Signs of Recovery And Signs of Warning

February 20 2010

Some recovery noted, finally, subprimes proven unsustainable, insurers and secret payments, tax credit may boost real property, Fed sits on Bear Stearns garbage, The massive markdown of Maiden Lane, warning signs for the market says Greenspan

Industrial production in the U.S. rose more than anticipated in January as factories churned out more consumer goods and business equipment, leading the recovery of the world’s biggest economy.

The 0.9 percent increase in production at factories, mines and utilities followed a 0.7 percent gain the prior month, according to the Federal Reserve in Washington. Figures from the Commerce Department today showed housing starts climbed to a 591,000 annual pace, exceeding the median forecast in a Bloomberg News survey.

Fannie Mae and Freddie Mac would no longer be able to rely on subprime mortgages to meet their government-mandated goals for helping lower-income Americans obtain mortgages, according to proposed regulations.

The Federal Housing Finance Agency is seeking to restrict the companies from using so-called private-label securities backed by risky mortgages to achieve certain affordable housing goals, the agency said in proposed rules on its Web site today.

Fannie Mae and Freddie Mac, the largest sources of money for U.S. residential mortgages, have relied on private-label debt backed by Alt-A and subprime mortgages to satisfy federal goals of financing loans for low- and moderate-income homebuyers, according to FHFA. Fannie Mae and Freddie Mac were seized in 2008 largely because of regulators’ concern that the companies wouldn’t have enough capital to cover losses on that debt.

“The results of providing large-scale funding for such loans were adverse for borrowers who entered into mortgages that did not sustain homeownership and for the enterprises themselves,â€