slight delay in processing aid to victims, and that the overall total of FEMA funding wouldn’t be enough to account for the damage caused by the disasters.

“They would delay the process by punting back to the House,” said Sen. Roy Blunt (R-Mo.). The deal “also stripped $1 billion in disaster relief and provides less emergency funding for Missourians in the wake of record flooding and tornadoes,” he added.

The debate over the budget bill turned on sharp — and familiar — political lines that scuttled earlier talk that the two parties were going to tone down their attacks.

Republicans, particularly House conservatives, said they were unwilling to add to the federal deficit, even for disaster funding, and accused Democrats of overspending. Democrats used the debate to portray Republicans as “holding hostage” relief checks for those struck by tornadoes, flooding, forest fires and droughts, focusing much of their criticism on House Majority Leader Eric Cantor (R), who represents Mineral, Va., the epicenter of the earthquake.

Although the agreement lifts the imminent specter of a government shutdown, it will not resolve the fight over how much FEMA needs to help disaster victims and whether that money must be offset with spending cuts.

The White House has said FEMA will need $4.6 billion for the next fiscal year — a figure many Democrats say underestimates the agency’s needs.

Democrats will push to fully fund FEMA’s request and perhaps broaden it during negotiations over spending for the rest of the year, but they were split Monday over what the compromise would mean for future funding battles.

“This is a very big and important move. It says we met each other halfway. We saved the jobs,” said Sen. Barbara Boxer (Calif.), referring to the the auto loan program. “We figured out a way to fund FEMA that was acceptable to them. It’s a template. We have to figure out how to meet each other halfway here.”

Sen. Patrick J. Leahy (Vt.), whose state was hit hard by flooding from Hurricane Irene, said the deal would solve the disaster issue — but only temporarily.

“I’m concerned about the fact that we give blank checks to Iraq and [Afghanistan] and we don’t want to take care of America for Americans,” he said. “It’s wrong, it’s foolish and it will come back to haunt us.”

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Freddie Mac Loan Deal Defective, Report Says

September 27, 2011

The New York Times

Freddie Mac used a flawed analysis when it accepted $1.35 billion from Bank of America to settle claims that the bank misled it about loans purchased during the mortgage boom, according to an oversight report scheduled for release on Tuesday.

The faulty methodology significantly increased the probable losses in Freddie Mac’s portfolio of loans, according to the report, prepared by the inspector general of the Federal Housing Finance Agency, which oversees the company. Freddie Mac and Fannie Mae were taken over by the government in 2008 so additional losses would be shouldered by taxpayers.

The report also noted that the settlement with Bank of America in December was completed over the objections of a senior examiner at the agency. Freddie Mac officials did not want to jeopardize the company’s relationship with Bank of America, from which it continues to buy loans, the report concluded.

The agency official who questioned the loan review methodology contended that Freddie Mac’s analysis greatly underestimated the number of dubious loans bought from the Countrywide unit of Bank of America from 2005 to 2007. The deal between Freddie Mac and the bank resolved claims associated with 787,000 loans, some of which were repurchased by the bank, and cannot be rescinded.

“An effective mortgage repurchase process is critical in limiting the enterprises’, and ultimately, the taxpayers’ exposure to credit losses resulting from the financial crisis,” said Steve A. Linick, the inspector general who oversaw the report. “F.H.F.A. and Freddie Mac must do more to ensure that high-dollar settlements of repurchase claims are accurately estimated and in the best interests of taxpayers.”

When selling loans to Freddie Mac and Fannie Mae, Countrywide and other originators vouched that the mortgages met certain quality standards or characteristics, like accurately representing a borrower’s income or the appraised value of a property. These promises require mortgage originators to buy back at full value those loans that do not meet the standards.

Companies often review loans for possible buybacks after experiencing large numbers of defaults. Not all defaults, of course, occur after misrepresentations.

