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Mortgage Rates Start Lower, but End Higher After Fed Announcement

10/31/2013

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Mortgage rates began the day lower, with several lenders releasing their best rate sheets in nearly 5 months.  The day progressed well in the secondary mortgage market with MBS prices (the "mortgage backed securities" that most directly affect rates) rising steadily into the Federal Reserve's policy announcement.  When MBS prices move higher, rates move lower.

The Fed wasn't seen as likely to change monetary policy in any way at this meeting, but market participants may have justifiably been expecting a more cautious tone than they got.  The Fed even removed verbiage alluding to the risks associated with recently tight financial conditions.  Bond markets, including MBS, weakened quickly following the announcement, and many lenders revised rate sheets to fall more in line with yesterday's.  

This is interesting because yesterday, we'd looked forward to today's data and events as holding the most promise for breaking the ongoing trend of "unchanged" (or close to it) rate sheets.  As it happened, we did get a break of that monotony this morning, but rates returned to the same levels in the afternoon.   As such the most prevalent Conforming 30yr fixed rate  (best-execution) remains at 4.125%.

Loan Originator Perspectives

"Fed Statement released today confirmed markets' conviction that tapering is on hold pending improved data. Rates did lose some ground (after AM gains) following the Fed release, but stayed within recent ranges. Nice opportunity for buyers and refinance borrowers to obtain the lowest best execution rates since June, loan volume picking up as borrowers moved to obtain these desirable rates." -Ted Rood, Senior Originator, Wintrust Mortgage

"Following the FOMC statement, the rates markets took a turn for the worse, but not sure why. I think the losses today will be recouped over the next day or so. If you were unable to lock prior to the FOMC statement and the reprices for worse that followed, I would float over night as I suspect we will get most of these loses back." -Victor Burek, Open Mortgage

"I've been on a stream of recommending locks and exercising them for clients over the past several days. My bias is lock at this point, and today's FOMC announcement rattled the market, so my clients are happy. Outside of 45 day lock, I'd still recommend the client watch and try to get inside of 30 days. For those happy with the rate, lock now, don't look back." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group

Ongoing Lock/Float Considerations

    Uncertainty over the Fed's bond-buying plans and more recently over Fiscal Policy has been making for a tough interest rate environment.
    A lack of data due to the government shutdown caused rates to experience moments of paralysis while headlines suggesting the shutdown might/might-not end, as well as a seizing-up of short term funding markets caused unexpectedly high volatility--enough to be felt in longer term rates like mortgages.
    After a deal was reached to avoid going over the debt ceiling, funding markets thawed and rates returned to the same 'wait and see' range that existed before the Fiscal drama. 
    Markets continue to be most interested in economic data and its suggestions about the longer term trajectory of the economy.  This will shape expectations for Fed policy in the coming months, and thus inform the direction of interest rates.
    The stronger the data the more likely the Fed is seen as reducing asset purchases.  Rates would rise under this scenario, but the most recent FOMC Meeting (and more importantly, the Fed's decision to hold off on tapering) suggests that they'll attempt to keep the pace of rising rates moderate as long as inflation isn't adversely affected.  The delayed release of the September jobs numbers on October 22nd helps confirm that.
    (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario.  There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

source: http://www.mortgagenewsdaily.com/consumer_rates/329853.aspx
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Purchase loans expected to buck rising mortgage rates next year 

10/30/2013

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Can You Get a HARP Refinance If You Have a Piggyback Mortgage?

10/29/2013

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Mortgages Swoon to Lowest Level Since June

10/28/2013

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Mortgage rates tumbled this week as economic data disappointed investors. Concerns about the nation's debt ceiling lingered, even after Congress reached a temporary deal.

Compare Mortgage Rates in Your Area

The benchmark 30-year fixed-rate mortgage fell to 4.27% from 4.42% last week, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.32 discount and origination points. One year ago, that rate stood at 3.61%. Four weeks ago, it was 4.47%.

This is the lowest level the 30-year fixed has reached in the last four months, according to Bankrate's weekly survey.

The benchmark 15-year fixed-rate mortgage fell to 3.37% from 3.49% last week, and the benchmark 5/1 adjustable-rate mortgage fell to 3.27% from 3.31%. The benchmark 30-year fixed-rate jumbo fell to 4.38% from 4.55%.

