(AP) Republican John McCain said Tuesday that government isn't in the business of saving and rewarding banks or small borrowers who behave irresponsibly though he offered a few immediate alternatives to fixing the growing housing crisis.
"I will consider any and all proposals based on their cost and benefits," the certain GOP presidential nominee, who has acknowledged in the past that the economy is not his strong suit, told local business leaders south of Los Angeles.
Democrats accused McCain of lacking the skills needed to lead a country on the brink of recession.
"Instead of offering a concrete plan to address the crisis at all levels, McCain promised to take the same hands-off approach that President Bush used to lead us into this crisis," Democratic Party Chairman Howard Dean said in a statement.
The housing turmoil has rocked Wall Street and is dominating the presidential race as the nation faces an economic downturn and the Federal Reserve has taken steps to intervene.
Over the past two days, the Fed essentially bailed out the investment house Bear Stearns and announced it has auctioned another $50 billion in short-term loans at an interest rate of 2.615 percent to cash-strapped banks to help them overcome credit problems. Since December, the Fed has provided a total of $260 billion in short-term loans to banks.
On Monday, Democratic presidential candidate Sen. Hillary Rodham Clinton proposed several remedies to the home mortgage problems, including greater protections for lenders from possible lawsuits by investors, a variation of so-called tort reform.
McCain, in the midst of a weeklong western fundraising swing, focused on the home-financing crisis at an event in the Republican bastion of Orange County as he tried to rebut Democratic criticism of his economic credentials.
His pitch, though, offered little in the way of specific proposals to immediately address the crisis.
McCain said he wants to leave the door open to a wide array of proposals to address the problems and seemed to suggest he might even be open even to solutions that stray from the GOP line.
"I will not play election-year politics with the housing crisis," he said, adding he would evaluate all proposals. "I will not allow dogma to override commonsense."
But the small-government advocate and four-term Arizona senator also put restrictions on how far he was willing to go.
"I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers," McCain said. "Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy."
He said any government assistance to alleviate the housing crisis must be temporary and should be accompanied by reforms that aim to make the system more transparent and accountable to prevent a repeat of the crisis. He said no assistance should be given to speculators, or people who bought houses to rent or as second homes.
In the short term, he called for the country's accounting experts to meet to discuss current accounting systems and said the country's top mortgage lenders should pledge do everything possible to help their cash-strapped but creditworthy customers.
"They've been asking the government to help them out," McCain said of lenders. "I'm now calling upon them to help their customers, and their nation, out."
As a freshman senator, however, McCain took a different approach. In early 1991, the Senate's ethics committee concluded that McCain "exercised poor judgment in intervening with the regulators" on behalf of banker Charles Keating Jr. Keating was a wealthy Arizona real estate developer and owner of a California thrift that failed during a nationwide savings and loan crisis - when Keating and other bankers made risky investments with depositors' money.
McCain was known for accepting contributions from Keating, flying to the banker's home in the Bahamas on his company planes and taking up Keating's cause with U.S. financial regulators as they investigated him. Keating served more than four years in prison for fraud.
Wednesday, March 26, 2008
For the First Time in Six Months Home Sales Are on the Rise
(CBS/AP) After falling for six straight months, sales of existing homes posted an unexpected increase in February which may have reflected more aggressive price cutting by sellers in some parts of the country, a real estate trade group reported.
The National Association of Realtors said that sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It was the biggest increase in a year and caught economists by surprise. They had been expecting a small decline.
The trade group reported that the median existing sales price in February fell to $195,900. That was the largest year-over-year drop on records that go back to 1999.
Lawrence Yun, chief economist for the Realtors, said that prices in some formerly hot markets in California and Florida were seeing significant price declines now as sellers try to attract buyers.
Analysts cautioned against reading too much into the one-month rise in sales. Many economists are predicting that the steep slump in housing will not bottom-out until later this year after prices fall further and allow huge levels of unsold inventories to be reduced.
Some analysts say housing prices could fall another 10 percent, reports CBS News correspondent Anthony Mason. The spring and summer buying seasons will be the real test of whether the housing market has come close to bottoming out.
"We're not expecting a notable gain in existing-home sales until the second half of this year, but the (February) improvement is nother sign that the market is stabilizing," Yun said.
By region of the country, sales surged by 11.3 percent in the Northeast and were up 2.5 percent in the Midwest and 2.1 percent in the South. The only region of the country to see a decline in the sales was the West, where they dropped by 1.1 percent.