The inspector general’s report does not specify how much additional money Freddie Mac could have received from Bank of America had it used a more effective analysis. But the senior examiner who questioned the deal told the inspector general’s staff that Freddie Mac’s faulty process could cost the company “billions of dollars of losses.”

A Freddie Mac spokesman, Douglas Duvall, declined to comment, but said that it continued to believe its deal with Bank of America was “commercially reasonable based upon our internal evaluation and judgments.”

Because of the faulty methodology, Freddie Mac failed to review 100,000 loans from 2006 for possible irregularities, the report said. As of June 2010, some 93 percent of foreclosed mortgages from 2005 and 2006 had not been analyzed, eliminating “any chance to put ineligible loans back to the lenders for those years.”

The report also noted that 300,000 foreclosed loans originated from 2004 to 2007 and owned by Freddie Mac were not reviewed for possible claims. These loans have a combined unpaid principal balance exceeding $50 billion, the report said.

Freddie Mac’s review process was faulty, according to the report, because it did not change its analysis to account for new types of mortgages issued during the housing boom. These included mortgages that had rock-bottom interest rates initially — known as teaser rates — lasting three years to five years before adjusting upward.

The loan review analysis used by Freddie Mac focused on mortgages that went bad within two years, because historically that had been the period during which defaults related to possible loan improprieties were most likely to occur. Reasoning that the new types of mortgages with artificially low initial rates would probably lengthen the period before large numbers of defaults occurred, the senior agency examiner urged Freddie Mac’s management in June 2010 to review loans that experienced problems well after two years, the report said.

The company declined to change its methodology. At a July 2010 meeting of Freddie Mac’s credit risk subcommittee, a company manager told housing finance agency staff that loan repurchase reviews were “not the highest and best use of his limited resources,” the report said. Freddie Mac officials also disagreed with the concerns expressed by the senior examiner at the agency, the report said, “partly because they believed a change to a more aggressive approach to repurchase claims would adversely affect Freddie Mac’s business relationships with Bank of America and other large loan sellers.”

A few months later, the deal was made with Bank of America. As they considered the merits of the deal, Freddie Mac’s directors were told that it would improve the company’s “ongoing relationship with Bank of America.”

The $1.35 billion buyback deal was done despite questions about its review process from the company’s internal auditors, the inspector general’s report said.

Randy Neugebauer, a Texas Republican who leads the oversight and investigations subcommittee of the House Financial Services Committee, said: “After reading the I.G.’s report, I am concerned that F.H.F.A. is not exercising independent judgment. The American taxpayers deserve better than business as usual, especially when they have already spent $160 billion to keep Freddie and Fannie afloat.”

The report also noted that superiors at the agency declined to help the senior examiner prod Freddie Mac to expand its review process. One of those superiors, a senior manager who was not identified, told the inspector general that he had not opened the attachment to an e-mail from the senior examiner outlining problems with the company’s methodology.

Responding to the inspector general’s report, the agency said it continued to believe that the Bank of America settlement was “appropriate and reasonable.” But the agency agreed that it lacked policies and procedures where “an examiner has a safety and soundness concern” but encountered resistance in pursuing it. The agency said it would soon issue such policies.

The Federal Housing Finance Agency has suspended all future mortgage repurchase settlements affected by the methodology underlying Freddie Mac’s loan review process.

Last June, Freddie Mac’s internal auditors advised the company that its controls regarding the loan review process were “unsatisfactory” and said that “opportunities for increasing the repurchase benefit justify an expansion of our sampling approach” after the second year of the loan, the report said. A company official told the Freddie Mac directors that a more in-depth loan review could generate as much as $1 billion in additional revenue.

Two months ago, Freddie Mac began a more rigorous review of foreclosed, interest-only loans. In late August, it told the housing finance agency staff that the study showed 15 percent of the sampled loans — a higher figure than that in the Bank of America settlement — contained defects that might result in buybacks among originators.

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Fed bond-buying decision keeps mortgage rates at record lows

September 26, 2011

Housingwire

The Federal Reserve‘s plan to reinvest principal payments on some bonds into mortgage-backed securities is already contributing to the nation’s record low mortgage interest rates, Bankrate said Thursday.