Weekly national mortgage survey

Results of Bankrate.com's Oct. 23, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM
This week's rate: 4.27% 3.37% 3.27%
Change from last week: -0.15 -0.12 -0.04
Monthly payment: $813.63 $1,169.05 $719.90
Change from last week: -$14.58 -$9.70 -$3.64

When the shutdown ended last week and Congress sealed an agreement to fund the government until January, some industry observers feared mortgage rates would rise. Instead, mortgage rates dived as investors digested the news that the U.S. debt ceiling debacle has merely been postponed.

"While we did get an agreement, they just delayed the problem for three months," says John Stearns, a mortgage banker at American Fidelity Mortgage Services in Mequon, Wis. "I think rates are going to stay low until we start hearing the rhetoric again in January. Plus, we are not getting consistently good economic data."

The Labor Department released the September employment report this week, and it was disappointing at best. The economy added only 148,000 jobs during that month. That's at least 30,000 fewer jobs than economists had expected.

The weak employment report helped push rates down, as it was another indication that the Federal Reserve will not pull back on the economic stimulus program this year. The Fed says it will begin to cut back on the $85 billion-per-month bond-purchasing program once the labor market is strong enough.

"The Fed is not going to withdraw the stimulus for now, given the poor performance of the jobs market," says Cameron Findlay, chief economist for Discover Home Loans.

Findlay expects mortgage rates to stay somewhat stable until the end of the year.

Rates might even drop a little more as the debate over the debt ceiling heats up again and if economic reports continue to point to a weak economy, says Derek Egeberg, a branch manager for Academy Mortgage in Yuma, Ariz. "For the next two months, I think (mortgage and Treasury bonds) become very attractive and mortgage rates might continue to decline," he says.

Don't expect rates to tumble back into the 3% range, Egerberg says.

"If they continue to decline at this pace, I don't think we would see more than a quarter of a percent reduction," he adds.

Refinancers and homebuyers should take advantage of the extra time and lock as soon as they feel comfortable with the rate and the deal they are getting, mortgage professionals say.

Several factors will put upward pressure on rates early next year, including the new deadline to raise the debt ceiling, the possibility that the Fed will trim the bond-purchasing program then and new mortgage rules that go into effect January.

"Everybody now thinks 4% is the new normal," Egeberg says. "But it's artificial." He predicts that if the Fed pulls back on the stimulus next year, the 30-year fixed could shoot up to 5% or 6%.

"I think some people might be shocked that they missed the rates we have today, given how quickly this is going to change," he adds.

Source: http://www.foxbusiness.com/personal-finance/2013/10/24/mortgages-swoon-to-lowest-level-since-june/
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Proposition 5 would allow reverse mortgages for elders

10/18/2013

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Currently the only state that doesn't let seniors use reverse mortgages for purchasing homes, Texas could switch course if voters approve a constitutional amendment in the Nov. 5 election.

Proposition 5 would allow homeowners age 62 or older to buy a new house by paying about half of their costs out of pocket and then using funds from a reverse mortgage loan to pay the difference — all in one transaction and without having to sell their current home first. Proponents say that such a streamlined process would cut closing costs and could benefit hundreds of thousands of Texans. But some observers warn that if the amendment passes, seniors shouldn't assume that a reverse mortgage is their only option when buying a new home.

If voters back Prop 5, Texans could become part of the Home Equity Conversion Mortgage for Purchase program, which offers seniors reverse mortgages, insured by the federal government, specifically for purchasing new residences.

Unlike a traditional mortgage, reverse mortgages allow seniors to borrow money against the value of their homes. The homeowners are not expected to make payments on the loan; instead, when the borrower dies, the home could be sold by the lender or the borrower's heirs to cover the loan amount.

Texas, which began allowing home-equity lending in 1997, has allowed reverse mortgages since 2000. State lawmakers had resisted this type of home-equity lending because of the state's constitutional homestead protections, which are designed to prevent creditors from placing or enforcing liens on a property.

Source: http://www.mysanantonio.com/community/bulverde/article/Proposition-5-would-allow-reverse-mortgages-for-4901424.php
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Surviving Spouses With Reverse Mortgages Win Case

10/17/2013

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It’s a jarring situation: Your spouse dies, and you end up facing the possible loss of your home through foreclosure--just because you aren’t listed as a borrower on a reverse mortgage on your home.

