Financial Update

· TSX +20.77pts
· Dow -171.22pts
· Dollar -.91c to $94.16US
· Oil -$.13 to $115.46US per barrel
· Gold -$1.60 to $829.30US per ounce

British government plans housing market rescue: tax cuts, government fund

By Emily Flynn Vencat, The Associated Press

LONDON - The British government presented a package of tax cuts and spending moves Tuesday to try to reinvigorate a housing market suffering its worst crash since the early 1990s.
Treasury head Alistair Darling eliminated the 1% tax that buyers are required to pay for the next year on home purchases of less than 175,000 pounds (US$313,000) to encourage first-time buyers to jump on the property ladder.

Prime Minister Gordon Brown also unveiled plans to spend one billion pounds (US$1.8 billion) to help buyers hit by a cut in bank mortgage lending in the face of the global credit crunch.
Property prices have fallen 10.5 per cent in the last 12 months, according to Nationwide Building Society.

The billion-pound housing scheme targets first-time buyers and families at risk of having their homes repossessed.

Economic performance Canada's worst since 1991

Email the author

Julian Beltrame The Canadian Press OTTAWA

Canada's economy limped ahead in the second quarter barely enough to avoid the first recession in 17 years, recording the thinnest of gains after a much worse winter quarter than previously believed.

But with Statistics Canada sharply revising downward its first quarter tally on gross domestic product to a negative 0.8%, the modest 0.3% gain in the March-June period meant that the economy actually contracted during the first six months of 2008.

It constitutes the worst performance by the economy since 1991 and comes at a critical time for the Conservative government of Prime Minister Stephen Harper, who has hinted broadly he is close to seeking a second mandate.

Hoping to get ahead of the bad news, Finance Minister Jim Flaherty called an impromptu media scrum at the Toronto International Airport 15 minutes after the release of the figures to assure Canadians that economic fundamentals remain strong.

"Canada is better positioned than most to weather this period of global economic uncertainty,'' he told reporters. "For 2008 as a whole, I expect real gross domestic product to increase by about one per cent.''

But the Liberals were having none of that, accusing the government of mismanagement and not doing enough to help the embattled manufacturing sector.

"Stephen Harper and Jim Flaherty continue to talk about how good the 'fundamentals' are in Canada in spite of the fact that by any economic definition Canada is slumping,'' said Stephane Dion in a statement.

Liberal finance critic John McCallum said even more troubling to him was that Canada's economy struggled at the same time that the U.S. recorded an impressive 3.3 per cent growth, largely due to exports and a multibillion-dollar stimulus package.

Scotia Capital's Derek Holt said if Canada did avoid a mild recession -- assuming the second quarter GDP isn't revised downward at a later date -- it was mainly through a technicality.

The key point is that the Canadian economy contracted in the first half of 2008 and "more importantly it deteriorated at a faster pace than the Bank of Canada had expected,'' he said.

Holt said the miscalculation on the state of the economy has been large enough that Mark Carney, governor of Canada's central bank since February, should move quickly and cut interest rates next week by at least one-quarter of a point, and possibly by half a point.

"I think the bank misjudged the balance of risks in the summer and it's time to retract some of that,'' he said.

"Every single category of business declined and detracted from growth . . . residential structures, non-residential structures, business machinery and equipment. . . . and this is among the weakest pace of consumer spending we've had in years.''

But other economists questioned whether it was appropriate to talk about a recession when employment remains near record levels and incomes continue to grow.

"If it were a recession, Canadians should also see their incomes and spending power in decline,'' noted Avery Shenfeld, a senior economist with CIBC World Markets.

"Instead, real consumer spending advanced at a decent 2.5 per cent pace in the spring quarter. And both total wages and nominal after-tax incomes were climbing at a 4.5 per cent annualized pace, enough to cover the high gasoline bills without taking the savings rate below last year's average.''

The details of the growth results were no more comforting than the tepid overall numbers, with GDP edging up 0.1 per cent in the second quarter on a quarter-to-quarter basis. The monthly GDP advanced 0.1 per cent in June over May. Statistics Canada said the weakness was broad-based, encompassing exports, manufacturing -- particularly autos, forestry, and energy exports

Financial Update

· TSX +219.38pts (Reuters) powered to its second triple-digit gain in a row as major banks climbed after releasing results that were not as bad as some analysts feared.
· Dow +212.67pts also showed very strong gains due to the unexpectedly robust economic data and decline in oil prices
· Dollar -.46c to $95.07US due to a drop in oil prices after the International Energy Agency pledged to dip into emergency stockpiles if Tropical Storm Gustav disrupted U.S. oil production. The Loonie has been linked increasingly to oil prices as Canada's importance as an energy producer has grown. Another factor was growing expectations that the Bank of Canada would have to cut its key lending rate to shore up softening economic growth
· Oil -$2.56 to $115.59US per barrel -3rd day of gains as Tropical Storm Gustav was expected to intensify into a hurricane that could threaten U.S. oil and natural gas production in the Gulf of Mexico.
· Gold +3.20 to $837.20US per ounce

Harper doesn't rule out recession

Globe and Mail Report on Business

INUVIK — Prime Minister Stephen Harper, who is expected to call an election as early as next week, did not rule out the possibility the Canadian economy may have slipped into recession but said Thursday that if so it would only be in a technical sense.

