The main housing debate in our nation's great sausage factory is over write-downs, or cram-downs: Should lenders be encouraged (forced?) to write down bad mortgages, and if so, under what terms, and what possible benefits? And where do the new mortgages come from, and who is on the hook for them?

That said, the Senate, in its great wisdom, continues to push for a seemingly unrelated tax break for home-builders. The headline above comes from a particularly scathing Slate.com analysis in which Daniel Gross argues that the tax break -- technically a "tax-loss carryback" -- is better described as "a bubble-head tax break." Oh, yes, and it's "perverse, absurd and unwarranted."

Gross: "The proposed tax break is hard to justify for several reasons. It does nothing for slow and steady companies that keep their heads and simply rack up profits year after year — and pay their taxes accordingly. Rather, it rewards the most reckless participants in the bubble. If you borrowed a ton of money to build spec houses in Miami and reported $2 billion in profits between 2002 and 2007 but gave up all those profits by notching a $2 billion loss this year, the extended carryback has a great deal of value. If you've been building affordable housing in Wichita, Kan., and booked $300 million in profits in those years, and then, through careful management of costs, managed to eke out a $5 million profit this year, it has no value. The big public homebuilders, whose shares rallied on the news of this potential tax break, didn't pay any windfall taxes on the bubble-era earnings. Why should they get an extraordinary post-bubble windfall?"

More: "The proposal to give new tax breaks to homebuilders and banks is yet another example of the pernicious trend of privatizing profit and socializing losses, which is gnawing away at faith in the system. Dilute the shareholders, not the taxpayers."

Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Hat Tip: Patrick.net
Photo Credit: Getty Images

I reported back in December that Washington Mutual had confirmed it was lowering the amount of some home equity lines of credit, or HELOCs. Judging from my e-mail in-box, WaMu is continuing to squeeze its customers.

This came in tonight:  "I just received the notice today of the reduction on our HELOC from WaMu ... As a customer I can verify that the amount they lowered it to is much less than the amount we currently have as a balance.  On 4/2/08 our balance was $69,778.47.  Today, 4/9/08, we received notice via mail that our limit was to be lowered to $64,900.  In addition to this change, which I should mention the letter was written on 4/3/08, the bank charged us an overlimit fee on 4/4/08."

Last week a Realtor in San Diego wrote, "Just after I made a large payment of $10K (only $350 payment was due), they took away all of my credit line.  This is putting me in a panic and possible bad situation.  I have been with WaMu for many years and have had many home loans with them, and never missed a payment, and have always had bank accounts with them, in addition, my credit is great. I had no notice or warning whatsoever, of course if I had, I would not have given them $10,000 that I did not need to."

More: "I am a Realtor, and times are tough, and it helped knowing that I had that cushion, making it a little easier to justify spending money on marketing and advertising in an effort to keep business coming in and thus enabling me to meet my payment obligations."

This is a significant trend in the economy right now: it is hard for lots of people to borrow money. Cal mentions this often in the comment section.  The Fed can cut interest rates 'til the cows come home, it doesn't matter, it's still hard to borrow.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

A programming note: Sen. Jim Bunning of Kentucky will appear on cable TV tomorrow (Thursday) to explain his opposition to the Senate's housing bill, which he has called "unusually bad." The senator's office reports he will be a guest on CNBC's "Squawk Box" at 8:15 a.m. Eastern (5:15 a.m. local) and on CNN's "Issue #1" at noon Eastern, 9 a.m. local time.

Bunning does not strike me as a reader of blogs, but he is listening to somebody: "It turns out that the American people don’t like the idea of bailing out banks and their neighbors who gambled on home prices," he said this week. "The voters understand what is going on in Washington, better than we do."

I look forward to a full report on the senator's Squawk Box appearance in the comment section from one of you early risers.
Photo Credit: File photo of Jim Bunning via AP

The rush in Congress to agree on an emergency housing bill appears to have given way to a three-way muddle, with the House, the Senate and the White House staking out different positions. A muddle is not necessarily a bad thing, but that's where we are:

The AP today: "The Bush administration announced new steps Wednesday to help more homeowners head off foreclosure. The Senate, in the meantime, worked to complete a bipartisan housing bill the White House says would worsen the mortgage mess."

The new White House proposal could be called Dodd-Frank Lite -- a limited and voluntary version of the widespread mortgage write-downs and new guarantees favored by Sen. Chris Dodd and Rep. Barney Frank: "It is a more modest version of a concept Democrats have recently been pushing to respond to the housing crisis, which would have the FHA back from $300 billion to $400 billion in restructured loans for distressed borrowers if lenders were willing to take a substantial loss on the mortgages. The administration's idea, however, would reach far fewer borrowers than the Democrats' proposal -- roughly 100,000 rather than between 1 million and 2 million -- without requiring lenders to take large losses."

The administration laid out its most explicit criticism of Dodd-Frank, saying it would "'essentially put taxpayers on the hook for a large number of non-performing loans." The administration also criticized the Senate's proposal for grants to allow local governments to buy foreclosed homes, calling it "a costly bailout for lenders and speculators.''

Your thoughts? Ideas? E-mail story tips to peter.viles@latimes.com
Photo Credit: AFP/Getty Images

Sen. Jim Bunning, formerly of the Philadelphia Phillies and now of Kentucky, receives special attention around here because he was the first U.S. senator to find fault with the housing bill that is dominated by tax breaks for home-builders.  Today Bunning explained his objections to the bill in detail. Excerpts:

"This is an unusually bad bill, and I have opposed it from the start.  The course it has followed almost guarantees that it will be filled with the worst kind of gimmickry.  And it is.  The Senate may be the world’s greatest deliberative body, but this bill is anything but the product of deliberation.  It is a jumble of disjointed ideas, unlikely to solve the crisis at hand, and it’s unpopular.

