05.02.2011
The Real Estate Lobby Is Ready to Rumble
Barbara J. Thompson plans to put a human face on the high-stakes debate over whether to preserve cherished U.S. government subsidies for home loans. Hundreds of faces, in fact. Next month, she'll lead a legion of "everyday people" to Capitol Hill to affirm the virtues of homeownership and urge Congress not to abandon federal support for low-cost mortgages. "These are your neighbors, they're the people who teach your kids at school, they're your firefighters," says Thompson, executive director of the National Council of State Housing Agencies, whose members help provide loans to first-time home buyers. "The middle working class is the bedrock of our country."
Joining Thompson's cause will be thousands of homebuilders, real estate agents, civil-rights leaders, and bankers who aim to deliver a similar message to Congress: Preserve government support for housing. Together, these groups represent what one might call, with apologies to President Dwight D. Eisenhower, a real estate-industrial complex that transcends partisan politics, geography, and socio-economic divides.
What unites them is a desire to protect a near-century of grants, tax breaks, and insurance policies funneled in large part through the government-owned mortgage-finance companies Fannie Mae (fnma.ob.OB) and Freddie Mac (fmcc.ob.OB), which played starring roles in the U.S. housing crisis. Fannie and Freddie bought home loans from banks and sold them to global investors with an implicit government guarantee to cover losses in the event of a default. The arrangement helped foster an $11 trillion mortgage industry and supported a housing sector that overheated -- and then started unraveling in 2008.
Now as lawmakers begin to overhaul the system, the housing lobby is mobilizing against its common enemy: a Republican plan to eliminate the federal government's guarantee of mortgages. "It's a coalition that's going to be very difficult for our adversaries to beat," says Jerry Howard, president and chief executive officer of the National Association of Home Builders. "We're preparing for one hell of a fight."
The group includes financiers who want to keep capital flowing on Wall Street, legions of real estate brokers and builders whose incomes depend on a robust housing market, and activists committed to the cause of shelter as a basic right. Among the ranks are some of Washington's biggest players, including the National Association of Realtors, whose members donated $3.9 million to candidates in the last election cycle, making it the nation's biggest political action committee. Then there's the American Bankers Assn., another powerhouse, which spent $6.2 million on lobbying last year, according to the Center for Responsive Politics. "It's David and Goliath," says Daniel J. Mitchell, an economist at the free-market Cato Institute who favors eliminating the government guarantee. "Not all hope is lost, but I'm not brimming with optimism."
On Feb. 16, the National Fair Housing Alliance, a civil-rights coalition, will bring together the Financial Services Roundtable and the Center for American Progress, a think tank aligned with the Obama Administration, along with other influential players to explore areas of common interest. The mortgage guarantee will be one of them, says Deborah Goldberg, who is leading the alliance effort. "Eliminating the government role in the secondary market is not the fix anybody is looking for," Goldberg says.
Lax subprime lending standards and conflicts between the public's interest and obligations to shareholders helped drive Washington-based Fannie Mae and Freddie Mac, based in McLean, Va., to the brink of collapse in 2008. The U.S. Treasury Dept. took control of the companies that year and has since advanced them $151 billion in taxpayer money to keep them solvent. Fannie and Freddie spent more than $164 million on lobbying in the decade leading up to the financial collapse. They now are banned from influencing Congress.
The real estate-industrial complex is doing that for them. In fighting to preserve some level of government insurance on mortgages, housing lobbyists are defending a crucial role played by Fannie and Freddie in greasing Wall Street's securitization machine. The duo now owns or guarantees more than half of all U.S. mortgages.
This month, Treasury Secretary Timothy Geithner will formally kick off the public debate when he presents Congress with a range of options for reducing the government's role in home financing while also encouraging Wall Street firms to take on some of the risk. Administration officials call the document "a path" to fixing housing finance and are lowering expectations that they will provide a magic bullet.
Republicans and their free-market allies want the mortgage system to stand on its own, and they've targeted the government guarantee for extinction. The House Financial Services Committee plans to begin hearings on Feb. 9. "There can't be any explicit guarantee," says Representative Scott Garrett (R-N.J.), who will have a lead role in housing legislation. "The taxpayer has been on the hook for this credit risk for a long time."