       That’s what happened to Robert Bennett of Annapolis, Md., when his wife died in 2008. She was listed as the borrower on a reverse mortgage taken out on their home before her death -- but Mr. Bennett wasn’t. Rules administered by the U.S. Department of Housing and Urban Development allow banks to force surviving spouses who aren’t also listed as borrowers to pay off reverse mortgages, and to foreclose on the property if they can’t.

But a court ruling this week in a case brought against H.U.D. on behalf of Mr. Bennett by AARP Foundation Litigation should lead to regulatory changes that will help him and others like him remain in their homes, said Jean Constantine-Davis, a senior attorney with the foundation.

“The decision marks a turning point for surviving spouses such as our clients and ensures that they will receive the protections guaranteed by the law: that they will be able to remain in their homes, despite the loss of their husband or wife,” she said in a statement.

The United States District Court for the District of Columbia ruled Monday for the AARP, finding that H.U.D.'s rules contradict federal law governing reverse mortgages, which protects surviving spouses. The court sent the matter back to the housing agency for a fix.

It’s not known yet exactly how the agency will correct the problem, Ms. Jean Constantine-Davis said. H.U.D. may have to offer to take over affected loans, since the rules gave lenders the right to foreclose. It’s also unclear how many reverse mortgages are affected, or what their total value is, she said.

A spokesman for H.U.D. didn’t return a phone call seeking comment; a recorded message at the agency’s press office said the office was closed Tuesday afternoon because of the federal government shut down.

No one was available to comment Tuesday at the National Reverse Mortgage Association, which represents lenders.

The decision, Ms. Constantine-Davis said, should help remedy a potentially devastating snag in a financial product that was designed to help older people meet their expenses. “The decision will ultimately affect an untold but substantial number of similar surviving spouses, many of whom have contacted plaintiffs’ counsel over the past few years,” she said.

Reverse mortgages work differently than traditional mortgage loans. They’re only available to you if you’re 62 or older, and they’re meant to help you tap the equity in your house. Instead of you paying the bank, the bank pays you -- either in a lump sum, or in monthly distributions -- and interest accrues. When you die or move, you or your heirs typically sell the home to pay off the loan, and keep any money left over if the house is worth more than the remaining balance.

Here are some questions to consider, before taking out a reverse mortgage:

■ Does this ruling mean that I can now safely take out a reverse mortgage and leave my spouse off the loan?

That’s not a good idea, said Ms. Constantine-Davis. “I would at this point still be very discouraging from doing a reverse mortgage that leaves the spouse off,” she said, until it’s clear precisely what H.U.D. will do to fix the problem.

■ Why would I want to leave my spouse off the loan anyway?

Reverse mortgages are granted based on factors including the age of the borrower; the younger you are, the less money you get, since you are likely to stay in the home longer. Some borrowers may have been advised by brokers to leave the younger spouse off the mortgage to increase the amount of their loan, but borrowers may not have realized that could leave them at risk when the borrowing spouse died.

■ How can I be sure that I understand the risks of taking out a reverse mortgage?

Reverse mortgage borrowers are required to undergo independent counseling before signing loan papers; make sure both you and your spouse attend. New rules governing the loans start taking effect this month. For instance, you may be limited in the amount of money you can access in the first year of the loan. And your finances may get more scrutiny, to make sure you can continue to pay taxes and insurance on the home. More details are available in recent column by my colleague, Tara Siegel Bernard.   

Source: http://www.nytimes.com/2013/10/02/your-money/surviving-spouses-with-reverse-mortgages-win-case.html?_r=0


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The ultimate mortgage checklist: How to get the best possible deal 

10/16/2013

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The lowest possible rate is how many define a good mortgage. But that’s like judging the “best car” by the one with the lowest monthly payment.

Anyone who’s had to cough up a mortgage penalty or deal with refinance limitations can vouch for one thing: Mortgage restrictions can easily outweigh small (e.g., 0.10 to 0.15 percentage point) differences in interest rates.


It’s tough to predict your refinance needs three or four years out. Statistics show that well over half of Canadians with a mortgage renegotiate before their term is up. And the average five-year borrower changes their mortgage every three-and-a-half years.

That’s why it often pays to trade a slightly lower rate for more flexibility, unless you know you won’t change your mortgage during its term. A cheap rate can certainly save hundreds of dollars up front. Just be sure it doesn’t cost thousands after closing.

On that note, here’s a list of questions to ask your mortgage expert of choice. Check the boxes one by one as you talk with your adviser. With a little effort, this list will help you snare the most feature-rich mortgage possible, at a rate that’s better than average.