"It turns out that the American people don’t like the idea of bailing out banks and their neighbors who gambled on home prices.   The voters understand what is going on in Washington, better than we do. ...

"Another provision that deserves far more scrutiny is the $4 billion in community development block grants that will be allocated to state and local governments to buy foreclosed properties.  To begin with, this program is very poorly managed. The Wall Street Journal called it among the worst-run programs in Washington, and there is a lot of competition for that title."

Worth noting: The governor of California (pictured), widely seen as having good business sense in his own affairs, has been a recent buyer of land. The L.A. Times' Hot Property reports Schwarzenegger and his wife, Maria Shriver, recently bought 25 acres of ranchland in Carpinteria, in Santa Barbara County. Price tag was about $4.7 million.

Also worth noting: An L.A. Times analysis of beach communities shows median sales prices are slipping -- down 8.9% from August -- though are still outperforming the rest of metro L.A.  Sales are down as well: 149 sales in February in 18 beach ZIP codes, down from 209 in February 2007. The biggest seaside price declines: In Huntington Beach, where median prices in one ZIP have dropped from $1.2 million in 2007 to $827,000 in February, a dip of 31%.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP

All kinds of news is breaking out on the real estate beat today. A quick catch-up:

--The White House voiced strong opposition to the Senate housing bill, saying it "will likely do more harm than good by bailing out lenders and speculators, and passing on costs to other Americans who play by the rules and honor their mortgage debt obligations."

--Washington Mutual found some new friends with money: "The Seattle-based thrift scored a $7 billion capital infusion Tuesday from a group led by private equity shop TPG." WaMu said "mortgage problems will lead to a $1.1 billion quarterly loss and the elimination of 3,000 jobs.... It also plans to close its 186 stand-alone home loan offices and stop offering loans through mortgage brokers."

--The National Assn. of Realtors reported that "pending sales of previously owned homes fell a bigger-than-expected 1.9% in February to the lowest level on record."

-- Last, never least, the L.A. Land blog launched several photo galleries in the popular, user-generated LATimes.com photo gallery Your Scene. The above photo, taken in Mar Vista this morning, is from the Foreclosure gallery. Post your photos, it's easy and free. Other L.A. Land galleries include Weird L.A. Houses, Under Construction and Tree of the Week.

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Our very first Foreclosure Photo of the Day, taken by your blogger this morning in Mar Vista, and posted on the Foreclosure photo gallery on Your Scene.  Who knew there were stressed owners in The 310? Consider this your invitation to post photos on Your Scene -- it's easy, and it's free, and the best photo of the day will be posted here on the blog.

Other L.A. Land photo categories on Your Scene include Weird L.A. Houses, Under Construction and the ever-popular Tree of the Week.

Now, get posting.

The unseemly, globetrotting, money-grabbing, legacy-spinning, responsibility-denying tour of Alan Greenspan continues, as relentless as a bad toothache. It brings to mind the words of the great Ring Lardner: " 'Shut up,' he explained."

I mean, Alan, please. Enough. How can we miss you if you won't go away?

If you missed it (and that would make you lucky), Greenspan is out and about, bloviating with renewed fervor, explaining that he is not to blame, even in a small way, for the housing and credit crises.

Earlier this week, writing in the Financial Times, he blamed "the misjudgments of the investment community" for the mortgage mess. A Wall Street Journal reporter emerged today from three interview sessions with Greenspan to report, "Mr. Greenspan says he doesn't regret a single decision." Today in Tokyo, Greenspan gave one of his typical speeches that drive copy editors nuts trying to pull a headline out of his wooly headed thinking.  I believe he said housing prices will stabilize "well before" early 2009. Unless they don't.

My foggy memory of American history from school is that public servants were supposed to serve for a while and then go home to their farm or their village. I don't remember the chapter that says ex-presidents and ex-Fed chairmen join some sort of permanent government for millionaires, flying around the world in private jets, invariably accepting suitcases full of cash for trading on their memories of working for the taxpayers. (Yes, that was a shot at the $100-million man, Bill Clinton, who seems to work very hard every day to make me regret twice voting for him).

Cranky today? You bet I am. My DVR cut out with 10 seconds left in the Memphis-Kansas game. That's my excuse. Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Bloomberg News.

Read this one carefully, there is news and then there is an explanation. Business Week, reporting on a March 16 foreclosure auction in Los Angeles, reports that several homes sold at huge discounts:

"A four-bedroom house in Palm Springs that had previously sold for $1.2 million went for $625,000. A two-bedroom cottage in Los Angeles' trendy Silver Lake neighborhood that had traded hands two years ago for $887,000 got picked up for $285,000. ... Edwin Beeks, retired from the U.S. Navy after being wounded in Iraq, picked up a four-bedroom ranch house in Lancaster, Calif., with a bid of $95,000. The previous owner paid $255,000 in 2005..."

Let's run those discounts from peak pricing quickly: That's 47.9% off of peak pricing in Palm Springs, 67% in Silver Lake, and 63% in Lancaster.

Explanation: Be careful -- we don't know that these three houses actually sold. We know there was an auction and there was bidding. But we don't know whether the banks that own the houses accepted the winning bids. I'm hearing more and more stories about winning auction bids being rejected by banks as too low. I reported recently about a house in Ladera Ranch that went to auction, was the subject of a bidding war, and "sold at auction," but then went back on the market because the bank didn't accept the winning bid.

Remember how these auctions work: If you bid and win, you agree to pay the total of the bid, plus 5%, and you agree to pay it quickly. But the bank does not necessarily agree to sell you the house. Banks can, and often do, reject winning bids as too low.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Hat tip: Peter M, in comments
Photo Credit: AP