$26 Billion for States Passes Key Test Vote

A measure to send federal aid to cash-strapped states passed a key vote in the Senate, putting it one step closer to becoming law. However, if a final vote is not made by the end of the week, the bill will have wait until the end of the month because the Senate has an August recess scheduled to begin next week.

The measure, which passed by a 61-38 vote, contains $16.1 billion in additional Medicaid money and $10 billion in education funding to prevent teacher layoffs.

State officials have been desperately lobbying their representatives, saying they need the money to shore up their budgets. President Obama weighed in Monday, asking lawmakers to pass the bill.

Senate Democrats needed to garner at least 60 votes for the measure to pass this initial vote, meaning some Republicans had to cross the aisle. That help came in the form of Maine Republicans Susan Collins and Olympia Snowe.

A final vote could come late in the week, just before the Senate is scheduled to recess for the long August break. The measure would then have to go back to the House, which has already recessed. So it might not get to President Obama's desk until September.

Continue reading at CNN.com…

States to Senate: Send More Federal Aid

From CNNMoney.com:

States are looking to the federal government for more help balancing their budgets, but the Senate is not heeding their call.

Federal aid to the states was among the top priorities in an early Senate job creation bill, as well as in a $154 billion measure passed by the House in December. But it has fallen off the list as Senate Democrats look to craft legislation that will attract bipartisan support.

Senate Majority Leader Harry Reid, D-Nev., on Thursday unveiled a jobs bill that does not contain state aid. A Senate Democratic aide said Reid hopes to back a state aid measure in the future. Republican support, however, remains questionable.

Experts and state officials say they need to know now whether they'll get more funds. Governors are currently crafting their budgets and, for many, it will be their third year of contending with massive deficits due to declining tax revenues.

Big budget gaps

States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them, will begin July 1. These cuts could lead to a loss of 900,000 jobs, according to Mark Zandi, chief economist of Moody's Economy.com.

Schwarzenegger Wants More Federal Money for California

In an attempt to close the budget gap during his last year in office, or at least make a worthy attempt, California governor Arnold Schwarzenegger swore earlier today that he would request more money from the Federal government to help the indebted State government. According to Reuters.com, Schwarzenegger went on to say that the State is owed more funding, and that a national healthcare policy would make things drastically worth for his California’s economy.

In a state of the state speech, the governor said creating jobs was the top priority for his last year in office and proposed spending $500 million in worker training funded by part of the budget which is in surplus.

He also laid out ambitious reforms for the final year of his term -- almost certain to include months of budget battle.

Schwarzenegger on Friday will present his plan to close a budget hole that reflects the problems of the boom and bust California economy. The U.S. economic engine faces deteriorating finances as it tries to balance its budget and preserve social safety nets in tough times.

The outgoing Republican governor, stopped by term limits from seeking reelection in November, called for tax reform, protection for higher education spending -- and more money from the federal government.

"We no longer can ignore what is owed to us, or what we are forced to spend on federal mandates," Schwarzenegger told the combined state Assembly and Senate, which must support any budget plan by a two-thirds majority -- a bar that has forced months of acrimonious debate in previous years.

Continue reading at Reuters.com…

Fannie And Freddie Receive Unlimited Future Funds To Stay Afloat

From Huffington Post.com:

The government has handed its ATM card to beleaguered mortgage giants Fannie Mae and Freddie Mac.

The Treasury Department said Thursday it removed the $400 billion financial cap on the money it will provide to keep the companies afloat. Already, taxpayers have shelled out $111 billion to the pair, and a senior Treasury official said losses are not expected to exceed the government's estimate this summer of $170 billion over 10 years.

Treasury Department officials said it will now use a flexible formula to ensure the two agencies can stand behind the billions of dollars in mortgage-backed securities they sell to investors. Under the formula, financial support would increase according to how much each firm loses in a quarter. The cap in place at the end of 2012 would apply thereafter.

By making the change before year-end, Treasury sidestepped the need for an OK from a bailout-weary Congress.

While most analysts say the companies are unlikely to use the full $400 billion, Treasury officials said they decided to lift the caps to eliminate any uncertainty among investors about the government's commitments. But the timing of the announcement on a traditionally slow news day raised eyebrows.

