Financial Watch

Demand for loans to buy U.S. homes raced to a seven-month high last week in the last hurrah for federal homebuyer tax credits that ended April 30, Mortgage Bankers Association (MBA) data showed on Wednesday.

Home purchase loan applications jumped 13 percent in the week ended April 30 to the highest level since early October, overshadowing a 2.1 percent drop in refinancing demand. Total mortgage applications rose by a seasonally adjusted 4 percent, the trade group reported.

It was the third straight weekly increase in purchase applications, rising almost 24 percent in the month. The share of loan refinancing fell to 51.9 percent of all applications, the lowest since early July 2009, the MBA said.

Failing to curb federal budget deficits would do “great damage” to the U.S. economy in the long run, Federal Reserve Chairman Ben Bernanke warned Tuesday.

Bernanke again urged the White House and Congress to come up with a credible plan to reduce the nation’s red ink, which hit a record $1.4 trillion last year.

Failing to do so would push interest rates higher — not only for Americans buying cars, homes and other things — but also for Uncle Sam to service its debt payments, he said.

All that would sap national economic activity and could cause employers to cut back on hiring, Bernanke said.

The Senate is considering legislation to let the federal government set a “cap” limiting the amount of carbon dioxide each business may emit. A company discharging less than its allowance could sell or “trade” its unused portion to another firm that had reached its limit. Hence cap and trade.

This is supposed to reduce the amount of carbon dioxide produced by burning oil, coal and natural gas. Utilities, manufacturing and transportation rely on these fossil fuels and will face heavy taxes. President Barack Obama predicted electricity rates would necessarily skyrocket. Remember, 86 percent of Ohio’s electricity comes from coal-fired power plants.

Sales of new homes surged 27 percent in March and orders for most durable goods climbed, indicating the U.S. economy sped up heading into the second quarter.

The gain in new-home sales was the biggest in 47 years as buyers rushed to qualify for a government tax credit and the weather improved, a Commerce Department report showed. Bookings for goods meant to last at least three years, excluding cars and aircraft, climbed 2.8 percent.

President Barack Obama on Saturday cited encouraging signs of an auto industry rebound as he promoted stronger financial rules that he said would help prevent a repeat of the crisis that pushed carmakers to the brink.

Senate Democrats have set a test vote Monday on legislation to tighten federal oversight of the financial sector.

The auto industry was one of the biggest casualties of a recession fueled by risky lending and speculative trading practices of major financial institutions. But after shedding 400,000 jobs in 2008, bailed-out U.S. automakers are rebounding.

As President Obama heads to New York City on Thursday to press for a major overhaul of financial rules, he faces stiff opposition by Wall Street to the toughest proposed regulatory crackdown since the Great Depression.

A Senate committee on Wednesday approved the final piece of the legislation: strict new oversight of the murky and unregulated market for complex financial derivatives. It is one of three significant provisions that rile Wall Street the most.