An increasing population is not really good news. Nevada has been reported to be the state that has the fastest growing population in the entire nation. The Census Bureau has stated that it grew by nearly 35 percent over the last 20 years.

But it isn’t all that good news. It probably just shows the deteriorating conditions in the state. It also shows that this state has gone through a very strenuous decade. As the census reports show, Nevada was known to be the boom capital of the nation.

Or it was at least so till the economy faced in a downfall in the year of 2007. The people of the state started shifting out, or looking out for employment or trying to get out of the house market since this state had the highest rate of foreclosure. This state has the highest unemployment rate – 14.3 percent.

David F. Damore teaches political science as an associate professor in the University of Nevada, Las Vegas. He said, “People come for the good jobs and the good life, and if that’s no longer here, they are gone.” Damore also added, “People are just moving out.”

Jeff Hardcastle is the official demographer of Nevada. He said that the state’s population had decreased by more than 90000 since the month of July 2008. He also expected that this decrement will go on till the following year. Hardcastle also added that Nevada was known to be the state with the fastest growing population for over a decade, before the economic downfall in 2007.

Nevada’s inhabitants are fast moving out to shift to a state that has a better and more successful economic scene. Analysts gave various reasons to explain how Nevada’s population had been negatively affected. It had been affected by a birthrate that was steeply declining. This is not surprising in times of economic stress. Besides, a huge number of illegal immigrants who left, or at least stayed away from census officials, affected the population.

In Henderson, which is in a constant state of collapse, conditions were pathetic. In a place which was practically a desert over a decade ago, there was advertisement on cheap deals on housing, on Wednesday.

There was much worse in store. A housing complex was left midway through construction in a place like Horizon Ridge Road. It was called, Vantage Lofts. There was a huge pile of debris like plywood, exposed glass and cement in the construction area.

The lowest mortgage rates in decades are prompting many to refinance their old loans. Previously refinancing was done on the equity that always built up because property values till now always went up and never down. With the cash on the equity the borrowers indulged in luxuries or vacations. But now the idea behind refinancing is to quickly get clear of old heavy loans.

But not all are able to avail of it because the housing market is weak and lenders have become strict about regulations and conditions.

Mike and his wife Caroline Asebrook were not to be left behind. They refinanced their old loan that was for 30 years carrying an interest of 6.125% by taking a loan for 10 years carrying an interest of 3.875%. They had on the last loan 22 years left. Although they are now paying slightly more than what they paid previously ($1,200 per month) with the new loan they would be able to free the house faster. They have sliced off ten years from their loan.

The valuation of their property in Sharon Woods fell from $205,000 to $179,000 within seven years. The couple would not have been eligible for refinancing if they had not been paying excess on the old loan.

Loan officer Kitsy Burt of Charter Mortgage, Worthington said out of five applications three are successful. She aid that the most important problem is the current market value. It is this that is responsible for “killing an awful lot of loans”.

Houses that had previously been purchased for $300,000 about three to four years back could be valued at $250,000 currently. She noted that one of her clients had failed to refinance her mortgage that had interest rate of 7.5%.

The buyers who think that the price for their house is great are taken aback when they see the depressed appraisals observed Barb Wilson of Park National Bank, a mortgage lender of New York. She explained, “It probably is a good deal but maybe not for five years. It depends on when the economy turns around”.

Another instance is that of Paul Manofski who opted fro refinancing after failing to sell his house in Washington. He calculates that his new loan of 15 years carrying 3.75% will
knock off 7 or 8 years off his payment. He commented, “I’m not disappointed that I’m not able to sell. Now I’m locked into a great rate. I’m going to be there for the long haul now”.

The taxpayers are ready to reap surprising billions from having rescued the banks of the country. Now they can harvest another mega profit from a programme launched by the federal government set up to exit the toxic property assets from the financial scene.

The new programme of the Obama team was named Public-Private Investment Program. The kingpin of the plan is thaw the frozen credit. With no buyers in the horizon for the complicated mortgage securities the health of the banks was at risk causing lending to be impacted.

As per the programme, the government will provide equal funds and extra cheap loans to some investment firms (two names being AllianceBernstein and Oaktree Capital) who would agree to purchase mortgage securities from the financial entities like the banks and others.

The taxpayers have a chance to dip into profits – this being considered to be a second goal of the programme. It has been 9 months since the plan made its debut. The 8th investment funds picked by the Treasury have created a return calculating a return of 15.5% for the taxpayers till last June, according Linus Wilson of University of Louisiana.