More Than 350,000 Homeowners Aided by Federal Mortgage Program

According to reports released this morning, federal mortgage programs have aided a surprisingly large amount of homeowners in the country. So far, over 300,000 families have been helped by the program, which is getting close to President Obama’s goal of half a million. Check out the following clip from a WashingtonPost.com article on the topic.

Lenders have helped more than 350,000 homeowners reduce their monthly mortgage payments through a federal foreclosure prevention program, according to government data released Wednesday morning.

That brings the industry closer to meeting the Obama administration's goal of modifying the loans of at least 500,000 borrowers by Nov. 1. But the data illustrate that some large lenders continue to struggle to address the backlog of homeowners in need of help.

Under the federal program, known as Making Home Affordable, lenders are paid to lower the payments of troubled borrowers. Consumer advocates and homeowners have complained that it's still difficult to reach lenders for help and confusion remains about how the program works.

Since the initiative was launched in March, 12 percent of delinquent borrowers have received help under the program, according to the Treasury data. That is up from less than 10 percent last month.

Mortgage Firms Struggle to Redo Hard-Hit Loans

At a time when struggling homeowners need it most, new studies are showing that mortgage firms are struggling to negotiate loan modifications fast enough to keep up with demand. The change comes with new government pressure to negotiate more loans under their Home Affordable Modification Program, or HAMP, where the Federal government encourages these firms to help keep families in their homes. Check out the following story on the issue courtesy of the Wall Street Journal.

Morgan Stanley chief John Mack recently made a new friend, he told shareholders in April -- a Southern woman who had benefited from the big bank's stepped-up efforts to modify loans under a new federal program aimed at keeping borrowers in their homes.

"I'm now invited -- if I ever visit Memphis, Tennessee -- to drive two hours south to have dinner with her and her family," Mr. Mack said.

But by some measures, Morgan Stanley's mortgage-loan servicing firm, Saxon Mortgage Services Inc., has a long road to go. An April Credit Suisse Group analysis of how quickly companies have renegotiated loans ranked Saxon last among 18 mortgage-servicing firms. Saxon has modified just 6% of the loans it oversees that originated between 2005 and 2007. By contrast, Litton Loan Servicing, a Goldman Sachs Group Inc. unit, modified 28% of its loans.

Such firms are at the center of a grand government experiment aimed at halting foreclosures and the collateral damage they cause neighboring homes. New foreclosure notices will total 2.4 million this year, which could trigger price drops in 69.5 million nearby homes, estimates the Center for Responsible Lending, a financial-services research and policy firm. At an average decline of $7,200 a house, that translates to a potential drop of $502 billion in total U.S. property values.

The government plan, rolled out in February and called the Home Affordable Modification Program, or HAMP, will pay mortgage-servicing firms to modify mortgages and find other ways to keep people in their homes. But the program's sheer scale and the speed with which it was rolled out have created a new set of problems for some of the 27 firms charged with carrying it out.

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Minority Broadcasters Seek Federal Aid

From the Wall Street Journal:

A group of minority broadcasters asked Treasury Secretary Timothy Geithner Monday for financial assistance akin to the aid that has been extended to the financial and auto industries.

"Minority-owned broadcasters are close to becoming an extinct species," the letter said. "Even in better economic times, minority broadcasters have historically had difficulties accessing the capital markets."

The broadcasters told Mr. Geithner they can bounce back if they are given some temporary assistance while the credit markets are slow. "Unlike the auto business, broadcasting has been healthy for many years," their letter said.

The broadcasters appeal follows a proposal sent in May to Mr. Geithner by a group of influential House members asking for a minority broadcaster support program, bridge funding, or government-backed loans.

The House letter was signed by House Majority Whip James Clyburn (D., S.C.) and a group of key committee chairmen, including Financial Services Committee Chairman Barney Frank (D., Mass.) Ways and Means Committee Chairman Charles Rangel (D., N.Y.) and Oversight Committee Chairman Edolphus Towns, (D., N.Y.).

At a hearing last week, National Association of Black Owned Broadcasters President James Winston told lawmakers that advertisers have severely cut investments in minority audiences at the same time minority broadcasters are having difficulty negotiating loan terms with banks.

Research from the Internet advocacy group Free Press says minorities own just 7.7% of full power commercial radio stations and 3.2% of full power commercial TV stations.