Economy Watch: Mortgage Settlement Done, Greek Deal Not

By Dees Stribling, Contributing Editor

Various kinds of negotiations came to various kinds of conclusion on Thursday. As expected, the federal government, the state attorneys general of 49 states, and five major U.S. banks have agreed to a $25 billion settlement regarding robo-signing and other dodgy practices that the banks undertook during the worst of the foreclosure crisis. The deal has its limits besides the monetary total. For example, most of the mortgage write downs will be for borrowers whose loans are owned by the banks themselves, which excludes the half of the mortgage market controlled by the FHA, Fannie Mae and Freddie Mac.

In fact, only about 10 percent of the nation’s mortgages are covered by the settlement. Still, it will amount to some housing market relief, since perhaps a million homeowners will be less under water on their mortgages than before. Some observers, such as RealtyTrac, have been predicting a jump in foreclosures in the event of a robo-signing deal, since the uncertainty over the situation has been slowing foreclosures down. So it’s possible that the settlement will allow stalled foreclosures to proceed, thus eventually offering housing markets some measure of recovery, as the foreclosed properties finally work their way through those markets.

The Greek government said on Thursday that it had finally agreed to an assortment of austerity measures, including job and minimum-wage cuts, and so for a few hours, the world thought that the country would finally be getting its bailout money from the EU and the IMF. But it wasn’t over. Finance ministers of the euro-zone countries (besides Greece) told the Greeks to go back and find another 325 million euros ($430 million) in spending cuts, and guarantee that they would be honored after the Greek elections in April. So the Greek bailout imbroglio isn’t over just yet.

Buffett calls it fools’ gold

Though not known as a publicity hound like some billionaires (and you know who you are, Trump) Warren Buffet nevertheless has a knack for generating headlines, and so it is with his most recent views on stocks and gold. Writing in Forbes—which is an except from an upcoming letter to Berkshire Hathaway stockholders—the Oracle of Omaha praised the outlook for stocks and panned the outlook for gold.

Buffett’s thoughts on gold are not original. Still, being Buffett, he’s gotten attention by writing “what motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. As ‘bandwagon’ investors join any party, they create their own truth–for a while.”

In other words, Buffett believes the greater fool phenomenon will apply to gold, sooner or later. In fact, the term “fool” eventually comes up. Buffett continued: “Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices… But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: ‘What the wise man does in the beginning, the fool does in the end.’ ”

Jobless claims down again

The U.S. Department of Labor reported on Thursday that initial jobless claims for the week ending Feb. 4 were 358,000, a decrease of 15,000 from the previous week’s revised figure of 373,000. The four-week moving average, which tends to be less volatile than the weekly numbers, was 366,250, a decrease of 11,000 from the previous week’s revised average of 377,250.

Wall Street seemed to like those jobs numbers, with the markets recovering from a morning fit of negativity to end the day roughly even. The Dow Jones Industrial Average gained 6.51 points, or a diminutive 0.05 percent, while the S&P 500 was up 0.15 percent and the Nasdaq advanced 0.39 percent.