WASHINGTON — After ending 2006 lethargically, the economy is expected to remain sluggish most of this year as businesses and consumers cope with fallout from the painful housing slump.
The broadest barometer of the country’s economic health, gross domestic product, grew at a 2.5 percent annual rate in the final three months of last year, the Commerce Department reported today.
It was a small improvement from the 2.2 percent pace estimated for the fourth quarter and a 2 percent growth rate logged in the third quarter. However, the new reading still marked a lackluster showing that reinforced economists’ predictions for similarly listless activity in the coming quarters.
"I see the economy continuing this well-entrenched, below-trend economic groove that we are in," said Stuart Hoffman, chief economist at PNC Financial Services Group.
According to various projections, GDP growth will remain mediocre, hovering at the 2 percent to 2.5 percent pace in the first half of this year. In contrast, the economy’s average, or trend, growth rate is closer to 3.25 percent, economists said. Gross domestic product measures the value of all goods and services produced in the United States.
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Recent hearings in the United States Senate have led to talk of bailouts for subprime borrowers spurring a "Stop the Subprime Bailout" letter writing campaign from long-time Bay Area housing bubble watcher Patrick Killelea at Patrick.net.
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NEW YORK (Reuters) - A Credit Suisse Group (CSGN.VX: Quote, Profile, Research) unit is charging three subprime mortgage lenders with violating loan obligations and has filed lawsuits totaling over $30 million.
DLJ Mortgage Capital Inc., a Credit Suisse unit that purchases mortgage loans from lenders, alleges in separate suits that Sunset Direct Lending LLC and Infinity Home Mortgage Co. Inc. breached agreements to repurchase loans they originated.
DLJ is seeking nearly $24 million in buybacks from Sunset and $3 million from Infinity.
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“We are sitting on a time bomb,” the mortgage analyst said — a huge increase in unconventional home loans like balloon mortgages taken out by consumers who cannot qualify for regular mortgages. The high payments, he continued, “are just beginning to come due and a lot of people who were betting interest rates would come down by now risk losing their homes because they can’t pay the debt.”
He would have given great testimony at the current Senate hearings on subprime mortgage lending. The only problem is, he said it in 1981 — when soon after several of the alternative mortgage products like those with adjustable rates and balloons first became popular.
When Senator Christopher J. Dodd, Democrat of Connecticut, gave his opening statement last week at the hearings lambasting the rise of “risky exotic and subprime mortgages,” he was actually tapping into a very old vein of suspicion against innovations in the mortgage market.
Almost every new form of mortgage lending — from adjustable-rate mortgages to home equity lines of credit to no-money-down mortgages — has tended to expand the pool of people who qualify but has also been greeted by a large number of people saying that it harms consumers and will fool people into thinking they can afford homes that they cannot.
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