Bankrate said the Federal Open Market Committee seems to be taking direct aim at mortgage rates by shifting $400 billion from short-term holdings into long-term government bonds. The program, which begins Oct. 3 and runs through June, will involve longer-term Treasury securities with remaining maturities of six years to 30 years, and will be financed through the sale of shorter-term Treasurys with maturities of three years or less.

"This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative," the FOMC said in a statement following its two-day meeting.

Analysts also said anemic economic growth and European debt fears are keeping investors on the sidelines.

Rates are unlikely to increase until mortgage refinancing and purchasing activity picks up, Bankrate said.

"In order to get the most economic impact out of low mortgage rates, the pool of prospective refinancers needs to be expanded. Deeply upside-down homeowners, those with second liens or mortgage insurance, and lender concerns about buyback liability are all formidable impediments to refinancing," according to the firm, which aggregates rate data from across the country.

The Freddie Mac primary mortgage market survey showed the average rate for a 30-year, fixed-rate mortgage remained unchanged this week at 4.09%, while the 15-year, fixed rate dropped one basis point to a new record low of 3.29%.

Meanwhile, the five-year, Treasury-indexed hybrid adjustable-rate mortgage averaged 3.02%, up from 2.99% last week and down from 3.54% a year ago.

The one-year, Treasury-indexed ARM averaged 2.82% this week, up from 2.81% a week earlier and down from 3.46% last year.

"A sluggish economy and investor concerns over the European debt markets left mortgage rates largely unchanged this week," said Frank Nothaft, vice president and chief economist for Freddie Mac.

"Manufacturing activity in both the New York and Philadelphia regions contracted in September," he said. "Moreover, the Federal Reserve board reported that households lost nearly $150 billion in net worth in the second quarter, representing the first quarterly decline in a year."

Bankrate data show the 30-year FRM at record lows for the fifth consecutive week. The average rate for a traditional mortgage fell to 4.29%, from 4.32% last week, while the 15-year FRM declined to 3.42% from 3.44%.

In addition, the 5/1 ARM decreased to 3.05% from 3.07% last week.

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What New Jumbo Mortgage Rules Mean for Expensive Zip Codes

September 26, 2011

Yahoo! Finance

On Oct. 1, the size of mortgages eligible for purchase by Fannie Mae and Freddie Mac will shrink. That isn’t necessarily a big deal in most parts of the country; the new lower limit of $625,500 — down from today’s $729,750 — still is big enough to cover most homes in almost all markets in the United States.

Furthermore, mortgage bankers are stepping up with new money to cover those bigger loans, reports Mortgage Daily. "Programs here and there are popping up," says publisher Sam Garcia. He reports that some new lenders, including TMS Funding and New Penn Financial LLC, are launching programs that will make mortgages as big as $2 million available to lenders with good credit scores and enough cash to keep up with the payments. And many existing mortgage lenders currently will make those so-called "jumbo" loans and just keep them in their portfolios instead of selling them.

But those loans will cost more. Currently the difference between rates on so-called conforming loans and private-made loans is about 0.64 percent. Over the last two years that spread has been as low as 0.48 percent and higher than one percent, says Garcia.

So in some pricey places, the new limits will really pinch borrowers. Those limits vary from market to market and are determined in part by local housing prices. In expensive housing markets where prices have fallen, the limits will drop the most. Hardest to be hit, according to a new analysis by Move.com, will be San Diego, where loans up until $697,500 qualify for Fannie and Freddie until Sept. 30. On Oct. 1, that limit drops to $546,250, a $151,250 difference.

Folks there who want to borrow a bunch for a home will see their costs rise significantly. A San Diego homebuyer who needs $600,000 would pay $2,937 a month for a 30-year loan at today’s rate of 4.18 percent, according to Bankrate.com. Starting next month, if rates stay stable and that borrower goes to a private lender, he would pay $3,155 a month. That’s $228 more a month, or $82,080 more over 30 years.