Angelo operated investment funds, Gordon-GE Capital consortium and another run by BlackRock have kicked off better beginnings and have posted returns above 20%. It calculates to a paper profit of about $657 million for the taxpayers. Some of the analysts of Wall Street are predicting that the taxpayers could gain nearly $6.2 billion from these investments in the forthcoming 9 years from investment of nearly $22 billion.

The outstanding performances of the funds are largely because of the turn around in the bond market of mortgages that had kicked off in the latter part of 2009. This is unlikely to be repeated. Even then the turnabout is nothing but remarkable.

When this Public-Private Investment Program was announced by the government the critics came down heavily on it. The charge was that it was another bonus being given away to private equity entities and the money managers of Wall Street. Nobel Laureate economist Joseph Stiglitz dubbed it as the “robbery of the American people”.

But the strong start of the funds has silenced all these fears. Davin N. Miller of the Treasury, its chief investment official said “We feel good about the performance to date”. The administration is yet to state its own profit expectations. The proceeds would go towards reducing the budget deficit of the federal government.

The forthcoming chairman of House Financial Services Committee, Spencer Bachus (Alabama/Republican) has openly admitted that serving the banks is the prime job of the regulators; as such they should play the role of the subject in relation to the king – the bank.

Bachus said, “In Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks”. He was speaking at an interview taken by Birmingham News.

The Republican Party assigned Bachus to be the next chairperson of the House Financial Services Committee – a most powerful post. It has the task of monitoring activities of banks, the financial markets and credit matters related to housing and consumer interests.

The Democrats reacted to the remark by saying that it was a Freudian slip. They nicknamed man from Alabama as “Big Bank Bachus”. The party claimed that the new house controlled by the Republican will place the interests of financial entities before that of the people of America.

Jesse Ferguson, spokesperson of Democratic Congressional Campaign Committee said, “Congressman Spencer ‘Big Bank’ Bachus has given Americans a startlingly honest answer about the House Republican agenda – do whatever is good for the big banks and Wall Street special interests, rather than what’s good for hardworking Americans”.

Speaking to Birmingham News afterwards Bachus said that he only meant Congress should not manage every small detail of the operations of banks.

Bachus form the 6th district of Alabama has been all along his career in the House for 18 years collected millions from monetary interests; it included over $1 million solely from the commercial banks as per the findings of Center for Responsive Politics. From real estate group, from securities cum investment companies and from credit firms he had taken $80,000, $700,000and $415,000 respectively. As chairperson he will have tremendous clout over them.

He was intimately involved with 2008 TARP scheme of $700,000 billion – a programme sarcastically referred to as the “bank bailout”. It fueled public ire although financial collapse was averted. TARP was given the green signal by both the parties. Rep Barney Frank (Democrat) played a pivotal part in bringing about fundamental changes in the regulatory financial reforms initiated by President Obama last July.

It has been the worst recession since the time of the Great Depression. People who would never have dreamt of it are now being pushed towards bankruptcy and asking themselves if they should file one without delay.

It is fear that is making many hesitate as they are concerned about finances having ruined their lives. But Tara Twomey, a lawyer with National Consumer Law Center gives the assurance that this not the case. Although there is a stigma attached to bankruptcy as it can remain on the credit report for as long as ten years. Despite this she said that those who are drowning in debt can start afresh and push forth without losing the assets that are of importance to them.

The housing crisis following the recession has left the lenders also very cautious. Many people who are keen to bring back order to their lives are failing to get loans after coming out of bankruptcy; it is the same story with credit cards. Exorbitant interests are charged for those with a history of bankruptcy.

Experts dealing with bankruptcy do not deny this but they stress that other options are there. New payment arrangements can be worked out with the lenders. Whatever it may be – one should not delay filing for bankruptcy protection.

There are 15 million unemployed and a quarter of the house owners have gone underwater with the value of their properties being less than the loan due amount. People have learnt the bitter way that imposing charges today on the belief that it will be possible for them to pay tomorrow is nothing but a risky trap.

After Congress made tight the rules of bankruptcy in 2005 there was a lull but lately personal bankruptcy numbers are increasing. As per government data 1.5 million have filed for it during the 12 month stretch that ended at the close of the third quarter. It was a spike of 14% from the previous 12 month period that ended with the close of the third quarter in 2009.

Thus the figures show that the condition of the people has worsened said Robert Lawless of University of Illinois. The suffering is aggravated because a good number of people wait for too long before filing for bankruptcy; they need not suffer to this extent, he opined. Lawless added that once foreclosure threatens it is prudent to discuss with a bankruptcy lawyer. Timing is an important factor.

