It's a joint responsibility between the lender and the home buyer. The problem is the "sub-prime" loans that had very low payments for the first year were the equivalent of snake-oil and the lenders were more than aware of that. This is why criminal charges are being brought. Deliberately shoe-horning people into houses the lender knows they cannot afford is unconscionable. At the same time, it's also on home-buyers (even first time buyers) to be aware of what they are getting in to.
There is no spoon Inflation sees biggest year-over-year surge since '81 Associated Press WASHINGTON — The economy showed the depth of its twin problems today, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel. The Labor Department reported that soaring costs for gasoline and food pushed inflation at the wholesale level up by a bigger-than-expected 1.8 percent in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century. Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains. Core inflation, which excludes energy and food, was better behaved in June, rising by just 0.2 percent, slightly lower than expectations. A separate report from the Commerce Department showed that all the economy's problems were weighing on the consumer. Retail sales edged up by a tiny 0.1 percent in June, weaker than had been expected, as consumer spending was held back by a sharp plunge in sales at auto dealerships. U.S. stocks headed for a sharply lower open as the reports on inflation and retail sales failed to cool concerns about the financial sector. Banking stocks were pounded on Monday despite the government's efforts to calm concerns with a support package fashioned over the weekend for mortgage giants Fannie Mae and Freddie Mac. Federal Reserve Chairman Ben Bernanke said today that the fragile economy was being confronted by "numerous difficulties" including persistent strains in financial markets, rising joblessness and housing problems. He said rising prices for energy and food were elevating the risks of inflation. Delivering his midyear economic report to the Congress, Bernanke said the current situation poses "significant challenges" for Fed policymakers as they try to chart the best course for keeping the economy growing, while making sure inflation doesn't dangerously flare up. The Fed signaled an end to an aggressive rate-cutting campaign in June because of growing concerns about inflation. Bernanke kept up his tough anti-inflation talk today but stressed many other problems that could short circuit economic growth. In a third economic report, the Commerce Department said business inventories rose at a slower-than-expected pace in May, a possible indication that the weakening economy is making companies cautious on their restocking plans. The department said inventories held on shelves and backlots edged up 0.3 percent in May, smaller than the 0.5 percent gain that many economists had been expecting. It was the smallest monthly increase since inventories had risen just 0.2 percent in April. Many economists are worried that a host of problems from a lengthy slump in housing to a severe credit crunch could push the country into a recession. But so far, the overall economy, as measured by the gross domestic product, has managed to stay in positive territory, helped in part by companies rebuilding their inventories. For June, energy prices at the wholesale level shot up by 6 percent; the price of unleaded regular gasoline surged by 9 percent following an even bigger 9.6 percent increase in May. The 0.1 percent rise in retail sales was even weaker than the 0.4 percent gain that analysts had been expecting. That small rise reflected a 3.3 percent drop in sales at auto dealerships, offsetting a big 4.6 percent jump in sales at gasoline stations, an increase that largely mirrored last month's huge jump in pump prices. General Motors said today that it plans to lay off salaried workers, cut truck production and suspend its stock dividend, showing the depth of the U.S. auto industry's mounting troubles as it adjusts to a declining U.S. market. GM said it would also borrow $2 billion to $3 billion as part of an effort to raise $15 billion to help turn around its North American operations.
No Fork either Consumer prices jump at fastest pace in 26 years Associated Press WASHINGTON — Consumer prices shot up in June at the fastest pace in 26 years with two-thirds of the surge blamed on soaring energy prices. The Labor Department reported today that consumer prices jumped 1.1 percent last month, much worse than had been expected. Energy prices rocketed upward by 6.6 percent, reflecting big gains for gasoline, home heating oil and natural gas. The big rise in prices cut deeply into consumers' earning power with average weekly wages, after adjusting for inflation, dropping by 0.9 percent in June, the biggest monthly decline since 1984. The report on retail inflation followed similarly grim news on Tuesday that wholesale prices had shot up by 1.8 percent in June. U.S. stocks looked to be headed for a mixed opening amid worries of how rising prices may affect the economy. Federal Reserve Chairman Ben Bernanke told Congress on Tuesday that the Fed was concerned about the threats posed by rising inflation. Bernanke said that the "upside risks to the inflation outlook have intensified lately, as the rising prices of energy and some other commodities have led to a sharp pickup in inflation and some measures of inflation expectations have moved higher." Bernanke's comments underscored the bind the central bank is in, caught between a faltering economy that is struggling to overcome a prolonged housing slump and a severe credit squeeze, and the risk that inflation would move higher. Many analysts believe that the central bank is likely to leave interest rates unchanged for the rest of the year out of concern that any tightening of credit policy could send the economy into an even worse tailspin. Over the past 12 months, consumer inflation is up by 5 percent, the largest year-over-year gain since a similar 5 percent rise in May 1991. Food prices also showed a big increase in June, rising by 0.7 percent, more than double the 0.3 percent increase of May. Vegetable prices shot up by 6.1 percent, the biggest increase in nearly three years. Core inflation, which excludes energy and food, showed rising pressures too with an increase of 0.3 percent in June, up from a 0.2 percent gain in May and the biggest one-month rise since January. This increase reflected a 4.5 percent jump in airline ticket prices, the biggest one-month rise for airline fares since March 2000.