Some buyers (and lenders) may try to get around that by piggy-backing loans; piling a smaller non-conforming loan onto a conforming loan.

Here are some other areas, most often searched on Realtor.com, that could see significant changes in their loan limits, according to the Move analysis.

Untitled

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FHFA lacks staff to effectively monitor GSEs, report says

September 26, 2011

Housingwire

The Federal Housing Finance Agency lacks the staff to properly monitor the mortgage giants it has in conservatorship, according to a report by the Office of the Inspector General.

The report said the agency also failed to provide adequate oversight over default services legal issues.

The Office of the Inspector General for the federal regulator said the FHFA "has far too few examiners" to properly handle its examination system to monitor Fannie Mae,Freddie Mac and the Federal Home Loan Banks

The inspector general report also "identified shortfalls in the agency’s examination coverage, particularly in the areas of real estate owned and default-related legal services," which it blames on the staffing shortages.

In another report, the inspector general said the FHFA over the past five years "repeatedly found Fannie Mae had not established an acceptable and effective operational risk management program despite outstanding requirements to do so." The auditor said the regulator hasn’t exercised its power as conservator to force the company to do as much, and recommends the FHFA compel Fannie to establish stronger controls.

"Fannie Mae’s lack of an acceptable and effective operational risk management program may have resulted in missed opportunities to strengthen the oversight of law firms it contracts with to process foreclosures," according to the auditor’s report.

"Given Fannie Mae’s history of noncompliance, (the Office of the Inspector General) believes that the agency must exercise maximum diligence and take forceful action to ensure that Fannie Mae meets the agency’s expectations in this regard. Otherwise, FHFA’s safety and soundness examination program, as well as its delegated approach to conservatorship management, may be adversely affected."

Fannie Mae declined comment.

Edward DeMarco, acting director of the FHFA, has said the agency is having trouble hiring experienced examiners because many don’t want to move to Washington and there’s the perception the government-sponsored enterprises will ultimately go away.

The FHFA has 120 examiners and plans to hire another 26, but "has expressed concern that its current hiring initiative will neither enable it to overcome its examination capacity shortfalls nor ensure the effectiveness of its 2011 reorganization," according to the inspector general report.

The agency wanted all the new examiners on board by the end of September, but now expects to have them all working by the end of the year.

The agency wants to assign 20 to 25 examiners to each examination team, yet is only staffing them with 13. The FHFA indicated only 34% of the 120 nonexecutive examiners are accredited federal financial examiners, and there is no accreditation program currently in place.

The federal auditor recommends the FHFA further study its staffing problems, implement an examiner accreditation program and use contractors to mitigate the shortage.

"Moreover, FHFA has not reported upon its examination capacity shortfalls in a systematic manner," according to the report. "Given FHFA’s critical responsibilities, it is essential that it keeps Congress, the executive branch and the public fully and currently informed about its examination capacity."

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Global surveyors want greener appraisals

September 26, 2011

Housingwire

The issue of whether or not a property is more environmentally friendly when compared to neighboring homes is not currently taken into great account during the appraisal process.

It’s a practice that should end, according to a recent white paper from the Royal Institute of Chartered Surveyors.

RICS is suggesting that, in cases when homes contain sustainability features such as solar panels or tankless water heaters, it should favorably impact the appraisal.

"A property’s sustainable status can cover a range of social, environmental and economic matters that can potentially lead to changes in demand and therefore affect value," said Ben Elder, RICS global director of valuation.

While RICS is most recognized in the United Kingdom, the independent land valuation association maintains a network of 100,000 qualified members and more than 50,000 students and trainees in 140 countries, including the United States.

Sustainability features can also include a home’s energy efficiency rating and green materials used in construction, but RICS says the concept needs to go even further.

For example, if the home is close to public transportation, it lowers the carbon footprint of residents. This should also make the property more valuable, the white paper states.

