Articles from 02/24/08 to 03/01/08

When real estate was booming, and lenders were handing out money to anyone who could sign his or her name, the Federal Housing Administration was viewed as a relic.

Requiring down payments, appraisals, and limiting loans to $362,000, FHA-backed loans lost businesses to sub-prime lenders. First-time homebuyers, who qualify for FHA were discouraged from pursuing FHA loans, and many in the real estate industry viewed them as difficult to work with.

Inflation is rising. Growth is falling. And oil prices are at record levels.

What’s happening today seems reminiscent of the situation in the 1970s and 1980s, during the years of stagflation.

But we couldn’t find a single economist that would make that case that stagflation is even a possibility on the horizon. All agreed there are important differences today that make a similar situation unlikely.

There are predictions that this economic slowdown will be more severe than the economy experienced in 2001. Fed Chairman Ben Bernanke seems to agree.

Asked by Senator Chris Dodd to compare the two, Bernanke pointed out the biggest difference, oil at that time was about $20 a barrel, today it’s over $100.

Like today, the downturn in 2001 was also caused by a sharp change in asset prices, but today that asset is home values.

And that makes it much more painful. Losing money in the stock market can be painful, even disastrous in some cases. But you don’t live in your investment portfolio.

Sears used to call itself the store where America shops. But, in the past decade that hasn't been the case. American consumers are increasingly buying clothes, electronics, and other staples at Target, WalMart, and even Kohl's.

Sears was a huge part of 20th century America. We bought tools, winter coats, and even homes out of its catalogues. But, the retailing giant has lost its way in the 21st century when trends and technology changed constantly.

Ben Bernanke's semi-annual monetary policy testimony was a gloomy affair today. The Fed Chairman rattled through a long list of economic woes. I didn't see much bright side in it all, save the fact that growth is not officially in negative territory.

For those who want a very detailed picture of the stress in housing and credit markets, check out the Fed's economic report.

As a journalist, I'm always interested in knowing where the "tipping point" is on a particular trend. In other words, when did people in a particular industry, such as those I interviewed for my segment in NBR’s “A Guide to Giving” series, start noticing that "the ballgame had changed" because of the use of the Internet? It appears that the 9-11 attacks on the World Trade Center towers and the Pentagon played a key role in getting people used to the idea of charitable giving through the web. The Internet was already in wide use, of course, but the idea of using it to make donations was still a largely unfamiliar to the vast majority of Americans in 2001. In the rush for funds and relief supplies following the attacks, Americans - and the larger charities - came to accept the internet as a standard fundraising technique.

I interviewed Alan Blinder, NBR commentator, Princeton professor and former vice-Chairman of the Federal Reserve, about an Op-Ed piece he wrote for the New York Times. In it he advocates the re-creation of the depression-era Home Owners’ Loan Corporation, which would be able to help homeowners unable to meet their obligations refinance into something they can handle.

This idea was floated in Congress about a month ago and was quickly attacked by Republicans as a “bail-out” and by financial industry representatives as government interference with the free market. Today Chris Dodd, Chairman of the Senate Banking Committee, said he was taking another look and he might like to read the Blinder column as homework.

We all thought recession was the big threat facing the economy. But as today’s Producer Price Index points out, inflation risks are rising.

The whopping 1% increase in the headline figure was far more than most economists expected. Even core prices—which exclude food and energy— climbed at the fastest rate in almost a year.

Economist Anthony Chan says it’s common for firms to try to raise prices at the beginning of the year. He also says there’s a possibility that the increases won’t stick long-term.

How do you pick the best quotes from 14-1/2 minutes of good stuff? That's the task I faced today, after Susie Gharib interviewed Richard Fisher, President of the Federal Reserve Bank of Dallas.

Susie and Fisher covered a lot of ground from inflation to stagflation to how much is enough when it comes to rate cuts? In the end we decided to accommodate as much of the interview as possible by pushing off some of our regular features, like the commentary that usually ends the program.

That said we were still only able to bring you about 7-1/2 minutes of the Fisher interview. So if you like what you see tonight, please check out the streaming video of the full interview on our website. You can also read the complete transcript here.

Stories of nonprofits that spend the bulk of their budgets on expenses and a relatively small percentage for their cause have created a high level of distrust. Bob Ottenhoff of GuideStar, which compiles data on nonprofits, says, "The era of assumed virtue is over." Many people who donate want to ensure their money is going for its intended purpose.

Figuring that out is not always so easy. As I explain in my report for the upcoming special NBR series "A Guide to Giving," the IRS 990 disclosures don't always tell the whole story and ratings from groups like Charity Navigator or Give.org may not measure what you care about most.

Following up on the topic of stagflation, from Goldman Sachs:

[Recent increases in producer and consumer prices] do not signal a sustained deterioration in the inflation outlook in our view. Inflation is a lagging indicator, and many of last month’s upside surprises look transitory. While persistent increases in the relative prices of energy and food highlight the risks of focusing solely on core inflation, they are unlikely to have a broad-based effect on other prices in today’s competitive economy.

Economists are supposed to support the free flow of goods and capital. So why is Arvind Subramanian, a former IMF economist, questioning the unregulated flow of capital? Here's an excerpt of a recent article in the FT:

It is time for a new model of financial globalisation, one that recognises that more is not necessarily better. As long as the world economy remains politically divided among different sovereign and regulatory authorities, global finance is condemned to suffer deformations far worse than those of domestic finance. Depending on context, the appropriate role of policy will be as often to stem the tide of capital flows as to encourage them. Policymakers who view their challenges exclusively from the latter perspective will get it badly wrong. Read more...

It seems every week I am doing more stories about the threat of a recession. While I have no reason to doubt the government's economic data or the wisdom of most professional economic forecasters, I still see little evidence of a recession where I live in NYC.

Elsewhere in the country, the housing market has fallen into what can best be described as a monstrous crater. Here in New York, real estate agents say the market is uneven. What that seems to mean is multibillion dollar apts are still selling at a healthy clip, while things on the low-end (under $2 mil) may move a bit slower. As for people with subprime mortgages, well there really aren't a lot them. That's because the majority of Manhattan apts are in co-op buildings...where the minimum down payment allowed is 20 percent. You usually can't get approved by the building's board if your finances aren't tip top.

When I started looking at the Obama/Clinton tax plans, one thing jumped out at me: Both campaigns are pushing for an aggressive expansion of refundable tax credits.

After digging around a bit, I came across this stat: According to the Tax Foundation one-third of tax filers owe no income tax at all.

Another 15 million families and individuals did not earn enough to be required to file a return.

I cannot begin to tell you how much I enjoyed doing this story on philanthropy. I would have to say it was one of my favorite topics ever.

As a business reporter, it is a special treat to research a topic that focuses on individual and corporate efforts to help society—not just making money.

I was blown away by the musical talent of the kids I met at Mount Carmel Holy Rosary. When I say most of these kids come from disadvantaged backgrounds, you have no idea of the degree of poverty. According to Education Through Music, the median household in East Harlem is under $10,000 a year. The principal told me many kids at the school live in the projects nearby and the vast majority cannot afford school lunch, which is under $2.00/day. Yet they are now learning about music—and some plan to try out for the Julliard School for Performing Arts.

A helpful source at the SEC called my attention to their latest efforts to improve disclosure.

You can read their press release here.

I am encouraged that the Advisory Committee on Improvements to Financial Reporting recognizes the current disclosure system favors the needs of auditors and preparers over investors.