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Fed Chief Signals Another Rate Cut

by Southern Californias Top Producing Mother & Son Te

WASHINGTON - Federal Reserve Chairman Ben Bernanke warned Congress Wednesday of a period of sluggish business growth, sending a fresh signal of another cut in interest rates.

 

"The economic situation has become distinctly less favorable" since the summer, Bernanke testified. Since his previous such assessment last summer, the housing slump has worsened(AP) - , credit problems have intensified and the job market has deteriorated. Bernanke said the confluence of these factors has turned people and businesses alike toward a more cautious attitude toward spending and investment. This, he said, has further weakened the economy.

 

Incoming barometers continue to "suggest sluggish economic activity in the near term," Bernanke said in an appearance before the House Financial Services Committee. At the same time, he added, the Fed must keep a close eye on inflation given the recent run-up in energy and other prices paid by consumers and businesses.

 

For now though, the No. 1 battle is shoring up the economy. And Bernanke pledged anew to slice a key interest rate to steady the wobbly economy, which many fear is on the verge of a recession - or possibly has already toppled into one.

 

The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said, hewing closely to assurances he offered earlier this month.

 

The central bank, which started lowering a key interest rate in September, has recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points - the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting on March 18.

 

There are dangers that the economy will weaken even further. "The risks include the possibilities that the housing market or labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further," Bernanke cautioned.

 

The Fed chief was hopeful that previous rate reductions along with a $168 billion stimulus package of tax rebates for people and tax breaks for business will energize the economy in the second half of this year.

 

Even as the Fed tries to shore up the economy, it must remain mindful of inflation pressures, Bernanke said.

 

Record high oil prices - topping $100 a barrel - are pushing consumer prices upward. That's shrinking paychecks, and with people feeling less well off because the values of their homes have dropped, consumer spending "slowed significantly" toward the end of the year, the Fed chief said.

 

The Fed forecasts that inflation will moderate this year compared with last year. But the Fed's recently revised inflation projection of an increase between 2.1 percent and 2.4 percent is higher than its old forecast from the fall.

 

Bernanke said there are "slightly greater upside risks" that inflation could turn out to be higher than the Fed currently anticipates, given the recent run-up in energy and food prices.

 

"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored," Bernanke warned. If people, companies and investors think inflation will move higher, they will act in ways that could turn inflation even worse, a sort of self-fulfilling prophecy. And Bernanke said that could complicate the Fed's job of trying to nurture economic growth while also keeping inflation under control.

 

With the economy slowing and prices rising, fears are growing that the country could be headed for a bout of stagflation, a dangerous economic brew not seen since the 1970s.

 

The Fed for now is focused on bolstering the economy through interest rate reductions. To combat inflation, the Fed would raise rates.

 

At some point over the course of this year, the Fed will need to "assess whether the stance of monetary policy is properly calibrated" to foster the Fed's objectives of price stability "in an environment of downside risks to growth," Bernanke said.

Michael Jackson's Neverland Auction Set

by Southern Californias Top Producing Mother & Son Te

LOS ANGELES - Want Michael Jackson's merry-go-round? How about his locomotive, or his curtains? Those items and more could hit the auction block next month as the pop star's Neverland Ranch will be put up for public sale unless he pays the more than $24 million he still owes on the property, according to a Tuesday court filing.

 

Financial Title Co. filed the notice of trustee's sale with Santa Barbara County Superior Court, setting the auction date for March 19.

 

A spokeswoman for Jackson did not return a call for comment.

 

Julie Wagner, a manager at the San Francisco-based title company, confirmed that Jackson's property was set for auction.

 

Court documents obtained by Fox News warn Jackson that he has until the date of the auction to take action to keep his lavish estate.

 

If the property does go to auction, the initial asking price could be higher than the $24.5 million Jackson owes because of interest due and other costs, according to the filing.

 

Also going up for sale would be all the home's furnishings and items on the property, according to the filing.