Mr. Harper was speaking on the eve of the release of second quarter GDP data, which will show whether Canada has had negative growth for two successive quarters – the most popular technical definition of a recession.

Most analysts expect slightly positive second-quarter growth after the first quarter's annualized reading of -0.3 per cent, but many say there is a risk it could be negative.

“People talk about a technical recession. Even if that's true, I don't think it's a real recession,” Mr. Harper told a news conference in the Arctic town of Inuvik, without confirming whether growth did in fact come in negative for two quarters.

“Somebody said a recession is when people start losing their jobs, and when your neighbour loses his job. There are job losses, but overall employment is pretty stable,” Mr. Harper said.

The economy remains strong and while employment numbers have softened they remained very high, he said.

Sensitive to the political ramifications if there is a recession, Mr. Harper said: “Look, I'm not trying to sugarcoat this. I said a year ago, and I said as we moved into the new year, that 2008 would be a year of significantly slower economic growth, because of the circumstances we have in the global economy and in the American economy.”

But he added: “At the same time I believe the fundamentals of Canada are strong, will get us through this [slow] growth, and if we make the right policy choices we will actually emerge from it with a very strong economy.”

He said it was not a time to go back to policies in the style of former Liberal Prime Minister Pierre Trudeau and impose taxes.

This was a reference to the Liberal Party's current proposal to introduce a carbon tax to fight climate change and offset it with income tax cuts and help for the poor.

Conservative sources have said that Harper would like to trigger an election next week, before Parliament returns from its summer recess on Sept. 15.

Statistics Canada will release the gross domestic product data on Friday at 8:30 a.m. EDT

Financial Update

· TSX +231.58pts (Reuters) as the key resource and financial sectors were lifted by commodity prices and a rally by Canadian banks. All the major banks rose as the heavy hitters release their quarterly results this week, culminating in reports from 3 institutions, including Royal Bank of Canada , which rose 2.7%
· Dow +89.64pts
· Dollar +.15c to $95.53US
· Oil +$1.88to $118.15US per barrel -3rd day of gains as Tropical Storm Gustav was expected to intensify into a hurricane that could threaten U.S. oil and natural gas production in the Gulf of Mexico.
· Gold +5.90to $834.00US per ounce

Often a mortgage originator with integrity and honesty, will question the need to verify documents that seem legitimate. Please see article below from the National Post which emphasizes the severity of fraud in our industry and the amount of damage just two people can cause.

Two charged in $30-million real estate fraud

VANCOUVER -- A marathon investigation into one of the biggest financial frauds in B.C. history has led to multiple criminal charges being filed against former Vancouver lawyer Martin Wirick and Vancouver real-estate developer Tarsem Singh Gill.

Both men were arrested Tuesday after a six-year investigation.

Messrs. Wirick and Gill are charged with two counts of fraud and theft against 77 different homeowners, and two counts of fraud and theft against lenders in 30 different loan transactions. Mr. Wirick is also charged with two counts of uttering false documents and Mr. Gill with one count of possession of stolen property.

The total amount of money alleged to have been unlawfully taken from homeowners and lenders exceeds $30-million.

Three Fannie Mae execs out

NEW YORK (Reuters) - Fannie Mae the biggest U.S. mortgage finance company, on Wednesday announced a shake-up of top executives, including the exit of its chief financial officer, in an effort to better implement a plan to preserve capital and cut losses.

Fannie Mae announced management changes amid a storm of controversy over its ability to survive a wave of mortgage defaults that have caused four straight quarters of losses and recent speculation a government bail-out was near. But the board is "firmly committed" to Chief Executive Officer Daniel Mudd, Chairman Stephen Ashley said in a statement .

Stephen Swad, who was CFO since early 2007 and helped Fannie return to timely filing of financial statements following a major accounting scandal, was replaced by Fannie Mae Controller David Hisey, the company said. Peter Niculescu, head of capital markets, will replace Robert Levin as chief business officer. Fannie Mae's chief risk officer, Enrico Dallavecchia, will also leave.

The changes "signal they are trying to correct some problems," said David Dreman, chairman of Jersey City, New Jersey-based Dreman Value Management, LLC, a Fannie Mae and Freddie Mac shareholder. "When you change risk management people, it has to be viewed as recognizing problems, so it is mildly positive."