Read More: http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/the-ultimate-mortgage-checklist-63-steps-to-navigating-the-best-deal/article14868520/

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Mr. James Clooney Ranks #10 in Men's 55 PPR Singles

10/15/2013

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Rank Name City State Section District Points
1  Berenbaum, David  Paramus  NJ  Eastern  New Jersey Region  1008
2  Adler, Richard W.  Southampton  NY  Eastern  Long Island Region  738
3  Lurie, Jonathan  New York  NY  Eastern  Metropolitan Region  666
4  Henderson, Jan Mark  East Brunswick  NJ  Eastern  New Jersey Region  592
5  Moss, Paul S.  New York  NY  Eastern  Metropolitan Region  588
6  Hoffman, John B.  New York  NY  Eastern  Metropolitan Region  510
6  Boutillette, Michael J.  Somerset  NJ  Eastern  New Jersey Region  510
8  Titcomb, John  Lloyd Harbor  NY  Eastern  Long Island Region  466
9  Brill, Steven C.  Great Neck  NY  Eastern  Long Island Region  448
10  Clooney, Jim  oyster bay cove  NY  Eastern  Long Island Region  400
11  Serebro, Boris  White Plains  NY  Eastern  Southern Region  398
12  Andersen, Glen A.  Wharton  NJ  Eastern  New Jersey Region  376
13  Slott, Joseph  Brooklyn  NY  Eastern  Metropolitan Region  358
14  Stillman, Richard  Mountain Lakes  NJ  Eastern  New Jersey Region  322
15  Johns, Mark  Great Neck  NY  Eastern  Long Island Region  275
16  L'allier, Jean  Flushing  NY  Eastern  Metropolitan Region  224
17  Tanis, Robert J.  Oak Ridge  NJ  Eastern  New Jersey Region  192
18  Rolfe, Chevas William  Astoria  NY  Eastern  Metropolitan Region  168
19  Coglietta, Fred F.  Saint James  NY  Eastern  Long Island Region  164
20  Farley, Robert C.  Saratoga Springs  NY  Eastern  Northern Region  134
21  Udis, Andrew  New York  NY  Eastern  Metropolitan Region  132
22  Hanchrow, James P.  White Plains  NY  Eastern  Southern Region  128
23  Ackerman, Philip  Rensselaer  NY  Eastern  Northern Region  126
24  Checa, Luis P  New York  NY  Eastern  Metropolitan Region  106
25  Smith, Gerard J.  Garden City  NY  Eastern  Long Island Region  104
25  Chizever, Richard S.  Aquebogue  NY  Eastern  Long Island Region  104
27  Evans, Dwight R.  Westfield  NJ  Eastern  New Jersey Region  96
28  Winnitzki, Walter J.  Manhasset  NY  Eastern  Long Island Region  88
29  Scheibner, Peter J.  Stony Point  NY  Eastern  Southern Region  82
29  Mutch, Robert D.  Ramsey  NJ  Eastern  New Jersey Region  82
29  Sussman, Gary A.  Highland Mills  NY  Eastern  Southern Region  82
29  Lamonaca, Donato  Brooklyn  NY  Eastern  Metropolitan Region  82
29  Dunning, Dennis J.  Poughquag  NY  Eastern  Southern Region  82
29  Scammacca, Michael  Waterford  NY  Eastern  Northern Region  82
35  Weisberger, Mike  New York  NY  Eastern  Metropolitan Region  68
35  Wawrzyniak, Piotr  Forest Hills  NY  Eastern  Metropolitan Region  68
37  Deutsch, Ron Edward  Chappaqua  NY  Eastern  Southern Region  66
37  LIEMER, DAVID  Chappaqua  NY  Eastern  Southern Region  66
39  Simel, Peter B.  Douglaston  NY  Eastern  Metropolitan Region  64
39  Underwood, Steven  Minoa  NY  Eastern  Western Region  64
39  Hoekstra, Mark  Baldwinsville  NY  Eastern  Western Region  64
42  Chavez, Peter  Cortlandt Manor  NY  Eastern  Southern Region  52
42  Rudina, Solee E.  Basking Ridge  NJ  Eastern  New Jersey Region  52
44  Neubauer, John  Patterson  NY  Eastern  Southern Region  22
45  Kier, Nelson  New York  NY  Eastern  Metropolitan Region  6
46  Darris, Cranston  New York  NY  Eastern  Metropolitan Region  4
46  Eskenazi, Jack  Levittown  NY  Eastern  Long Island Region  4
46  Kalb, Scott E.  Greenwich  CT  Eastern  Southern Region  4
46  McIntyre, Mark J.  New York  NY  Eastern  Metropolitan Region  4
46  Cooper, Judson A.  Armonk  NY  Eastern  Southern Region  4
46  Wilkinson, Alan W.  New York  NY  Eastern  Metropolitan Region  4
46  Harvey, Michael  Boca Raton  FL  Florida  Region 6  4
46  Yonkers, Paul J  Sea Cliff  NY  Eastern  Long Island Region  4
54  Prasad, Narayan  New York  NY  Eastern  Metropolitan Region  3
55  Silbiger, Thomas  New York  NY  Eastern  Metropolitan Region  2
55  Guernsey, Steve G.  Poughkeepsie  NY  Eastern  Southern Region  2
55  Schechner, Robert M.  Hazlet  NJ  Eastern  New Jersey Region  2
55  Schneider, David I.  Springfield  NJ  Eastern  New Jersey Region  2
55  Ambrose, Eric  Rosedale  NY  Eastern  Metropolitan Region  2
55  Rahbari, Raymond K.  North Babylon  NY  Eastern  Long Island Region  2
55  Gash, Gary M.  White Plains  NY  Eastern  Southern Region  2
55  Lease, Jack  Newburgh  NY  Eastern  Southern Region  2
55  Donnelly, James G.  Richmond Hill  NY  Eastern  Metropolitan Region  2
55  Wilkinson, Kenneth  Brooklyn  NY  Eastern  Metropolitan Region  2
55  De La Cruz, Augusto C.  New York  NY  Eastern  Metropolitan Region  2
55  Hickey, Tom  Hopewell Junction  NY  Eastern  Southern Region  2
55  Bart, H Ted  New York  NY  Eastern  Metropolitan Region  2
55  Lerner, Peter  New York  NY  Eastern  Metropolitan Region  2
69  Glanzman, Robert L.  Carmel  NY  Eastern  Southern Region  1
69  Makuch, Bish  Woodside  NY  Eastern  Metropolitan Region  1
69  Eleby, Larry  Valatie  NY  Eastern  Northern Region  1
69  Dowling, Robert E  Castleton  NY  Eastern  Northern Region  1
69  Ruiz, Hugo  Jackson Heights  NY  Eastern  Metropolitan Region  1
69  Dirusso, Steve  Great Neck  NY  Eastern  Long Island Region  1
69  Landau, Donald Alan  Goldens Bridge  NY  Eastern  Southern Region  1

