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Housing: Freddie bets against homeowners

Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off only if American homeowners stay trapped in high-interest mortgages, said Jesse Eisinger and Chris Arnold in a joint investigation by ProPublica.org and NPR​.org. That puts “a conflict of interest at the heart of the company,” since Freddie Mac also sets rules that make it harder for homeowners to refinance at today’s historically low interest rates. Freddie Mac officials say that the traders responsible for the complex bets are “walled off” from those who determine refinancing rules, but the company still “could lose substantial amounts of money” if too many borrowers qualify for lower mortgage rates. “We were actually shocked they did this,” says Scott Simon, head of the mortgage-backed securities team at investment firm PIMCO. The trades “put them squarely against the homeowner.”

There is a potential upside, said Suzy Khimm in WashingtonPost​.com. When Freddie’s huge invest­ment portfolio makes a profit, “it helps reduce the potential burden on taxpayers,” who bailed out the mortgage giant during the financial crisis. On the other hand, if Freddie made it easier for struggling homeowners to lower their mortgage payments, it would help “heal the housing market,” which is holding back the U.S. economy.

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Economy: Modest U.S. growth amid slack demand

The U.S. economy ended 2011 “on firmer footing,” but signs of weakness are dampening expectations for 2012, said Don Lee in the Los Angeles Times. The economy grew at an annualized rate of 2.8 percent between October and December, lower than what analysts had expected. “The good news is we avoided a recession,” says economist Kathy Bostjancic. But we still face a “frustratingly slow recovery.” In hopes of stimulating the economy, the Federal Reserve announced last week that it would keep short-term interest rates near zero through 2014.

Tech: Facebook launches initial public offering

Facebook, the world’s largest social network, with more than 800 million users, filed papers this week for an initial public offering that could value the company at as much as $100 billion, said Pallavi Gogoi in the Associated Press. The company is expected to raise at least $5 billion from investors when shares begin trading in two to three months, making it the biggest tech IPO in history. “Pandemonium is what I expect in terms of demand for this stock,” says Scott Sweet of the advisory firm IPO Boutique.

France: Sarkozy unveils financial transactions tax

French President Nicolas Sarkozy has announced plans to impose a 0.1 percent tax on financial transactions beginning in August, despite fierce opposition from the country’s banks, said Rupert Neate in the London Guardian. Sarkozy, who faces a tough re-election fight this spring, says he hopes other countries will follow France’s example. “There is absolutely no reason why those who helped bring about the crisis shouldn’t pay to restore the finances,” he said.

Companies: Netflix enjoys a turnaround

Several months after angering customers with a controversial price increase and a bungled spin-off plan, Netflix is back in the market’s good graces, said Brian Stelter in The New York Times. The company beat earnings expectations in the fourth quarter, posting $876 million in revenue, up 47 percent over the same quarter in 2010. Though the company lost about 800,000 subscribers after announcing—and then abandoning—plans to separate its streaming and DVD-by-mail services, it added about 600,000 new subscribers between October and December.