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Housing Recovery? New home sales reached a two-year high in May, and while the S&P/Case-Shiller 20-City Home Price Index has been lingering in the valley (the latest report, released this morning, showed a decline, albeit at the slowest pace in more than a year), other indexes "show a nascent recovery," the Journal says. … Fidelity National Financial appears to be hedging its bets, though; the title insurance company has agreed to buy a restaurant chain. … A bill expected to pass the Senate this week would more than double flood insurance premiums over four years in high-risk areas. … Believe it or not, the mortgage-backed security market still discriminates between Fannie Mae and Freddie Mac — so much so that Freddie has been forced to pay rebates to lenders to compensate for the lower prices fetched by bonds with its guarantee, according to Businessweek. … The Post profiles Rep. Elijah Cummings, a Maryland Democrat who's become a "voice for distressed homeowners," and a vocal critic of the FHFA's resistance to principal reductions. … And though your Morning Scan rarely mentions stories from the arts section of the newspapers, Joe Nocera's Times piece on the documentary "The Queen of Versailles" is worth reading as a reminder of the housing boom's excesses. Yes, this is the same wealthy couple's Florida dream home (which they really did name after the French monarchial palace) the Journal wrote about in October, when construction was on hold. The husband, who is suing the director of the forthcoming documentary for defamation, tells Nocera that his timeshare business is as profitable as ever (despite losing possession of a resort) and that construction on Versailles has resumed. Well, that settles it: we're in a housing recovery.

Break-Up Advocates: Living wills are due from nine of the biggest banks by July 1. Thomas Hoenig, the FDIC vice chairman, doubts that this feature of the Dodd-Frank Act will end the problem of too-big-to-fail. The law allows the FDIC to forcibly split apart a bank that cannot write a "credible" wind-down plan for itself, and bankers fear regulators, particularly Hoenig (an advocate of kicking commercial banks out of the broker-dealer business), will use the provision as a pretext for dismantling institutions. But he tells the Journal he wouldn't use the living will process for that purpose because he wants breakups to be done in a "systematic, fair way." Meanwhile Phil Purcell, the former CEO of Morgan Stanley and its predecessor Dean Witter, advocates in an op-ed that shareholders of big banks push to spin off their trading and investment banking businesses. Purcell acknowledges that he made a career of aggregating financial services operations, and says the synergies remain "considerable." But today "the market is now discounting the stock prices of financial institutions with investment banking and trading. Breaking these companies into separate businesses would double to triple the shareholder value of each institution." If you were wondering what he's up to these days, Purcell is now running "a private-equity firm investing in high-growth financial-service companies." Would that include spinoffs?

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