More Housing Data Drags Wall Street Down
Thursday, July 24, 2008JEFF YASTINE: Another gloomy report on the U.S. housing market took its toll on Wall Street today. The Dow plunged 283 points and the NASDAQ tumbled 45. That came as investors weighed the National Association of Realtors' June data which showed existing home sales hitting their lowest level in 10 years. Sales of previously owned homes fell 2.6 percent in June, double what economists had expected. The weakness in sales is also depressing home prices. The median price of an existing home sold last month was $215,000. That's down over 6 percent from June of last year. Economist Michelle Meyer of Lehman Brothers thinks the surge in foreclosures may actually help the housing market find its footing.
MICHELLE MEYER, ECONOMIST, LEHMAN BROTHERS: I think the trend is still down for existing home sales. We may find a bottom at some point in the fall and that's partly because foreclosures are becoming an increasing share of existing home sales and there's a faster turnover for foreclosures, so, that may be biasing the number a little bit higher and may actually get us to a bottom a little quicker.
YASTINE: As the news on housing worsened, the focus on Capitol Hill today turned to preventing a repeat of the near collapse of Bear Stearns and the Federal rescue of Fannie Mae and Freddie Mac. As Stephanie Dhue reports, congressional leaders are contemplating a regulatory overhaul.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Lawmakers want a better solution to future financial crises. So House Financial Services Committee Chairman Barney Frank posed this question to the heads of the Securities and Exchange Commission and the Federal Reserve Bank of New York.
REP. BARNEY FRANK, CHAIRMAN, HOUSE FINANCIAL SERVICES: What new regulatory approaches should we be taking to make the crises less likely?
DHUE: SEC Chairman Christopher Cox had an answer, giving his agency the explicit authority to regulate investment banks. Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley now voluntarily submit capital and liquidity positions to the SEC. Cox wants that to be mandatory. He also wants the SEC, instead of bankruptcy courts, to liquidate failed investment banks.
CHRISTOPHER COX, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION: We don't need to start from scratch. Instead we can build on what we know has worked. At the same time, we can take lessons from what has not worked and modernize, rather than replace the current system.
DHUE: New York Fed President Timothy Geithner also had an answer: expanding powers for the central bank to regulate investment banks.
TIMOTHY GEITHNER, PRESIDENT, FEDERAL RESERVE BANK OF NEW YORK: You will not have good judgments made by this central, this bank, this Federal Reserve in the future unless we have the direct knowledge that comes with supervision.
DHUE: And he suggested mortgage giants Fannie Mae and Freddie Mac need a more complete regulatory overhaul than House lawmakers passed just yesterday.
GEITHNER: I believe that there are going to have to be some very fundamental rethinking of the future of these institutions going forward. It is hard though to say today with confidence what the optimal role will be in the future. But, for the reasons you've said and many others, the current balance is probably untenable over the longer term.
DHUE: While lawmakers and regulators are looking for a longer term fix for the troubles in the housing and financial markets, they are more likely to keep putting out fires until those markets stabilize. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
