2012 July FIRE Policy News

In an April 17 Rose Garden speech, President Barack Obama blamed “speculators,” whom he called “an irresponsible few,” for the rise in the price of oil. But, as the July issue of FIRE Policy News reports, energy and finance experts say the president fundamentally misrepresented, or perhaps doesn’t understand, the roles that traders and financial markets play in protecting consumers from supply interruptions and sudden price spikes.

Also in this issue:

• Home prices hit new post-bubble lows nationally in February, reaching their lowest levels since 2002.

• Everglades Re Ltd., the first-ever catastrophe bond from Florida’s Citizens Property Insurance Corp., will go down as the largest single-tranche, single-peril catastrophe insurance bond in history, with a record offering size of $750 million. The offering’s Class A notes have been rated B+ by rating agency Standard & Poor’s. The two-year notes would cover three-quarters of the $1 billion in private reinsurance Citizens projected it would obtain for the 2012 storm season, which opened June 1.

• More than $5.8 trillion in U.S. home mortgage debt is now either owned or guaranteed by a federal entity--the Federal Housing Administration (FHA), Ginnie Mae, the Veterans Housing Administration, or one of the two government-sponsored enterprises (GSEs) under “conservatorship” since 2008, Fannie Mae and Freddie Mac. The Reason Foundation has a plan to transfer housing credit risk back to the private sector by replacing government mortgages with private loans as owners move or refinance--on average, mortgages are refinanced every seven to eight years.

• Economist Robert Wenzel edits and publishes the EconomicPolicyJournal.com Web site, where he regularly takes Federal Reserve policies to task. Nonetheless, the New York Federal Reserve Bank recently invited him to speak. He told the central bankers they could do the nation a service by going out of business. “Nothing good goes on in this place,” he said.

• California’s harsh land use regulations had already driven housing affordability from fairly typical levels to twice and even three times higher than those of much of the nation. Now, in the name of reducing greenhouse gases, even harsher land use regulations recently have been imposed. Research shows they are unnecessary.