"When calculating a property’s worth, the market doesn’t always take the issue of sustainability into account, but this could also have been said for central heating way back in the 1970s when people weren’t convinced it was going to have a market impact," said Elder, who is expecting some industry headwinds.

"With the increased emphasis on green living and energy efficiency, it is highly possible that the market will need to adapt," he added.

Homes built in the aftermath of the U.S. financial crisis should be more efficient in their use of space and energy to address a renewed emphasis on cost-consciousness among homebuyers, New York-based residential developer Mitchell Hochberg, principal at Madden Real Estate Ventures, told HousingWire in an interview appearing in the September issue.

Homebuyers are willing to pay more to get green features because they realize the operating costs of the home long term are far more important than the potential additional costs associated with buying a green home, he said.

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Dodd-Frank Act a Favorite Target for Republicans Laying Blame

September 26, 2011

The New York Times

On the stump, words like “Obamacare” roll off the tongue. “Swap execution facility,” not so much.

That has not stopped Republican presidential candidates from using the Dodd-Frank Act, the sprawling regulatory effort to address the causes of the financial crisis, as their newest anti-Obama target for what ails the economy.

Republicans have repeatedly invoked the law’s 848-page girth — and its rules on, among other things, trading derivatives and swaps — as a symbol of government overreach that is killing jobs.

But in trying to turn Dodd-Frank into the new Obamacare, the disparaging term that opponents use to refer to the new health care law, Republicans are largely ignoring the basic trade-off that the financial law represents, supporters say.

“Dodd-Frank is adding safety margins to the banking system,” said Douglas J. Elliott, an economic studies fellow at the Brookings Institution. “That may mean somewhat fewer jobs in normal years, in exchange for the benefit of avoiding something like what we just went through in the financial crisis, which was an immense job killer.”

So far, only a small portion of the law, which was signed by the president in July 2010, has taken hold. Of the up to 400 regulations called for in the act, only about a quarter have even been written, much less approved.

Dodd-Frank aims to rein in abusive lending practices and high-risk bets on complex derivative securities that nearly drove the banking system off a cliff. It creates a bureau to protect consumers from financial fraud, cuts the fees banks charge for debit card use, and sets up a means for the government to better supervise the nation’s largest financial institutions to avoid expensive and catastrophic failures. And it calls for swap execution facilities, or exchanges on which derivatives and other complex financial instruments are traded.

Republicans say Dodd-Frank is the root of some of today’s economic problems. It has stopped banks from lending to “job creators,” they contend, and is a direct cause of high unemployment. “It created such uncertainty that the bankers, instead of making loans, pulled back,” said Mitt Romney, the former Massachusetts governor, speaking at a South Carolina rally over Labor Day weekend where he again called for the law’s repeal.

“I think part of that flows from the fact that the people who were putting that together, Dodd and Frank,” he continued, referring to Democratic lawmakers former Senator Christopher J. Dodd of Connecticut and Representative Barney Frank of Massachusetts, “as much as anyone I know in this country were responsible for the meltdown that we had.” 

Mr. Frank demurs.  “Their claims are literally based on nothing but misconception,” he said. “The legislation is very popular. Nobody wants to go back to totally unregulated derivatives. Nobody wants banks to go back to making loans without having to retain some of them. This is a debate that is being conducted for the right wing.”

Rick Perry, the governor of Texas, has also called for the repeal of Dodd-Frank. “We have to end it right now,” he said, on the same weekend in the same state as Mr. Romney. Newt Gingrich said it is “a devastatingly bad bill” that is “killing small banks, killing small business, killing the housing industry.”  Representative Michele Bachmann regularly reminds voters that she introduced the first Dodd-Frank repeal bill this year.

Former Gov. Jon Huntsman of Utah agrees, but he wouldn’t stop there. He would also eliminate the Sarbanes-Oxley law passed in 2002, which set standards for corporate accountability in the wake of the Enron scandal.