For Garrett and other Republicans, withstanding the lobbying onslaught might be difficult. Homebuilders and real estate agents in particular tend to support Republicans, according to the Center for Responsive Politics, and both groups are enlisting local business leaders and donors to make their case directly to lawmakers. "We're looking to make the arguments in a very personal way with each congressman," says Ronald Phipps, president of the National Association of Realtors. "We represent not just the 1.1 million Realtors and the 46 million consumers who have mortgages but also the 75 million homeowners in the U.S.," Phipps says.
Realtors and builders also have a simple message that resonates with lawmakers, says Peter J. Wallison, a former Treasury Dept. official and an architect of the Republican plan to dismantle Fannie and Freddie. That message comes down to: One wrong move, and home sales and construction could come to a halt, unsettling the economy just as it seems to be recovering from the Great Recession. Even small-government idealists, such as Tea Party conservatives, could be sympathetic to such bread-and-butter arguments. "They will say that without the government's backing it will be very difficult for them to build homes or get financing for mortgages," Wallison says. "We have a very, very difficult road ahead of us."
The bottom line: A vast housing lobby will fight to retain mortgage subsidies as Republicans seek to privatize Fannie Mae and Freddie Mac.
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Frost again delays Phoenix Open
SCOTTSDALE, Ariz. – Tom Lehman knows the difference between chilly and cold.
"Somebody mentioned about playing in Minnesota where I grew up," Lehman said Thursday after his first round in the frosty Phoenix Open.
"There were some days there where it was so brutally cold that I can tell you, one time in high school, a kid broke his hand, but didn't know it until the ride home because his hands were numb all day. That's cold. Today wasn't there."
The 51-year-old Lehman thrived in the chill at TPC Scottsdale, shooting a 6-under 65 for a share of the lead in the suspended round.
"Once you get playing, you kind of forget about it," Lehman said. "I started hitting the ball better and better and better as the day went on."
On Friday, frost delayed play until just after 11 a.m. — 94 minutes after the scheduled start that was already nearly two hours later than normal. Only half the field finished the first round Thursday after a four-hour morning delay.
The delays — costing a total of 7 hours, 24 minutes of playing time — will force most of the second round to Saturday, setting up a marathon finish Sunday.
Lehman played the back nine in 5-under 31 to join Bill Haas, Jason Bohn and Tom Gillis atop the leaderboard. Dustin Johnson was 4 under through five holes when play resumed Friday in sunny, 42-degree conditions.
Lehman, the Senior PGA Championship winner last year, opened the season two weeks ago with a second-place finish in the Champions Tour event at Hualalai. He won the 2000 Phoenix Open for the last of his five PGA Tour titles.
"There's three rounds to go, but it was a good start," Lehman said.
The temperature dipped into the mid-20s early Thursday and it was 39 when play started at 11:40 a.m. The high was 47 on a cloudless day in the desert.
"It's cold," Haas said. "You've got four layers on."
Lucas Glover, sporting a thick beard that prompted calls of "Grizzly" and "Brian Wilson" from fans, was a stroke back along with Chris Couch and Ben Crane.
"It was cold, and it's getting colder," Glover said.
Phil Mickelson, coming off a one-stroke loss to Bubba Watson last week at Torrey Pines in San Diego, topped the group at 67.
"It wasn't too bad," said Mickelson, who played his final nine holes in short sleeves. "I expected the golf course to be frozen and balls to be bouncing on the greens quite a ways. It played terrific. The greens were receptive."
Haas was amazed his playing partner didn't need another layer on the final nine.
"I don't know how he was doing it because I didn't think it was that warm out," Haas said. "Better than it was in the morning, but it's still pretty cold."
Watson, also playing in the group, started play with a ski cap and kept his hands warm with mittens between shots. He shot a 70.
Gillis said it seemed colder than it was around Christmas in Michigan when he played hockey on a lake in 15-degree conditions.
"I was wearing the same stuff and it felt a little colder today," Gillis said. "Probably because we weren't moving as much as we were when we were playing hockey. ... But it just seemed colder than 15 degrees up there, that's all I know."