Sales of existing homes fell by 12.7 percent in 2007, the biggest decline in 25 years. Over the past two years, housing has been in a steep downturn made worse by a severe credit crunch as financial institutions tightened their lending standards in reaction to their multibillion-dollar losses on mortgages that have gone into default.
The National Association of Realtors said that sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It was the biggest increase in a year and caught economists by surprise. They had been expecting a small decline.
The trade group reported that the median existing sales price in February fell to $195,900. That was the largest year-over-year drop on records that go back to 1999.
Lawrence Yun, chief economist for the Realtors, said that prices in some formerly hot markets in California and Florida were seeing significant price declines now as sellers try to attract buyers.
Analysts cautioned against reading too much into the one-month rise in sales. Many economists are predicting that the steep slump in housing will not bottom-out until later this year after prices fall further and allow huge levels of unsold inventories to be reduced.
Some analysts say housing prices could fall another 10 percent, reports CBS News correspondent Anthony Mason. The spring and summer buying seasons will be the real test of whether the housing market has come close to bottoming out.
"We're not expecting a notable gain in existing-home sales until the second half of this year, but the (February) improvement is nother sign that the market is stabilizing," Yun said.
By region of the country, sales surged by 11.3 percent in the Northeast and were up 2.5 percent in the Midwest and 2.1 percent in the South. The only region of the country to see a decline in the sales was the West, where they dropped by 1.1 percent.
Sales of existing homes fell by 12.7 percent in 2007, the biggest decline in 25 years. Over the past two years, housing has been in a steep downturn made worse by a severe credit crunch as financial institutions tightened their lending standards in reaction to their multibillion-dollar losses on mortgages that have gone into default.
Stocks Jump on New Bear Sterns Bid
(CBS/AP) Wall Street extended its big advance Monday as investors applauded a new agreement that will give Bear Stearns Cos. shareholders five times the payout that was set in a JPMorgan Chase & Co. buyout deal a week ago. Investors were also pleased by a stronger-than-expected housing report, and sent the Dow Jones industrial average nearly 190 points.
JPMorgan boosted investors' optimism by lifting its offer for Bear Stearns to $10 per share from $2. The revised plan is aimed at soothing Bear Stearns shareholders upset over JPMorgan's earlier offer, which was made at the behest of the Federal Reserve when Bear Stearns was near collapse.
Shares in the investment bank jumped $3.42, or 57 percent, to $9.38, while JPMorgan rose 58 cents to $46.55.
Beyond the troubles of the financials, Wall Street was examining the housing sector - the root of much of investors' angst. A real estate trade group said sales of existing homes rose rather than declined in February, as had been expected.
The Fed's move and even the housing figures appeared to alleviate some of Wall Street's concerns about souring mortgage debt and lenders' resulting hesitance to grant loans of any sort. The latest Bear Stearns deal signals that investors' losses might not be as sizable as feared.
"The reason we've rallied the last three or four days is people are saying 'Hey, even if this paper is worth less than people think, the Fed is willing come in and buy it at some level,"' said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh.
The move was clearly aimed at diffusing a backlash among Bear Stearns shareholders who felt the original deal undervalued the 85-year-old institution. JPMorgan Chase Chief Executive Jamie Dimon spent most of the week trying to woo Bear Stearns employees, who collectively own about a third of the company.
A lot of people lost money, including Bear Stearns employees who were counting on stock for their retirement Bloomberg TV's Dierdre Bolton told CBS News' The Early Show.
"The Fed had a pretty unusual role in helping the two banks get together to begin with," says Bolton. "The idea was really supposed to be to stabilize the markets, but the Fed can't be seen using taxpayer money to bail out shareholders and has already drawn criticism on that account."
"We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise," Dimon said in a statement, "and bring more certainty for our respective shareholders, clients, and the marketplace."
The new deal values Bear Stearns at about $1.19 billion - still a fraction of what the company was worth before its sudden near-collapse earlier this month. It also includes a provision for JPMorgan to buy 95 million new Bear Stearns shares immediately, which gives it a 39.5 percent stake in the company before shareholders have even voted.
The amended offer was Dimon's attempt to ward off any competition, and quickly move on with the acquisition. The two sides also changed certain guarantees JPMorgan made related to Bear Stearns' positions.
The new agreement also calls for the Federal Reserve - which helped broker the emergency deal to save Bear Stearns from failure - to provide a $30 billion term loan with portfolio assets put up as collateral. Those assets will be held by a newly created company managed by BlackRock Inc.
If any part of the portfolio defaults, JPMorgan will be on the hook to cover the first $1 billion in losses. As the assets are paid off, the Fed will receive principal plus any gains.
