Republicans attempt to weaken Dodd-Frank

“The consumer agency has put in place strong rules to protect consumers from tricks and traps in financial products,” Warren said in a statement to National Journal Tuesday night. “The big banks don’t like that—and that’s the number one reason the CFPB should remain free of political influence.”

“In addition, it risks returning us to the days of ‘too big to fail,’ protecting Wall Street firms from important regulatory safeguards and putting ordinary citizens and the economy at risk,” the White House said in a fact sheet Tuesday evening.

The House budget also would scrap what’s known as the Orderly Liquidation Authority, a provision that gives the Federal Deposit Insurance Corporation, the independent agency created during the Great Depression meant to maintain stability of the U.S. financial system, the power to assume operational and financial control of a troubled financial institution considered systemically important. In that role, it has the responsibility to merge, sell, and manage the institution’s assets, as well provide money necessary to bring an orderly end to the troubled institution.

Republicans say cutting this provision prevents taxpayers from being on the hook for bailouts of financial institutions behaving badly. But the White House struck back on Tuesday, saying, while Republicans claim the budget does not rely on gimmicks or “creative-accounting tricks,” the savings made by getting rid of the provision would be both.

“[The Orderly Liquidation Authority] was enacted to ensure taxpayer funds are never again used to bail out ‘too big to fail’ financial institutions,” the White House fact sheet said.

This is unprecedented, but not surprising given the conditions

Low Homeownership Rates Push Homebuilders into Rental Market

Lennar homebuilder made a big move when they decided to enter the rental market after disappointing homeownership rates. Now, according to a report from Bloomberg News that risk could be paying off, influencing other homebuilders to make the jump and increase their rental properties.

The business news company reports, Lennar opened its first community of single-family rental homes this month in Sparks, Nevada, and has a construction pipeline of 20,000 apartments exceeding $5.5 billion, the Miami-based company said today.

“We’ve seen and continue to see outsized improvement in the rental market in terms of low vacancies and higher rental rates,” Chief Executive Officer Stuart Miller said on Lennar’s earnings conference call Thursday. “The inability of the American family to access the mortgage market” is forcing many families to consider renting single-family homes because they aren’t able to buy.

The U.S. homeownership rate fell to its lowest level in 20 years at the end of 2014 at the same time the rental housing vacancy rate dropped to its smallest share since 1993, according to the Census Bureau. Demand has shifted toward rentals as millions of homeowners lost properties to foreclosure and potential buyers couldn’t afford to own real estate or had trouble qualifying for loans.

Sales and construction of new homes remain below historical averages. Single-family home starts plunged 15 percent in February from the previous month to an annual pace of 593,000 as bad weather slowed development, the Commerce Department reported this week. The average since 1995 has been 1.04 million.

Most renters are not ready (or willing) to buy

The rent may be too damn high, but it’s not enough to turn most renters into buyers.

The gap between rental costs and household income is widening to “unsustainable levels” in many parts of the country, new research published Monday by the National Association of Realtors found, “and the situation could worsen unless new home construction meaningfully rises.” In the last five years, a typical rent rose 15% while the income of renters grew by only 11%, the study found. The top markets where renters have seen the highest increase in rents since 2009 are New York (51%), Seattle, (32%), San Jose, Calif., (26%), Denver, (24%) and St. Louis. (22%).

“Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities,” Lawrence Yun, NAR’s chief economist said in a statement. “With a stronger economy and labor market, it’s critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren’t compensating for the gains in home prices.”

But most renters are reluctant to buy. Only 12% of current renters say they plan to buy a home within the next year, according to the latest “Housing Confidence Index” published last week by real-estate company Zillow.

What people say they would like to do — and what they actually do — are two different things. “While the increase in confidence among renters is heartening,” Zillow chief economist Stan Humphries said that it’s important to take a reality check. Among renters aged 18 to 34, 66.2% said owning a home was the best long-term investment, up from 61.4% last year. “Not all renters who want to buy this year will be successful,” Humphries says. “Saving a down payment, qualifying for a mortgage and finding an affordable home to buy all remain formidable challenges for many.”

Mortgage Amounts Rising More Quickly Than Home Prices

Mortgage amounts are rising more quickly than home prices, an unusual phenomenon that seems to confirm continued weakness at the lower end of the housing market, according to the Mortgage Bankers Association.

The trade association reports that the average size of purchase loans began to outpace the recovery in home prices in September 2011. By December 2014, according to the group’s weekly mortgage application survey, the average purchase loan amount had risen by nearly 32 percent. The average for the week ending March 6 was $294,900, a record high. In other words, the average purchase loan now exceeds levels reached before the recession when home prices soared to unsustainable heights.

