The Fed’s outright purchases of agency mortgage-backed securities — bonds guaranteed by government-sponsored entities such as Fannie Mae or Freddie Mac — are having the desired effect: Rates are down and staying down.

Even the Fed’s immense power cannot force rates to 4.5 percent or lower (not quickly), but it has removed upside volatility. Mortgage rates should have run back way above 5 percent in a week like this — a big bear-market stock rally and immense refinance demand — and instead held near 4.75 percent.

The chatter all week long, especially among the stock-happy adolescents at CNBC: Bottoming is in process, and the worst is over. In the "blogocracy," doom is predominant: The credit fixes and stimulus either won’t work in time or were the wrong things to try.

Reality is in the middle somewhere. The thing to hope for is decline in the rate of decline (yeah, we’re in that much trouble).

Housing first. Mortgage rates are down, which should stimulate consumer spending and aid a housing turn. Good try. In recent weeks, 80 percent of new mortgage applications have been for refinance, and purchase applications have not increased significantly since rates broke in December. Given suicidal credit and qualifying restrictions, still tightening, the only households that can refi are ones that least need to, and are most likely to save the monthly benefit and not spend.

Home sales appear to have slowed their numerical decline (pending sales rose 2.1 percent in February), but the overall numbers are very low, and the market is distorted by a silent freeze on foreclosures. More are "continued" instead of sold at auction, and servicers are required to use the new but non-operational refi and mod programs before foreclosing — hence a lot of foreclosure water is building behind a weak dam.

The unemployment rate has slowed its rate of increase: to 8.5 percent in March, the 0.4 percent rise half the rate of February. However, payroll contraction is steady at 650,000 monthly, as are new claims for unemployment insurance at 660,000 weekly. That stable rate of loss is hardly reassuring. …CONTINUED

Business and consumer conditions here and around the world are murky. In the U.S. we junk 13 million cars each year, but production and purchase have collapsed from 16 million to 9 million. When might we see a bounce in demand for replacement, no matter how feeble? The global supply chain went to standstill in winter (Japan’s exports fell 49 percent in February). At some point some businesses will buy just to refill an empty pipeline, and that might produce a bottoming event. Many pointed hopefully at a 1.8 percent rise in February factory orders, but they barely offset a negative revision for January.

The purchasing managers’ indices have flattened, manufacturing to 36 in March from February’s 35.8, but an end to economic contraction would require a reading clear up in the high 40s. Internal readings on inventories still show business’ determination to sell them off. Gasoline prices are little more than they were half a year ago, but driving miles are down and refineries are operating at only 82 percent of capacity.

Some good news. Grim, but good. President Obama’s tough-mindedness has begun to show. Last Thursday, the Automotive Working Group decided to fire Rick Wagoner as General Motors Corp.’s chief executive officer. (One group member: "It wasn’t the hardest decision we made.") Stephen Rattner, head of the group, asked Wagoner to fly back to Washington, D.C., on Friday, and fired him.

He fired him at roughly the same moment that the top 13 bank CEOs were meeting with President Obama. The announcement did not come until Sunday night. Wishful thinking on my part, but … did Wagoner’s dismissal make an impression on the bankers? Might Obama have been silently measuring a few for shrouds and coffins, as object lessons to the others upon completion of bank stress tests later this month?

It was reportedly a practice in China, after an execution, to send to the family of the departed a bill for the cost of the bullet. To your heirs, Bank of America CEO Kenneth Lewis, JPMorgan CEO Jamie Dimon, others: Maybe, just maybe … act like public servants, restore some credit and leverage … or else.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at


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