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Refinance applications rise following taper-driven drop in rates 

10/11/2013

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The Refinance Index rose 2.4% (to 1,995 from 1,947) after the Fed decided to maintain its current pace of asset purchases. The bond market has been re-adjusting to the idea that we may see the end of quantitative easing soon, and then the Fed surprised everyone. This has given people one last chance to refinance.

The MBA reported that the share of refinance applications rose to 63%. Going forward, home price appreciation will drive refinance activity as previously underwater homeowners eventually get back to positive equity and take advantage of lower rates. Slowing refinance activity could be a negative for originators like PennyMac (PMT) and Redwood Trust (RWT).

Policy could have an impact, though. President Obama gave a speech regarding housing in which he said he wants everyone to be able to refinance. That means HARP 3.0 (another wave of the Home Affordable Refinance Program), which would presumably extend to non-government mortgages and would have a later cutoff date than early 2009. If this happens, expect another refinance wave.

Implications for mortgage REITs

Refinancing activity affects prepayment speeds, which are a critical driver of mortgage REIT returns. Prepayment speeds occur because homeowners are allowed to pay off their mortgage early, without penalty, and when interest rates fall, those who can refinance at a lower rate do. This is good for homeowners. However, it isn’t necessarily good for mortgage lenders—especially REITs. When homeowners prepay, the investor loses a high-yielding asset and is forced to reinvest the proceeds in a lower-rate investment. This means lower returns going forward. A rise in prepayment speeds could negatively affect REITs, like American Agency Capital Corp. (AGNC), Annaly Capital Management, Inc. (NLY), Hatteras Financial Corp. (HTS), CYS Investments, Inc. (CYS), and Capstead Mortgage Corporation (CMO). That said, the increase in rates has basically put prepayment worries on the back burner for the REITs.