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S&P 500 posts best week in nine
NEW YORK (Reuters) – The S&P 500 posted its best week in nine on Friday as the market defied calls for a pullback, and investors rotated into defensive and lagging sectors in a move that could intensify in coming weeks.
Signs of improvement in the economy and strong corporate earnings have propelled stock prices, but tapering volume, meager gains and declining numbers of advancing stocks pointed to waning buying interest at the end of the week.
January's employment data had a limited impact as job creation was weak but the unemployment rate fell, leaving many investors unsure how to interpret the report.
Sectors that have posted strong gains recently, such as energy, materials and industrials, showed signs of profit-taking as investors shifted to consumer discretionary and technology shares.
"The market has been getting more selective and the rotation is important," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. "I'm not sure people have it completely figured out yet."
Networking shares were among the leaders after JDS Uniphase
(JDSU.O) posted strong earnings. Its stock rose almost 30 percent and bolstered hopes for strong results from Cisco Systems (CSCO.O) next week.
The Dow Jones industrial average (.DJI) rose 29.89 points, or 0.25 percent, at 12,092.15. The Standard & Poor's 500 Index (.SPX) added 3.77 points, or 0.29 percent, at 1,310.87. The Nasdaq Composite Index (.IXIC) climbed 15.42 points, or 0.56 percent, at 2,769.30.
For the week the Dow rose 2.3 percent the S&P 500 rose 2.7 percent and the Nasdaq gained 3.1 percent.
The S&P's energy sector (.GSPE), which has gained the most this year, was among the biggest losers on the day, falling 0.3 percent. Dow component Chevron Corp (CVX.N) dropped 0.2 percent to $97.11.
Consumer discretionary shares (.GSPD) rose 0.7 percent after recent signs of life in the consumer. Shares in online retailer Amazon.com Inc (AMZN.O) climbed 1.3 percent to $175.93. Consumer shares have lagged the rally since the start of the year.
Strength in technology helped push the Nasdaq to new 3-year highs after the index posted its best week since mid-September, but the move was not broad-based as declining stocks came in just ahead of advancers.
A jump in Treasury debt yields could favor companies with stronger balance sheets as investors start to worry about funding costs. The yield on the 10-year note rose to 3.64 percent, the highest it has been since May 2010.
"The sharp increase in the 10-year yield is concerning, and investors may be starting to focus on businesses with better balance sheets," said Eric Cinnamond, a fund manager at River Road Asset Management in Louisville, Kentucky. "Technology obviously fits that mold."
Shares of JDS Uniphase and other optical component makers jumped a day after the company posted solid quarterly results, helped by ever-increasing demand for higher bandwidth in smart phones, tablets and other applications.
JDS Uniphase shares rose 26.9 percent to $22.76.
"The strength in the technology sector today and strong earnings from JDS Uniphase potentially have people bulled up on the prospects of a positive earnings surprise from Cisco next Wednesday," said Steve Claussen, chief investment strategist at online brokerage OptionsHouse LLC.
Cisco is set to report earnings on Wednesday. The stock rose 0.6 percent to $22.05.
Both the Dow and the S&P 500 made new 2 1/2-year highs.
"From a short-term perspective, the Dow has resistance at the 12,050 level and support at the key 12,000 region," said Joseph Hargett, analyst at Schaeffer's Investment Research in Cincinnati, Ohio.
Health insurer Aetna Inc (AET.N) forecast 2011 profit well above of Wall Street's target on Friday and increased its dividend, sending its shares 12.5 percent higher to $37.42.
Tyson Foods Inc (TSN.N) advanced 5.7 percent to $18.56 after the company said quarterly earnings surged 86 percent.
U.S. employment rose by a meager 36,000 jobs in January, far less than expected, but the unemployment rate fell to 9.0 percent, its lowest level since April 2009.
Composite volume on the NYSE, the Amex and the Nasdaq reached 7.29 billion shares, below last year's estimated daily average of 8.47 billion.
(Additional reporting by Doris Frankel and Rodrigo Campos; Editing by Kenneth Barry)
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