Lita Epstein
Florida - http://www.litaepstein.com

Lita Epstein, who earned her MBA from Emory University’s Goizueta Business School, enjoys helping people develop good financial, investing and tax planning skills. While getting her MBA, Lita worked as a teaching assistant for the financial accounting department and ran the accounting lab. After completing her MBA, she managed finances for a small non-profit organization and for the facilities management section of a large medical clinic. She’s written over 20 books including "Trading for Dummies," "Reading Financial Reports for Dummies" and "Complete Idiot’s Guide to Improving Your Credit Score."

Mortgage applications fell almost 25% last week with new loan applications for home purchases hitting an eight-year low, according to the Mortgage Bankers Association. People continue to sit on the sidelines, waiting for prices to drop. Who wants to buy a home today if the price for that home might be lower soon after the deal closes?

Adding to that wait-and-see attitude are some major incentives that could be part of the stimulus package making its way through Congress. The biggest incentive of them all is a Senate provision that would give all home buyers a $15,000 tax credit. Who wouldn't wait to see if that provision survives the House/Senate negotiations?

Many were surprised when they heard that Home Depot was closing all 34 of its Expo Home Design Centers, but if you are a regular reader of its financial reports, you certainly would have seen signs of major financial stress. Home Depot (NYSE: HD) first discussed a "store rationalization plan" in its first quarter of 2008 report. At that point, it closed 15 stores and removed about 50 stores from the future growth pipeline.

In the third quarter report (December 2008), Home Depot said, "We recognized $564 million in total pretax charges for the first nine months of fiscal 2008 related to the store rationalization plan, including $3 million in the third quarter of fiscal 2008." Clearly, the store rationalization plan was not complete and more cuts were to come.

Everybody's talking about the need for changes in the U.S. financial regulatory system. This week the U.S. GAO released its framework for crafting and assessing modernization proposals. First the report highlights the major problems with our current system:

• Regulators have often failed to mitigate systemic risks posed by large and interconnected financial conglomerates and to ensure they adequately manage their risks.
• Regulators have had problems addressing financial market problems resulting from activities of less regulated markets -- non-bank mortgage lenders, hedge funds, and credit rating agencies.
• New and complex investment products have not been adequately monitored or even understood.
• Standards set by accounting and financial regulators have not kept up with financial market developments.
• Attempts to coordinate internationally with other regulators have been difficult because of the fragmented U.S. regulatory structure.

Actually it's this fragmented structure that is at the root of all our problems. Today, we have almost a dozen federal banking, securities, futures and other regulatory agencies. The Federal Reserve System was created in 1913 and most of the remaining agencies were created in response to the Great Depression. Now that we seem to be nearing that same type of financial devastation, we need to reconsider that entire regulatory structure.

This post is part of our feature on Money Losers of 2008. See all 20.

As we learn more about the scandal involving the investment businesses managed by Wall Street power broker Bernard Madoff, it's a tale of failure by government regulators and investors alike. Madoff saw a weakness in the system and took advantage of people and institutions for about $50 billion (we don't know the final tally yet because Madoff kept several sets of books and the courts need to sort out what's left).

Regulators got too cozy with a man whom they trusted so much that he served on a advisory committee for the SEC on investor information involving scams, while the entire time he was building a business that will probably hold a record for being Wall Street's largest Ponzi scheme. He also served as chairman of the NASDAQ Stock Market.

Investors, including investment advisers and large institutions, were taken in by his charms and overlooked the fact that steady returns, like the ones Madoff promised, were suspect. Indications are that some investment advisers who did their due diligence advised against investing money through Madoff.

This post is part of our feature on Money Losers of 2008. See all 20.

For a second year in a row, American homeowners are among the biggest losers of 2008. In 2007, predictions were that American homeowners would lose over $103 billion. Now at the end of 2008 the number jumped to losses of $2 trillion as the value of homes continue to fall with no end in sight. As job losses increase, even more families will be forced into foreclosure.

Homeowners who bought at the top of the housing bubble between 2005 and 2006, could wait decades for the prices to reach that level again. People who must move for a new job or family crisis find they either have to come up with cash for closing (if they find a willing buyer) or they must walk away from the loan and give the house back to the bank either through foreclosure or through a deed-in-lieu of foreclosure.

The housing bubble that started to inflate in 2002 and burst in 2007 drove housing prices way out of the normal range. The normal ranges for housing prices track these measures:

• Income: The house price should not exceed three times your average household income, which was true from 1950 to 2000. In 2006 the average household income was $66,600, so the average home price should have been about $200,000. But during that year the average home price was about $300,000.