C.A.R. President William Brown's 9/22/08 Update

Sept. 22, 2008

Dear C.A.R. Member:

As promised, here is your first Market Matters Daily Briefing on the evolving financial situation impacting our nation. All this week, C.A.R. will be closely following developments in Washington and will be reporting to you, as needed, via this Briefing e-mail, and through C.A.R. Newsline, or Market Matters.

As expected, this weekend the U.S. Dept. of the Treasury submitted its proposal to promote stability in the U.S. financial markets.

Key components of the Treasury’s proposal include:

• The authority to issue up to $700 billion of Treasury securities to finance the purchase of troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans.
• This authority would expire in two years, and assets must have been originated or issued on or before Sept. 17, 2008, to qualify.
• Assets will be managed by private asset managers at the direction of the Treasury.
• Cash received from liquidating the assets will be returned to the Treasury’s general fund for the benefit of taxpayers.
• Funding for the program will be provided directly by the Treasury from its general fund by increasing its debt limit by $700 billion.
• Once the program is up and running, Treasury will provide updates to Congress semi-annually.

The proposal also grants Treasury Secretary Paulson sweeping authority regarding the purchase of assets, the timing and sale of assets, determining financial institutions’ eligibility to participate and more. To access a fact sheet on the Treasury proposal, go to http://www.treasury.gov/press/releases/hp1150.htm.

Congress is weighing in on the Treasury’s proposal today, and may seek to add an oversight structure, limit the compensation of executives at the companies benefiting from the rescue, and provide mortgage relief for struggling borrowers. We’ll report on this effort in detail tomorrow. As part of that process, House Financial Services Committee Chairman Barney Frank has scheduled a committee hearing this Wednesday.

Our sources tell us that it may be overly optimistic to expect final legislation to be brought forward by Friday and cautioned us to expect this to run into next week. Your Leadership Team will remain in close contact with elected officials and other key leaders in Washington to ensure that the interests of the real estate industry are represented. We’ll be ready to weigh in on the final legislative package, and will keep you informed.

Thanks to all who have shared their thoughts with me this past week.

Sincerely,

William E. Brown
2008 President
CALIFORNIA ASSOCIATION OF REALTORS®

Even the savviest of Buyers are not convinced the the bottom is here

The Wall Street Radio Journal excerpt from the article posted previous to this blog is an excellent weekly summary of financial accounts this week. We look forward to further government plans to put a bottom to this "already hemorrhaging" financial situation and "protect the taxpayer to the fullest extent".

Although this current insecurity can provide excellent real estate buying situations for cash rich investors, there is not certainty enough to convince even the savviest of buyers that the bottom has been reached.

President of C.A.R. comments on financial markets

Sept. 19, 2008

Dear C.A.R. Member:

What a week this has been for the financial markets! I’ve been following the tumultuous events on Wall Street, the 24/7 news cycle, and the actions of our Congress and the federal government. No doubt you have as well.

As you know, in recent weeks Fannie Mae and Freddie Mac were placed into conservatorship, the federal government bailed out AIG, Bank of America purchased Merrill Lynch, and Lehman Brothers filed for bankruptcy. Late this week, the credit market appeared to be on the verge of collapsing.

Like most Americans, I’m concerned about both the near-term and long-term health of our financial system and its impact on the housing market, and I’m sorting though an over-abundance of news and information trying to make sense of it all.

Although it is premature at this point in time to address specifics in an evolving plan, C.A.R. strongly supports the intent of Congress and the federal government to calm the financial markets, address liquidity issues and to begin laying the foundation of a new mortgage finance system.

To that end, I want to assure you that your state Association is closely monitoring the events in our nation’s capital. C.A.R. is taking appropriate steps to ensure that the needs of California are addressed, and to emphasize that housing is a central part of the equation in the federal government’s efforts moving forward. We’re actively engaged in ongoing dialogue with our congressional representatives and other key leaders in Washington.

To recap what’s happened -- so far -- this week:

U.S. Dept. of the Treasury Secretary Paulson today announced that Congress and the administration intend to take poorly performing assets, primarily mortgage-backed securities, off the books of financial institutions. These assets have been a prime impediment to the ability of financial institutions to lend money.

The government also prohibited the short sale of nearly 800 financial institutions for 10 days, and may extend this prohibition to 30 days.

The U.S. Dept. of the Treasury also plans to increase the amount of mortgage-backed securities bought from government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, in an effort to increase the GSEs’ role in the housing market.

The Federal Reserve and other major financial institutions worldwide also made hundreds of billions of dollars in loans available to commercial banks in an effort to improve liquidity.

Our expectation is that Congress and the administration will work together to craft legislation as early as next week addressing these critical issues. We expect to have a good sense of what the legislation will contain by this weekend, prior to financial markets opening Monday morning.

As events continue to unfold, look to C.A.R. as your one-stop source for news and information on these critical issues. Beginning Monday, you’ll receive “Market Matters Daily Briefing,” a daily e-mail that will aggressively monitor the situation and keep you informed as events play out. Your regularly scheduled “Market Matters” e-mail on Thursdays will include tools and information to help you explain and communicate to your clients. You also can check www.car.org for recent headlines and video clips, and Wednesday’s “C.A.R. Newsline” e-mail for additional information pertinent to the ongoing story. Stay tuned for more.

Sincerely,

William E. Brown
2008 President
CALIFORNIA ASSOCIATION OF REALTORS®