The Senate voted 83 to 9 to consider authorizing the Federal Housing Administration (FHA) to help troubled borrowers refinance into more affordable loans if their bankers agree to forgive a portion of their debt. The proposed bill would also create an $8,000 tax credit for first-time home buyers, provide $4 billion in emergency assistance to communities hit hard by foreclosures, and strengthen regulation of Fannie Mae and Freddie Mac. Democratic and Republican leaders could not agree on how to handle several proposed amendments, including the elimination of $4 billion in community assistance to purchase and rehabilitate foreclosed properties, which has drawn a veto threat from the White House, so it has not gone into the Senate/House negotiation phase yet.

The Federal Open Market Committee decided yesterday to keep its target for the overnight Federal Funds rate at 2%, as expected. The Fed said, “Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending.  However, labor markets have softened further and financial markets remain under considerable stress.  Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters. The Committee expects inflation to moderate later this year and next year.  However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.”

Many economists believe, however, that unless oil prices drop soon, or the economic data doesn’t show more of a slowdown, the Fed will likely raise overnight rates by at least .25% before year end. Speaking of which, this morning Jobless Claims were unchanged at 384k, slightly higher than expected, and the figures for the U.S. GDP for the 1st quarter were revised from +.9% to +1.0%, as expected. New Home Sales yesterday, which were -2.5% month-over-month, were also as expected. The “inventory overhang” remains large, which is certainly a hindrance to price appreciation in many markets. We have some supply to digest ($20 billion of 5-yr notes), so let's hope as this auction goes as well as the 2-yr auction on Tuesday. The bond market likes the news, and the 10-yr yield is down to 4.05% and 30-yr mortgages are better by .250 in price. (Stocks, on the other hand, are pointing to another poor day.)

According to California Attorney General Jerry Brown, Countrywide Financial misled borrowers into taking risky loans they couldn't afford. According to a complaint filed in a Los Angeles court, Angelo Mozilo, and a unit specializing in loans to consumers with poor credit, used deceptive marketing tactics to entice thousands of borrowers into adjustable-rate loans without disclosing that their payments would balloon in later months. This didn’t stop Countrywide’s shareholders from approving the company's takeover by Bank of America. The lender says the deal is expected to close on July 1st. Countrywide agreed to sell itself in January for about $4 billion in stock, but given BofA’s slide in stock price the deal is now valued at about $2.8 billion.

Thank you to Jeff C…For all those French art history buffs…

A thief in Paris planned to steal some paintings from the Louvre.

After careful planning, he got past security, stole the paintings, and made it safely to his van.

However, he was captured only two blocks away when his van ran out of gas.

When asked how he could mastermind such a crime and then make such an obvious error, he replied, “Monsieur, that is the reason I stole the paintings. I had no Monet to buy Degas to make the Van Gogh.”

See if you have De Gaulle to send this on to someone else. I repeated it because I figured I had nothing Toulouse.

Rob