Another Big Mortgage Bust?

Could another massive government-backed mortgage lender go bust? The fear in Washington is that the Federal Housing Authority could "be the next housing domino," the New York Times reports this morning, leading off its business coverage. FHA Commissioner David H. Stevens was on Capitol Hill on Thursday telling lawmakers everything was OK, but the NYT is still skeptical, noting Stevens acknowledged that the bed debt is backing up on FHA's books. To be sure, few are buying Stevens' rosy assessment. Edward J. Pinto, a real estate finance expert who worked at Fannie Mae in the 1980s, testified on The Hill on Thursday, predicting "the FHA will suffer $40 billion in losses, leaving it unable to cover its bad loans without taxpayer help," the Washington Post ominously reports. And Stevens himself admits "some 20 percent of F.H.A. loans insured last year—and as many as 24 percent of those from 2007—faced serious problems including foreclosure," the NYT writes. Stevens, though, says that unless home prices fall precipitously "we will not need a bailout."

If only lawmakers could be so confident. The mood is tense in Washington after it was revealed on Thursday that the tab so far to prop up Fannie Mae (FNM) and Freddie Mac (FRE) is nearing a gaudy 12-figure sum. According to a separate article in the NYT, in the 12 months since the government stepped in to rescue them, the companies have taken $96 billion from the Treasury and could require still more.

Another day, another new low for the dollar. The greenback hit a 14-month low against most major world currencies, adding more heat to a global debate about the fitness of the once-mighty dollar as the global trade standard. And what's the feeling in Washington? Meh, it's not such a big deal. According to the Wall Street Journal, the Obama Administration "appears prepared to tolerate quietly" the steady decline of the dollar, hoping it helps boost U.S. exports. Central bankers around the world did their best to make supportive comments about the dollar's importance, hoping slyly it would push the greenback up in global trade. Not so. "The dollar, down 11.9% against a basket of currencies since President Barack Obama took office, fell an additional 0.7% Thursday," the WSJ writes. One policy move that would surely prop up the dollar is an interest-rate hike. And that very prospect, distant at is may be, is already causing a rift at the Fed between chairman Ben Bernanke and Kansas City Fed President Thomas M. Hoenig, the NYT reports.

Retail rejoices as September sales show the first year-over-year rise in 13 months, the WSJ reports. Major chains like Kohl's Corp. (KSS), Target (TGT), and Limited Brands Inc. (LTD) contributed to same-store sales rises of 0.6 percent, according to the Thomson Reuters index of 30 top retailers. Still, no one's popping the bubbly just yet. As the NYT writes, "The improvement in September sales came largely because the stores had easier year-over-year comparisons. For the first time this year, retailers were comparing their sales with the abysmal numbers they began posting last fall, when the markets virtually collapsed." Barnes & Noble was conspicuously absent from the list of upbeat retailers. It saw September sales fall 3 percent and expects to post a second-fiscal-quarter loss.

Even as some sales indicators point to a gradual economic recovery the calamity America has experienced in the past 12 months has left a "scorched landscape that will weigh on the labor market and the broader economy for years to come," economists tell the WSJ. That means that while the 48 top thinkers expect the economy to record a 3.1 percent growth in this third quarter, they can't see unemployment falling below 6 percent until 2013. "Never before has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance," one expert tells the paper.

Finally, gas-mileage efficiency for the Hummer may not have budged in years, but the prospective sale price continues to improve—if you are the Chinese buyers. The WSJ reports General Motors (MTLQQ) could sell the gas guzzler for as little as $150 million (early reports in June suggested somewhere around $500 million) to China's Tengzhong Heavy Industrial Machinery Co. The deal could be announced some time today. As Business Week notes, "given GM’s cash needs, that money won’t go far. But getting Hummer out of the portfolio will help GM focus on its core brands."