By comparison, the association noted, a Federal Housing Finance Agency index that measures home purchase prices shows a considerably more gradual rise of 18.5 percent since 2011. Why this unusual parting of the two trend lines? Lynn M. Fisher, the association’s vice president for research and economics, said one possible explanation is that home prices are rising more quickly for larger homes, skewing the loan average upward. But more likely, she said, is that the bulk of the properties being sold are at the high end of the price range. “The mix of people buying is changing,” Dr. Fisher said. “More of the bigger stuff is transacting.”

Buyers on the lower end — looking for homes priced at $250,000 and below — “are generally of moderate credit and are having trouble or being intimidated from applying for mortgages,” said Lawrence Yun, the chief economist and senior vice president for research at the National Association of Realtors. “While on the upper end,” he continued, “given the stock market bull run of the past six years, they have done very well financially. The stock market expansion has given a comfort level at the top tier of families to go ahead and apply.”

Hysteria Over Drought Stoked by Climate Change Advocates

Climate change driving California’s drought

Research by Stanford University points to climate change as a key driver in California’s historic drought level. It is not a question of whether California has ever before had droughts. The question of this research was how climate change impacts the severity of weather events like droughts. The findings were that “… extreme atmospheric high pressure in this region – which is strongly linked to unusually low precipitation in California – is much more likely to occur today than prior to the human emission of greenhouse gases that began during the Industrial Revolution in the 1800s.”

This research can be yet another climate change deniers’ example of science getting in the way of their personal beliefs or economic incentives, except this time the consequences of denial will impact Americans who eat tomato-based products, use a lemon or search Google.

No water, no economy

Imagine the ramifications for your state if it were to run out of water. That is the immediate challenge facing California. January 2015 was the driest in California since record-keeping began in 1895. This is not a recent weather event: NASA data shows that California’s water storage capacity — in the form of its lakes, snow levels, water table etc. — has been in decline since 2002. There is no contingency plan for this level of climate change for the world’s seventh largest economy.

The economic ramification will range from measurable to catastrophic. Two-thirds of the state’s water losses are tied to the agricultural community’s pumping the aquifer dry. A point of diminishing return is being reached with increased reports of dry wells. California’s agricultural industry is on the precipice of economic decline and may be heading toward collapse due to a lack of water.

The cost of climate change denial

California is unfortunately positioned to become the first case study on the cost of climate change denial. If California’s water crisis reduces its economic activity by 20 percent, that would equate to a $500 billion decline in our nation’s gross domestic production. This scale of economic decline would represent significant national job loss. It would represent significant food inflation from lost production. It would increase the national deficit from lost tax revenues from California. It would circumvent all the work by the Federal Reserve, Congress and the president to restore economic growth following the Great Recession.

My guess is that California will address this crisis through technology. Over the long term, the state will accelerate its adoption of zero net buildings. Creating economies of scale through state-wide adoption will drive the cost of smart water technology to affordability. New companies will be born, and California will become a global supplier of smart water technologies. But that is the future, after much economic pain tied to the consequences of climate change. The storm cloud on the immediate horizon is the potential first national economic crisis tied to global warming. The forecast is for a very hot political season over whether our country can deny climate change any longer.

The cities where houses are suddenly going underwater

Presents second buying opportunity for investors

Despite an overall housing recovery, it’s suddenly becoming more common in several of the nation’s largest cities for homeowners to owe more on their home than it’s worth.

The national negative equity rate, which had declined for 2 1/2 years, stalled in the fourth quarter of 2014 at 16.9 percent, according to a new report from Zillow.

In the fourth quarter, the rate worsened in 21 of the nation’s top 50 housing markets, including Philadelphia, Boston and Houston.

Zillow estimated that more than a quarter of homeowners are underwater in the metropolitan areas of Virginia Beach, Jacksonville, Las Vegas, Atlanta, Chicago and Memphis.

During most of the recovery, rising home prices and the completion of foreclosures pushed down the number of homeowners with negative equity from a recession peak of 15 million.

Now, however, many lower-value homes are losing value again, Zillow reported, and that’s what’s behind the rising rates of negative equity.

Zillow reported that the underwater rate for top value homes was only about 9 percent, compared to almost 16 percent for middle value homes, and for the bottom tier of home values more than 27 percent.

In places like Kansas City, Cleveland, Atlanta and Chicago, more than 40 percent of bottom tier homeowners were underwater, but 10 percent or less for the top.

Ted Cruz Is Running For President: 5 Obstacles Between Him and the White House

Speaking at the largest Christian university in the country on the fifth anniversary of the enactment of the Affordable Care Act, Texas Sen. Ted Cruz officially announced his campaign for president today, billing himself as the small-government, socially conservative antidote to the Obama administration.