The Fed said the action is being taken with the support of the Treasury Department to "bolster market liquidity and promote orderly market functioning."
Alan Schwartz, Bear Stearns' embattled president and chief executive, has been vilified within the company for the past week for selling out too low. The company's 14,000 shareholders - most of whom depended on Bear Stearns' stock as part of their retirement plans - are facing significant job cuts if the deal goes through.
He said the substantial share issuance to JPMorgan "was a necessary condition" to maintaining Bear Stearns' financial stability.
"Our board of directors believes that the amended terms provide both significantly greater value to our shareholders, many of whom are Bear Stearns employees, and enhanced coverage and certainty for our customers, counterparties, and lenders," he said in a statement.
Bear shares had been much higher than its deal price last week in anticipation of a new buyout agreement. The stock surged on Monday, rising $5.34 to $11.30 after the new agreement was unveiled.
JPMorgan shares also rose, adding $1.79, or 3.7 percent, to $47.76 in morning trading.
JPMorgan boosted investors' optimism by lifting its offer for Bear Stearns to $10 per share from $2. The revised plan is aimed at soothing Bear Stearns shareholders upset over JPMorgan's earlier offer, which was made at the behest of the Federal Reserve when Bear Stearns was near collapse.
Shares in the investment bank jumped $3.42, or 57 percent, to $9.38, while JPMorgan rose 58 cents to $46.55.
Beyond the troubles of the financials, Wall Street was examining the housing sector - the root of much of investors' angst. A real estate trade group said sales of existing homes rose rather than declined in February, as had been expected.
The Fed's move and even the housing figures appeared to alleviate some of Wall Street's concerns about souring mortgage debt and lenders' resulting hesitance to grant loans of any sort. The latest Bear Stearns deal signals that investors' losses might not be as sizable as feared.
"The reason we've rallied the last three or four days is people are saying 'Hey, even if this paper is worth less than people think, the Fed is willing come in and buy it at some level,"' said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh.
The move was clearly aimed at diffusing a backlash among Bear Stearns shareholders who felt the original deal undervalued the 85-year-old institution. JPMorgan Chase Chief Executive Jamie Dimon spent most of the week trying to woo Bear Stearns employees, who collectively own about a third of the company.
A lot of people lost money, including Bear Stearns employees who were counting on stock for their retirement Bloomberg TV's Dierdre Bolton told CBS News' The Early Show.
"The Fed had a pretty unusual role in helping the two banks get together to begin with," says Bolton. "The idea was really supposed to be to stabilize the markets, but the Fed can't be seen using taxpayer money to bail out shareholders and has already drawn criticism on that account."
"We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise," Dimon said in a statement, "and bring more certainty for our respective shareholders, clients, and the marketplace."
The new deal values Bear Stearns at about $1.19 billion - still a fraction of what the company was worth before its sudden near-collapse earlier this month. It also includes a provision for JPMorgan to buy 95 million new Bear Stearns shares immediately, which gives it a 39.5 percent stake in the company before shareholders have even voted.
The amended offer was Dimon's attempt to ward off any competition, and quickly move on with the acquisition. The two sides also changed certain guarantees JPMorgan made related to Bear Stearns' positions.
The new agreement also calls for the Federal Reserve - which helped broker the emergency deal to save Bear Stearns from failure - to provide a $30 billion term loan with portfolio assets put up as collateral. Those assets will be held by a newly created company managed by BlackRock Inc.
If any part of the portfolio defaults, JPMorgan will be on the hook to cover the first $1 billion in losses. As the assets are paid off, the Fed will receive principal plus any gains.
The Fed said the action is being taken with the support of the Treasury Department to "bolster market liquidity and promote orderly market functioning."
Alan Schwartz, Bear Stearns' embattled president and chief executive, has been vilified within the company for the past week for selling out too low. The company's 14,000 shareholders - most of whom depended on Bear Stearns' stock as part of their retirement plans - are facing significant job cuts if the deal goes through.
He said the substantial share issuance to JPMorgan "was a necessary condition" to maintaining Bear Stearns' financial stability.
"Our board of directors believes that the amended terms provide both significantly greater value to our shareholders, many of whom are Bear Stearns employees, and enhanced coverage and certainty for our customers, counterparties, and lenders," he said in a statement.
Bear shares had been much higher than its deal price last week in anticipation of a new buyout agreement. The stock surged on Monday, rising $5.34 to $11.30 after the new agreement was unveiled.
JPMorgan shares also rose, adding $1.79, or 3.7 percent, to $47.76 in morning trading.
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