However, as rates increase, prepayments become less of a problem for REITs. But increasing rates bring their own set of problems, and REITs face mark-to-market hits on their portfolio and must adjust their hedges to a more volatile interest rate environment. Mortgage-backed securities outperform in stable interest rate environments, but they’re highly vulnerable to interest rate shocks. As we’ve seen from the mortgage REIT earnings so far, virtually everyone is reporting a substantial decline in book value as higher rates have taken their toll. It would be ironic to see the only silver lining of increased rates (lower prepayment speeds) taken away from the REITs as well.

Source: http://marketrealist.com/2013/10/refinance-applications-rise-following-taper-driven-drop-rates/
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A Case Against Janet Yellen For Fed Chairman

10/10/2013

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A case for Janet Yellen is that as the Fed’s current vice chair, she represents continuity. Based on her comments and past record, she would either continue Bernanke’s policy or even take them up a notch, creating even more new money in order to “help” the economy. A case against Janet Yellen is the flip side of this. Bernanke’s policies have been a complete failure, so choosing an acolyte of his would be the worst possible thing to do.

Bernanke’s policies have in fact failed on many levels. In the first place, he is a Keynesian who thought that more money would increase demand in the economy. Studies have shown that this did not work, that it actually backfired.

Every dollar of new borrowing encouraged by giveaway interest rates was more than offset by a reduction in spending by savers. When savers receive little or no return on savings, they cannot either spend or invest what they do not receive. Moreover, the repressed interest rates have actually discouraged bank lending while destabilizing pension funds and insurance companies.

Interest rates below inflation have succeeded in creating a mirage of prosperity by  fueling a stock market rise, a rise that is looking more and more like another bubble among other Fed sponsored asset bubbles. But bubble or not, there is no demonstrated link in economic theory between a rising stock market and rising employment levels.

Yet even this recital of failure does not get to the heart of what is so tragically wrong with Bernanke’s and Yellen’s ideas. The worst part of their failed policies is that the severely repressed interest rates they have favored represent price controls, price controls blanketing the entire economy, and price controls never work.

There is an irony here.  A large majority of professional economists, including those aligned on the political “left” as well as “right,” respond to surveys by indicating that they generally oppose “government price controls.” The problem  is that most government price  manipulations and controls are not advertised as such. They may be stealthy by design; or they may just take a form that is hard to recognize for what it is.

Ben Bernanke himself told a group of college students studying economics that he opposes price controls. He said that:

    “Prices are the thermostat of an economy. They are the mechanisms by which an economy functions.”

But Bernanke’s Fed has unarguably been the chief price controller of our economy.

Why exactly are manipulated or controlled prices so damaging? A thriving economy is comprised of billions of prices and trillions of price relationships. Consumers rely on honest price signals and so do investors. They tell us what we need to know in order to make sound economic decisions.

If prices are not allowed to communicate accurate and honest information, no economic system can be expected to function properly.  If the price manipulation or control is not extreme, the economy may limp along, impaired, not realizing its full potential, but not in overt crisis. If the undermining of honest prices is extreme enough, the system will visibly falter and may even collapse, as in 1929 or 2008.

Unfortunately price manipulations and controls just lead to more manipulations and controls.. In 2009, the government tried its best to restore the health of banks by finding buyers for their bad mortgages. Generous subsidies were offered to  persuade Wall Street to buy the mortgages. But Wall Street refused all the offers. Why? Because the government had taken over the mortgage market, and in the absence of normal market prices, no one had a clue what the mortgages were worth.

This is a dramatic example, but on close examination too much of what the entire government does in trying to lead or regulate the economy involves a price manipulation or control. It is time to pay heed to some sensible advice from  humorist P. J. O’Rourke:

    “The  price system] is a bathroom scale. We may not like what we see when we step on the bathroom scale, but we can’t pass a law making ourselves weigh 165. . . .”

Norwegian business executive Oystein Dahle reminded us that: [Soviet] socialism collapsed because it did not allow prices to tell the economic truth.”  Janet Yellen, like Ben Bernanke before her, seems completely unaware of the importance of honest prices. How can we expect the economy to recover under her stewardship?

Source: http://www.forbes.com/sites/realspin/2013/10/09/a-case-against-janet-yellen-for-fed-chairman/

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