 

The reclusive star no longer lives at the famous, 2,500-acre spread in Los Olivos, a popular tourist spot northwest of Santa Barbara known for its wineries.

 

He has been mostly residing abroad since his 2005 acquittal on child molestation charges, although he has spent time in Las Vegas as he tries to stage his musical comeback.

Existing Home Sales Hit 9 year lows

by Southern Californias Top Producing Mother & Son Te

WASHINGTON - Sales of existing homes fell to the lowest level in nearly a decade in January while the median price for a home dropped for the fifth straight month.

 

The National Association of Realtors said Monday that sales of single-family homes and condominiums dropped by 0.4 percent last month to a seasonally adjusted annual rate of 4.89 million units, the slowest sales pace on records going back to 1999.

 

The median price of a home sold in January slid to $201,100, a drop of 4.6 percent from a year ago.

 

The drop in sales and the fifth consecutive decline in prices underscored the continued pressure facing housing, which is struggling to emerge from its worst slump in a quarter-century.

 

Sales were weak in all parts of the country except the Midwest, where sales posted an increase of 3.4 percent. Sales dropped by 3.6 percent in the Northeast, 2.1 percent in the West and 0.5 percent in the West.

 

Sales of both existing homes and new homes tumbled for a second straight year in 2007 as the housing industry was battered by a severe credit crunch that hit in August as major financial institutions began reporting multibillion-dollar losses on their investments in risky subprime mortgages, loans made to homeowners with weak credit.

 

The market for subprime mortgages has essentially dried up and other types of loans have become harder to obtain as lenders have tightened their standards.

 

Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out with a rebound expected to start toward the end of this year.

 

"Subprime loans and other risky mortgage products have virtually disappeared from the marketplace, and over the past five months, this has been reflected in soft but fairly stable home sales," he said.

 

He said he expected demand to be bolstered in coming months by the action of Congress in the economic stimulus bill to raise the caps on the size of loans that can be backed by Fannie Mae and Freddie Mac and the Federal Housing Administration.

 

The slump in housing that began in 2006 followed a boom period in which sales and prices had soared to record levels. Many economists believe that the sharp turnaround has severely depressed economic growth and boosted the odds that the country could fall into a full-blown recession.

Bernanke Says Economic Outlook Is Worse

by Southern Californias Top Producing Mother & Son Te

Federal Reserve Chairman Ben Bernanke told Congress Thursday that the country's economic outlook has deteriorated and signaled that the central bank is ready to keep on lowering a key interest rate - as needed - to shore things up.

 

In remarks to the Senate Banking Committee, Bernanke said the one-two punch of the housing and credit crises has greatly strained the economy. Hiring has slowed and people are likely to tighten their belts further, as they are pinched by high energy prices and watch the value of their single biggest asset - their homes - weaken, he warned.

 

"The outlook for the economy has worsened in recent months, and the downside risks to growth have increased," Bernanke said. "To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so." Bernanke also said that the "virtual shutdown" of the market for subprime mortgages - given to people with blemished credit histories or low incomes - and a reluctance by skittish lenders to make "jumbo" home loans exceeding $417,000 have aggravated problems in the housing market.

 

Unsold homes have piled up and foreclosures have climbed to record highs.

 

"Further cuts in homebuilding and in related activities are likely," Bernanke cautioned.

 

Given all the dangers facing the economy, the Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," he said, indicating additional rate cuts were likely.

 

Bernanke appeared with Treasury Secretary Henry Paulson and Christopher Cox, chairman of the Security and Exchange Commission, amid increasing concerns that the economy may be drifting into recession.

 

The troubles in the housing and credit markets threaten to push the economy into its first recession since 2001 - if it hasn't fallen into one already.

 

Bernanke and Paulson didn't speak of a recession, noting that their forecasts still call for growth, albeit slow growth. However, the Fed and the Bush administration are expected to downgrade their economic forecasts for this year, given all the troubles, Bernanke and Paulson said.