New research conducted by economist Carmen M. Reinhart of University of Maryland has indicated that the economy of America would grow through a period of painful tardy growth and persisting high levels of unemployment for ten years or more caused by the 2007 collapse of the housing sector followed by the financial mayhem. Reinhart is an authority on financial crises’ history.

The analysis has generated hot debate during the yearly conference in Maryland sponsored by the Federal Bank of Kansas City. The venue of the symposium concluded on Saturday 28th August was Grand Teton National Park. It was attended by 110 bankers representing the Federal Reserve and economists.

In 2008 the symposium had taken place just prior to the collapse of Lehman Brothers causing the near shutting down of the financial system. In the 2009 conference the officials had lauded each other for having weathered the danger period.

But the recent report and figures on the performance of the economy has cast a pall of gloom on the gathering this year. Some of the economists in jeans and cowboy style boots exchanged views on the terrace commanding a majestic view of Mount Teton and nearby ranch training unruly colts.

The pundits were focusing on the research findings of Reinhart. It was emphasized by a Federal Reserve spokeswoman that the participants fund the occasion and it is not a load on the taxpayers.

Allen Sinai of Decision Economics who has been attending the symposium for many years said, “I’m more worried than I have ever been about the future of the U.S. economy. The challenge is unique – poor and diminishing growth, a sticky unemployment rate, sky high deficits and a sovereign debt that makes us one of the most fiscally irresponsible countries in the world”.

Reinhart had based her paper upon the study she had conducted together with Kenneth S. Rogoff of Harvard University for a book jointly authored ‘This Time is Different: Eight Centuries of Financial Folly’. Princeton University Press published the book in 2009. The co-author of the paper was Carmen’s husband Vincent R. Reinhart who was formerly monetary affairs director of the Federal Reserve.

The couple studied severed crises in the financial sector since the close of World War II. Also they scrutinized the stock market collapse of 1929, the 1973 oil catastrophe and the 2007 sub-prime mortgage implosion.

A coalition of consumers has thrown a challenge questioning the requirements of FICO scores demanded by lenders as being higher than the standards set by FHA. This is actually causing harm to the minority applicants. On this issue the coalition is planning to file a string of complaints starting from Monday 6th December.

It is a general practice among the lending group to expect the borrowers applying for FHA (Federal Housing Administration) loans to have credit scores (FICO) much above the minimum fixed by FHA – it being a minimum of 580 points. Only then would the applicants qualify to get a loan by making a down payment of 3.5%.

The allegation by the complainants was that by wanting higher FICO scores, the Black and Latino borrowers are discriminated. Their scores were higher than the minimum of 580 but less than 620 or 660 that the lenders often demand. The FICO scores stretch from 300 to 850; high scores indicate that the risk is lower.

FHA gives insurance coverage to the lenders if the loans trip into foreclosure. But there is no justification in wanting scores above the mark stipulated by FHA. Over 20 mortgage lenders targeted for fair lending practices could not be contacted. John Taylor the head of National Community Reinvestment Coalition said among the 20 were the names of “large, medium and small banks” – all stipulating higher then FHA standards.

The coalition is an amalgam of consumers at the local and national level numbering about 600, including civil rights groups wanting economic development. The entity has for long been advocating equal opportunities for all in the field of mortgage lending.

The complaint will soon be filed. In the draft it is said there were “extensive” blind tests conducted to feel the waters. The testers appearing before the loan officers said that they were qualified to apply for FHA insured house loans with scores ranging from 601 to 605.

The officers dealing with loans regularly told them as a matter of routine they (the applicant) could not qualify if the FICO score was below 620. When the dummy applicants argued that they knew about the benchmark score of FHA the answer was blatant – they wanted higher scores otherwise no sanction of loans.

By adopting this policy the Blacks and Latinos, the economically weaker section of American society, are cut off from not only loans but also refinancing.

The parallels between the economic woes of USA and European countries should be a warning so that the mistakes are not repeated on the western side of the Atlantic. Greece was the first county to fall and now Ireland has followed suit. Most probably it will be the turn of Portugal next. Then it will be bigger fry and the mighty name of USA cannot be ruled out.

Currently the crisis in Europe seems to be lessening thanks to a bailout calculating to $90 billion for Ireland. It will be sufficient to prop up its banks and keep afloat the Irish government for next few years. But international investors are far from happy. The stock markets have refused to surge but are drifting downwards following the bailout of Ireland. It indicates that the crisis has not blown off.

Some results can be predicted. For instance it is known to all that the Iberian countries as well as Italy, Belgium and some other countries of Europe in combination are burdened with heavy debts coupled with other economic woes. This will compel many countries to make cuts in spending and increase taxes during the forthcoming months.