The candidates could find that there are some political dangers to their deregulation strategy, as Republicans in Congress learned last year during the debate over the legislation. Then, opponents of measures to address the causes of the financial crisis found themselves rather easily painted as defenders of Wall Street financiers and the banking industry, rather than being on the side of borrowers and consumers. Mr. Obama has signaled recently that in the 2012 campaign he plans to portray Republicans as defending corporations and the wealthy.

These political risks probably account for the Republicans’ current effort to portray Dodd-Frank as an enemy of jobs rather than as a burden to banks. Most of the regulations included in the law fall on the big banks that were at the center of the financial crisis — Bank of America, Citigroup, Wells Fargo and JPMorgan Chase.

Those names rarely pass the candidates’ lips, however, as Republicans have turned Dodd-Frank into a piñata. Instead, they invoke community bankers — the small-town lenders who are more likely to be seen coaching a Little League team than wearing a pinstripe suit — as the beleaguered victims of overregulation.

Community bankers worry about Dodd-Frank rules setting limits on how much banks can charge for debit card transactions. Those rules have yet to go into effect. In the meantime, the bankers say, they have plenty of money to lend, but small-business owners are not asking for loans.

“There are a lot of qualified borrowers who don’t want to borrow, because they are not sure what is going to happen with the economy,” said R. Todd Price, president of the First State Bank of Mesquite, Tex. “I don’t know if that can be directly associated with Dodd-Frank,” he added. While the law “will put a whole lot more regulations especially on community bankers,” he said, “I think they’re yet to come.”

The arguments of the Republican candidates have some support among economists, particularly conservatives. Todd J. Zywicki, a senior scholar at the Mercatus Center at George Mason University, says that credit is the lifeblood of the economy, and that Dodd-Frank was designed to decrease access to credit. “Dodd-Frank is the thing that is most harming the economy right now,” he said. “Big business can deal with regulatory uncertainty, but it makes small businesses reluctant to take on risk and expand their operations.”

Unless Republicans capture the presidency and can also muster 60 votes in the Senate, it appears unlikely that Dodd-Frank will be repealed in full. Senate and House Republicans introduced such bills, but they have never been brought up for floor votes.

But there has also been relatively little resistance from Democrats in defense of Dodd-Frank. Federal agencies have been busy writing regulations to put the law into effect, but those efforts have not generated the widespread public debate that occurred when the legislation was debated in Congress. Without someone on the Democratic side actively fighting on its behalf, Dodd-Frank, for the moment at least, has been left without a champion.

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G.O.P. Urges No Further Fed Stimulus

September 26, 2011

The New York Times

Even though the financial markets have been counting on the Federal Reserve to take action, Republican Congressional leadership sent a letter to the Federal Reserve chairman on Tuesday evening urging it not to engage in further stimulus.

The letter was sent in the midst of a two-day meeting in which Fed officials are widely expected to undertake policies to lower long-term interest rates. That move would be intended to loosen up credit in hopes of promoting growth. The meeting ends Wednesday, and the Fed is expected to release a statement Wednesday at 2:15 p.m.

“We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy,” said the letter, signed by four of the top Republicans in Congress: Mitch McConnell of Kentucky, the Senate Republican leader; Jon Kyl of Arizona, the Senate Republican whip; House Speaker John Boehner of Ohio and House Majority Leader Eric Cantor of Virginia.

The Fed’s chairman, Ben S. Bernanke, has not said further stimulus was in the works, but economists and analysts have repeatedly asserted that they believe the central bank will announce more easing.

“I just don’t think the Fed will sit idly as momentum fizzles in this recovery,” said Dana Saporta, a United States economist at Credit Suisse.

Minutes from the Fed’s latest meeting revealed sharp dissent within the group of policy makers, so further stimulus is not necessarily a sure bet.

As the Republican letter notes, economists are divided on how much the move would help the stalled recovery. The Fed, after all, has tried several rounds of monetary stimulus in the last four years.

