Frpm the NYT

History | You certainly won’t find Rev. Samuel Willard on the list of Founding Fathers, but his role in shaping the nation was considerable, according to ”Heavenly Merchandize,” a new book by Mark Valeri, professor of church history at Union Theological Seminary in Richmond, Va. Mr. Valeri’s book, subtitled “How Religion Shaped Commerce in Puritan America,” explains how a series of catastrophes in the mid-17th century turned Puritan preachers like Willard from disdain for the market to praise for it as morally necessary, for economic growth and hence the social order:

[He] preached during a period when Boston merchants believed that their occupation was essential to the commonweal—to England’s prosperity and therefore to Protestantism and liberty. Their strategies to convey goods, credit, and power throughout the British Atlantic proved them to be patrons of the empire. Many moralists, Willard included, valorized them in such terms. His successors, leading Boston pastors of the 1710s, 1720s, and 1730s, went further. They, along with their parishioners, sanctioned the practices that guaranteed economic success as moral mandates, and the rules that governed commercial exchange as natural and divine laws. Their convictions informed a market culture that, by many accounts, came to maturity by 1750 and provided motives for rebellion against the British Empire after the cessation of war with France. ["Heavenly Merchandize" (introduction); author interview, The Boston Globe]

By DAVID STREITFELD

PHOENIX — During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.

The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.

Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.

“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”

Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.

Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. “People got 90 cents for free,” Mr. Combs said. “It rewards immorality, to some extent.”

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Gus: I believe Yamerika is the only country in the world where borrowers can basically tell a bank to shove it and abandon the asset and the debt at the same time. Anywhere else, the contract is binding in such a way that assets would have to be sold and the difference in the shortfall carried by the borrower. I believe the Europeans are baffled by the way the Yamerikans run these affairs. Even in Australia, people and the system are more honest than that...

By SEWELL CHAN

WASHINGTON — Federal Reserve officials expressed considerable uncertainty before they took a nearly unanimous vote on Aug. 10 to take a modest step to bolster the flagging recovery, according to the central bank’s minutes of the meeting.

The meeting, which lasted 5 hours and 35 minutes, longer than usual, ended with the Federal Open Market Committee, which sets monetary policy, voting 9 to 1 to use proceeds from the Fed’s mortgage bonds to buy long-term Treasury securities.

The action was largely technical — it merely prevented the Fed’s bond portfolio from shrinking — but it was also strongly symbolic as it signaled a growing concern about slowing recovery and the risk of deflation. After the Fed announced its action, markets have been on a decline.

The minutes, released Tuesday, revealed that Fed officials were divided on how effective the purchase of long-term Treasuries would be, and on whether it would complicate an eventual return to normal monetary policy.

While the committee closed ranks behind the Fed chairman, Ben S. Bernanke, who supported the move and whose views are generally decisive in setting policy, the minutes suggested that he would have to go even further to overcome his colleagues’ reservations if the Fed were to resume buying huge quantities of government debt — an action Mr. Bernanke says he is prepared to take if the economy worsened significantly.

The Fed used up its main policy tool by lowering short-term interest rates to nearly zero in late 2008. So it bought about $1.4 trillion in mortgage-linked securities and debts owed by entities like Fannie Mae and Freddie Mac from January 2009 to March 2010 in an effort to ease credit and push down long-term rates.

One consequence is that homeowners have been refinancing their loans and paying off their debts early. As a result, the nearly $2.1 trillion in domestic securities on the Fed’s balance sheet was likely to shrink by nearly $400 billion by the end of 2011.

To avoid an unintended “passive tightening” of monetary policy, the committee agreed to reinvest proceeds from the Fed’s holdings of mortgage bonds in long-dated government securities.

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Gus: I feel all comfortable with slippers on my weary feet...

WASHINGTON — The Federal Reserve, concerned about the slow recovery, announced a second, large purchase of Treasury bonds on Wednesday, an effort to spur economic growth by lowering long-term interest rates.

The Fed said it would buy an additional $600 billion in long-term Treasury securities by the end of June 2011, somewhat more than the $300 billion to $500 billion that many in the markets had expected.

The central bank said it would also continue its program, announced in August, of reinvesting proceeds from its mortgage-related holdings to buy Treasury debt. The Fed now expects to reinvest $250 billion to $300 billion under that program by the end of June, making the total asset purchases in the range of $850 billion to $900 billion.

That would just about double the $800 billion or so in Treasury debt currently on the Fed’s balance sheet.

http://www.nytimes.com/2010/11/04/business/economy/04fomc.html?_r=1&hp=&pagewanted=print

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... Now "Another largely technical action"... Now you see it, now you don't... Like magic, the debt disappears from view...

The Federal Reserve will pump an extra $US600 billion into the US financial system to try and boost the country's ailing economy.

The Australian dollar shot through parity with the greenback as soon as the measures were announced, and has remained there throughout the local trading day.

In the United States official interest rates are as low as they can get - currently between 0 and 0.25 per cent.

So with conventional ways to stimulate the economy exhausted, America's central bank has resorted to an urgent, almost last-ditch, solution.

It is known as quantitative easing, in other words, the metaphorical printing of money.

http://www.abc.net.au/news/stories/2010/11/04/3057337.htm

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