“It is a time for truth, it is a time for liberty, it is a time to reclaim the Constitution of the United States,” Cruz said this morning at Liberty University in Lynchburg, Virginia.

Cruz became the first major candidate to formally declare his candidacy.

“I believe in the power of millions of courageous conservatives, rising up to reignite the promise of America,” he said.

But despite his appeal to the conservative, grassroots elements of the GOP, Cruz faces an significant challenges in the battle for the Republican Party’s presidential nomination.

Here are five obstacles standing between Cruz and the White House:

1. Standing Out As The Conservative Candidate

Ted Cruz’s presidential campaign will largely hinge on appealing to the conservative base of the Republican Party, and his ability to distinguish himself from other conservative candidates.

Cruz’s first test will come in Iowa — a state that selected former Arkansas Governor Mike Huckabee and former Pennsylvania Senator Rick Santorum as the winner of its caucus in 2008 and 2012, respectively. Recently, Wisconsin Governor Scott Walker has attracted the attention of Iowa’s social conservatives after his fiery speech at the Iowa Freedom Summit in January. Cruz will need to differentiate himself from these candidates to win over the state’s social conservative voters, who represent a large bloc of caucus-goers, and set the path for the rest of the primary races.

2. Jeb Bush’s Fundraising Juggernaut

With $100,000-per-ticket fundraisers and a purported goal of raising as much as $500 million for the Republican presidential primary fight, former Florida Governor Jeb Bush has emerged as the fundraising heavyweight in the 2016 race, pressuring other candidates to ramp up their own efforts.

Cruz had the backing of traditional donors in his 2012 Senate race, but also raised a significant amount of money from small-dollar donors. Cruz will need that grassroots support once again to sustain his campaign. As the first candidate to declare, he’ll be the first to solicit direct contributions to his campaign. Against Jeb Bush’s prolific fundraising machine, every direct dollar, from contributions big or small, will help Cruz in what is expected to be the most expensive presidential campaign cycle to date.

3. The Canada Question

Can Cruz — who was born in Calgary, Canada — legally run for president? He says yes. His mother, a U.S. citizen, gave birth while his parents happened to be working in Canada at the time.

Cruz was a dual American-Canadian citizen until 2014, when he renounced his Canadian citizenship after its discovery raised questions about his presidential eligibility. While he won’t be the first presidential candidate not to be be born in the United States (John McCain was born in the Panama Canal zone, and George Romney was born in Mexico to American parents), legal experts have concluded that Cruz’s birth isn’t an obstacle to becoming president. In a recent Harvard Law Review article, a pair of former solicitors general said Cruz was “fully eligible” to serve as president. Still, Cruz could face some resistance from within the party – potential candidate Donald Trump has already voiced concerns about Cruz’s eligibility.

4. He’s Not Always The Most Popular Guy In The Room

In his three years in the Senate, Cruz has irked his colleagues over and over — whether it was leading a 21 hour filibuster just days before a government shutdown or making one senator miss a performance of the “Nutcracker” with her family ahead of Christmas.

In 2013, McCain called Cruz a “wacko bird” for his positions and representation of the Republican Party. But Cruz–who tellingly called himself a “proud wacko bird” in response to McCain’s comment–has built his political brand on such confrontations with Democrats and Republicans, and will likely bill himself as an uncompromising candidate willing to stand up to both parties in defense of his principles, and regardless of popularity.

5. He Hasn’t Been Around the Block

Unlike many of the current and former governors in the Republican field, Cruz is a relative political newcomer, having only taken office in 2013. While Bush can draw from eight years of governing experience, and Walker can highlight five years of battling public sector unions in Wisconsin, Cruz has only three years in Washington to his name. That level of experience didn’t stop then Sen. Barack Obama (who had just as much experience as Cruz does now when he ran for president), but it leaves Cruz open to criticism from his potential challengers.

Gold Slips as Investors Sell Into Last Week’s Rally

Bullish sentiment signals further declines forthcoming

Gold prices edged lower on Monday, as traders took profits after a series of sharp gains last week, although some believe the precious metal will resume its upward course in the days ahead.

Gold for April delivery, the most actively traded contract, was recently down less than 0.1% at $1,184 a troy ounce on the Comex division of the New York Mercantile Exchange.

Some investors believed gold’s fortunes have turned, at least for the time being, after the Federal Reserve gave a more dovish-than-expected assessment of the U.S. economy last week and indicated it isn’t in a hurry to raise interest rates. Continued low rates are good news for gold, which struggles to compete with yield-bearing investments when borrowing costs rise. Gold prices are up more than 3% since the March 18 Fed meeting.

“We may give back a little bit of last week’s bounce, but for the longer term, it appears gold has turned a corner,” said James Cordier, a broker at OptionSellers.com. “We expect gold to be over $1,200 an ounce very soon.”