Republican Congressional leaders expressed not only skepticism that further easing would improve the recovery, but also concerns that such actions might be damaging.

“Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers,” the letter from Republicans said.

Many economists, however, are unconvinced by these risks and argue that a weakened dollar would be good for the country because it would make American exports more attractive.

With unemployment at 9.1 percent and Congress unable to agree on fiscal policies that might encourage job creation, many advisers have been calling on the Fed to continue using whatever ammunition it has left.

The Federal Reserve is an independent body whose decisions do not have to be ratified by the president or Congress, and efforts to influence monetary policy are discouraged to maintain its credibility.

“Even if I agreed” with the Republican letter, Tony Fratto, a former adviser to President George W. Bush, wrote in a Twitter post, “I’d still disagree with the effort to put public political pressure on Bernanke.”

Over the years, there have been many efforts by members of both parties, from both the White House and Congress, to influence Fed policies, according to Allan H. Meltzer, a political economy historian at Carnegie Mellon.

Less than a year ago Michele Bachmann, a Minnesota congresswoman who is running as a Republican presidential candidate, sent a letter to Mr. Bernanke urging him to refrain from the last round of stimulus, which the Fed ultimately decided to do.

In recent months other Republican presidential candidates have stepped up their attacks on Fed policy, with Rick Perry, the governor of Texas, calling further easing “treasonous.”

Fed critics have said they are merely trying to counter pressure from Democrats for the Fed to do more.

“This is the most politicized Fed we’ve ever had,” Mr. Meltzer said. “They’ve been doing the Treasury’s work for quite some time, buying things like Treasuries and bonds. It’s no surprise that there’s political pressure coming from the other direction.”

The Federal Reserve was meant to be independent so that it would be shielded from short-term political interests, and Fed officials have repeatedly said they are unmoved by external political pressures. A Fed spokeswoman acknowledged receiving the letter on Tuesday evening but she declined to comment further.

Appearing to cave to political interests — on the left or the right — could compromise the Fed’s authority and jolt markets even more than a popular or unpopular policy decision.

If anything, Federal Reserve members seem to be trying show their ability to exert their own influence. Traditionally, Fed officials have refrained from commenting on fiscal policy except in the vaguest of terms, but in an August speech Mr. Bernanke called on Congress to avoid steep spending cuts in the near future. He also gave specific recommendations for fiscal measures to promote long-term growth.

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Fed Runs Risk of Doing Less Than Investors Expect

September 26, 2011

The New York Times

Investors have concluded that the Federal Reserve will announce new measures to promote economic growth after a meeting of its policy-making committee ends Wednesday. Long-term interest rates have moved as if the Fed had already spoken.

The central bank is often described as facing the choice of whether to do more to improve the economy. But the anticipatory behavior of investors means the Fed really faces a slightly different choice, one it has confronted often in recent years: whether to risk doing less than expected.

The overriding argument for action is the persistent weakness of the American economy, which has left more than 25 million Americans unable to find full-time work.

The Federal Reserve chairman, Ben S. Bernanke, who has made a series of unusual efforts to revive growth, has not discouraged speculation that he is ready to try again.

“I think the Fed has no choice but to act,” said Krishna Memani, director of fixed income at Oppenheimer Funds. “If the Fed were not to do anything having built market expectations to a pretty decent level, I think the markets would react quite negatively to that.”

But the Fed also faces mounting pressure against additional action, including strident criticism from Republican presidential candidates and divisions in the policy-making committee. Moreover, the options available to the central bank have less power to generate growth, a greater chance of negative consequences, or both, than those it has already tried.

Some close watchers of the central bank say investors’ behavior could let the Fed offer a token gesture now, postponing any larger move at least until its next meeting in November. After all, the Fed is reaping the benefits of action without the costs.

“There is no reason for the Fed to rush,” Lou Crandall, chief economist at Wrightson/ICAP, wrote in a recent note to clients predicting such an outcome. “It is in the Fed’s interest to milk the anticipation effect as long as possible.”