However the markets are being spooked by unknown factors that are resulting in the teetering of government bonds. For example the size of the losses of the Irish banks remains unknown. It has been bleeding because of tumble of property values and the housing bust in Ireland has not subsided as yet.

Spain too is suffering from the collapse of the real estate and the bottom has not been reached as yet. The economy of Portugal had always been weak and this means although the debt amount is not high it weight is stronger – the country cannot overcome it. In all the cases the debate is about debt crisis versus growth. It is about the strategy of politicians to make harsh decisions to fix their country’s finances.

It is easy to draw a parallel with the above situation in Europe and what is happening in USA. Despite deficit spending for ten years the ratio between debt-to-GDP is 65% – a modest figure compared to 100% of most of the European countries in trouble.

Despite its woes America continues to remain one of the wealthiest nations with the economy being much more vibrant than that of any European country. Because of this relative stability the borrowing costs of America continues to be very low. But there is fast increase in debt levels.

Property value has been tumbling fast, gnawing into the wealth of USA and hampering recovery in the quarter ending September. It is apprehended that prices will continue to fall and this will give a big blow to the economy that is just crawling towards recovery.

House owners by the millions experienced the bitter blow of seeing their most precious asset – their house, fall in value from July to last September according to a recent data released by the Federal Reserve. A string of reports reflecting the decline of house value increased the pressure on the weak property market.

Until the real estate market finally touches the bottom the foreclosure crisis will continue to swell feeding upon itself, according to analysts. It is foreclosures that are pushing down the prices of houses.

Coupled with this and linked to it is the increase in unemployment rate. It is now near 10%. The business groups are extremely reluctant to expand and hire employees; they lack confidence. This drag in the housing sector is proving to be the biggest dampener to the economic recovery in general.

It is calculated that the prices of residences would have dropped by 7% or to $1.7 million according to Zillow.com. The latter provides data on real estate. This decline has picked up speed.

Since last August the prices have dropped by 7.9% as per the findings of Clear Capital, a real estate firm based in Truckee, California. It is the sharpest drop in property values since the peak of the financial mayhem in 2008 said Alex Villacorta of Clear Capital (senior statistician).

The prediction for 2011 continues to be gloomy – it will fall by another 10% as per the findings of Fitch Ratings (credit ratings firm).

The grasp of Americans on their houses is fast weakening. The equity on their homes fell by 2% to 38.8% during the quarter that started from last July, according to the data of the Federal Reserve. The drop brought down curtains to a steady growth during the past five quarters. In the first quarter of 2009 it hit a record low of 36.3%.

Dean Baker of Center for Economic and Policy Research based in Washington said, “There continues, of course, to be a backlog of foreclosed properties, or properties on their way to foreclosure. We’re not about to see the end of foreclosures anytime soon”.

Obama has suspended all debates and come to an bipartisan agreement by which the Bush tax rebates have been extended to all for a year together with unemployment benefits. He plans to make a comprehensive reform during that one year. The plan would be along the lines of the reform plan of 1986 with all the loopholes cut off. Special interests would be taken on. Rates would be lowered and the tax code would be made fair.

Obama has asked his assistants to come forth with a proposal for tax reform that he can place in front of the Congress. Obama knows that the State of the Union will provide him with one big opportunity to redefine himself in front of the public. On that mega night, Obama would stand in front of the Congress gesturing over giant piles of documents pointing to them as the tax code – something rotten that would have to be scrapped.

He then comes forth with his own suggestions. It is similar to that drafted by Democrat Senator Ron Wyden from Oregon together with Republican Judd Gregg outgoing senator from New Hampshire.  Their plan makes simpler the tax code and brings down the number of rates to three from six.

The bulk of the taxpayers would be enabled to make us of a one page form – 1040 IRS. It keeps intact some deductions like the cuts from mortgage interest, credit pertaining to child tax but many others are eliminated.

According to the calculations of Heritage Foundation the plan would bring down the budget deficit by as much as $61 billion per year and generate jobs numbering 2.3 million. The Tax Policy Center commented that it would be making more progressive the tax code and lower the tax bill for the majority of households earning below $200,000.

In all likelihood something similar to this would be laid before the Republicans and then they would be asked if they are ready for talks or if they were not prepared to give the nod as yet. The Republicans would find themselves in an interesting situation.

Paul Ryan of American Enterprise Institute is the chairperson of the incoming House Budget Committee – a formidable brain of the Congress. He has many admirable plans to lower the deficit and health care costs. Ryan thinks that the Democrats believe in setting up a welfare state on the lines of Europe where social security is provided from the cradle to the grave. A half way meeting point is hard to achieve.