 

"It would be less, but I do believe we'll keep growing," Paulson told the panel. Bernanke said the Fed's new forecast out next week will "show lower projections of growth ....growth looks to be weak, but still positive."

 

On Wall Street, Bernanke's bearish assessment of the economy pulled stocks lower. The Dow Jones industrials lost nearly 100 points in morning trading.

 

The Federal Reserve, which started lowering a key interest rate in September, recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points - the biggest one-month rate reduction in a quarter-century. Economists and Wall Street investors believe the Fed will cut rates even more at its next meeting in March and probably again in April.

 

"Our economy is clearly in trouble," said the committee's chairman, Sen. Christopher Dodd, D-Conn. Restoring investor and consumer confidence, he said, is critical "if we are going to get back on our feet again."

 

Bernanke said his forecast is for the economy to continue to endure a "period of sluggish growth." That would be "followed by a somewhat stronger pace of growth starting later this year" as the effects of the Fed's rate cuts and a newly enacted stimulus package begin to be felt. The $168 billion package, which includes rebates for people and tax breaks for businesses, was speedily passed by Congress last week and signed into law on Wednesday by President Bush.

 

Sen. Richard Shelby, R-Ala., though, believed the energizing impact of the rebates would be "negligible" and likened it to "pouring a glass of water into the ocean."

 

Even though Bernanke's forecast envisions an improving economic picture later this year, the Fed chief said it was nonetheless "important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated" or that credit will become even harder to secure.

 

That's why, for now, Bernanke indicated the Fed is still inclined to lower interest rates.

 

Yet, that could change, depending on how the economy and inflation unfold.

 

"A critical task for the Federal Reserve over the course of this year will be to assess whether the stance of monetary policy is properly calibrated to foster our mandated objectives" of promoting healthy employment and economic growth while keeping inflation under control.

 

Inflation should moderate, Bernanke said. Yet last year's steep run-up in oil prices is a reminder that the Fed can't let down its inflation guard and must keep close tabs on the inflation expectations of investors, consumers and businesses. Those expectations can affect their behavior, which can affect the economy.

 

"Any tendency of inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate" the Fed's job, he said.

 

Stimulus from the new rescue package also should help the faltering jobs market, Paulson said. He estimated that it would create "more than half a million jobs by the end of this year."

 

Meanwhile, the Bush administration's efforts to help homeowners at risk of losing their homes is paying off.

 

In the final three months of last year, more than 470,000 received help from the company servicing their mortgages and almost 30 percent of those received a loan modification, Paulson said.

 

Still, the secretary said more needs to be done. He called on Congress to revamp mortgage giants Fannie Mae and Freddie Mac and modernize the Depression-era Federal Housing Administration. He also asked Congress to pass legislation that will allow states to issue tax-exempt bonds and use the proceeds to help struggling homeowners refinance into more affordable mortgages.

 

The SEC is exploring the role of ratings agencies in the meltdown of subprime mortgages, Cox said. Critics allege ratings agencies didn't adequately assess risk when assigning ratings to certain complex mortgage securities.

 

Cox said he expects to receive preliminary reports from the agency's examinations in the coming months and a final report in the early summer.

 

Bernanke and Paulson have been fighting to keep the economy afloat. Foreclosures have climbed to record highs, financial companies have racked up multibillion-dollar losses from soured mortgage investments, Wall Street has convulsed, and employers have turned cautious in their hiring. Payrolls in January fell by 17,000, the first nationwide job loss in more than four years.

 

Economic growth practically stalled in the final three months of last year, and some economists believe it may actually be contracting now. By one rough rule of thumb, a recession occurs when there are two consecutive quarters - six straight months - when the economy shrinks.

 

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Photo of The Mother & Son Team - Maria Palacios & Chris Gon Real Estate
The Mother & Son Team - Maria Palacios & Chris Gon
Berkshire Hathaway HomeServices, California Properties
16911 Bellflower Blvd
Bellflower CA 90706
(877) 883-1003
Fax: 562-381-9113