The move markets are anticipating is a new effort to reduce long-term interest rates, which would allow businesses and consumers to borrow more cheaply. Yields on the benchmark 10-year Treasury note fell to a record low of 1.88 percent at the start of last week, reflecting the Fed’s earlier efforts to lower rates and investors’ pessimism about the economy.

The hope is that an additional reduction in rates will provide a little more encouragement for companies to build factories and hire workers and for consumers to buy cars and dishwashers.

The Fed has held short-term rates near zero since December 2008, by increasing the supply of money.

To further reduce long-term rates, the Fed bought more than $2 trillion in government debt and mortgage-backed securities, reducing the supply available to investors and thereby forcing them to pay higher prices — that is, to accept lower interest rates.

The Fed could seek to amplify that effect by adjusting the composition of its portfolio, selling short-term securities and using the proceeds to buy long-term securities, which it predicts would further reduce rates.

An analysis by the forecasting firm Macroeconomic Advisers estimated that such an effort by the Fed could raise gross domestic product by 0.4 of a percentage point over the next two years, and create about 350,000 jobs. That is comparable to estimates of the impact of the central bank’s most recent aid campaign, the QE2, or quantitative easing, purchases of $600 billion in Treasury securities, which concluded in June.

Mr. Bernanke announced in August that the Federal Open Market Committee, the policy-making board, would meet for two days, extending its scheduled one-day meeting this week to include both Tuesday and Wednesday, to consider that and other options.

The Fed could take smaller steps, like promising to maintain current efforts longer. It may also consider options that could deliver a more powerful jolt to the economy, like increasing the size of its investment portfolio again. But more aggressive measures have little internal support.

The Fed, Mr. Bernanke said, is “prepared to employ these tools as appropriate to promote a stronger economic recovery in a context of price stability.”

He still commands a solid majority of his 10-member board despite the emergence of the largest bloc of internal dissent in two decades. Three members voted against the decision last month to declare an intention to hold short-term interest rates near zero for at least two more years, replacing a stated intention to maintain the policy for an “extended period.”

The central bank has also become a target of conservative politicians, with several Republican presidential candidates denouncing its efforts to increase growth. But even Mr. Bernanke’s internal critics dismiss these attacks.

“I don’t spend a lot of time worrying about what any one candidate says about us,” Richard W. Fisher, president of the Federal Reserve Bank of Dallas, told Fox Business Network in a recent interview. “The issue is to get it right.”

Of greater concern is the possibility that the Fed is nearing the limits of its powers. Interest rates are already depressed and, like a board mounted on a spring, pushing down gets harder as the floor gets closer.

Studies also have found the Fed’s success in reducing rates has not yielded the full measure of predicted benefits. Mortgages and small business loans may be cheap, but because lenders remain cautious, they are not easy to get.

The research firm Capital Economics said recently any renewed effort by the central bank would be unlikely to overcome those obstacles.

“We don’t expect it to have any dramatic impact on the wider economy because many households will still not qualify for loans at those lower rates,” it said.

The Fed also would face an increased risk of losing money on its investments.

And only so many Treasuries are available for sale. If the Fed sold all of its securities maturing in the next four years and bought only securities maturing in more than 17 years, maximizing its impact, it would end up with 70 percent of the available long-term inventory. That could interfere with the normal operations of insurance companies and other traditional buyers.

Laurence H. Meyer, a former Federal Reserve governor who now leads Macroeconomic Advisers, said he expected the Fed to conclude that the potential benefits outweighed these issues, but that it needed more time to hammer out details.

“We expect them to come out of the committee meeting feeling that they’ve decided and have a consensus to move in November,” he said.

Mr. Meyer suggested that the Fed could mollify the markets by announcing what amounts to a preview, by investing the proceeds of maturing securities — about $20 billion each month — in longer-term debt.

Such a move might not do much to move the economic needle, because the amounts involved would be minute by the standards of monetary policy, but it could be enough to preserve the valuable conviction that the Fed will do more soon.

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