KeNo's Housing and Economic Portal

Tuesday December 1 Housing and Economic stories

2009-11-30T18:43:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

The Middle Class Are Shoplifting to Keep Up Appearances - (www.timesonline.co.uk) Middle-class shoppers who have been hit by the recession are stealing hundreds of millions of pounds of expensive food in an effort to maintain their high standard of living, according to a new survey. Quality cuts of meat, fresh fish and high-priced cheeses are being taken by mostly middle-class women from speciality food and convenience shops, where thefts have risen sharply in the past year. Thousands of retailers have found that luxury foods are being stolen for individual use rather than to be sold on. The information comes from more than 42,000 shops in Europe with combined sales of £262 billion, who were questioned by the Centre for Retail Research, an independent organisation, for Checkpoint Systems, the retail security specialists. They found that shoplifting in Britain has increased in the past year by nearly 20 per cent to almost £5 billion, £750 million more than in 2008, keeping Britain at the top of Europe’s shoplifting table. Clothing and fashion accessory shops were hardest hit, with branded designer goods high on thieves’ shopping lists, closely followed by DIY stores.

Hundreds of thousands of prisoners are released each year. They are now virtually unemployable. – (money.cnn.com) If you think it's tough getting a job during a recession, imagine what it's like for an ex-convict. Gregory Headley, 29, knows exactly what it's like. The Harlem resident was released from prison in July after serving two years and eight months for the criminal sale of a firearm. Now that he's out, he said, the conviction is dogging his attempts to land a full-time job. "There's no nice way of saying, 'I sold a gun,' " Headley said recently as he headed to his part-time job cleaning sidewalks. Headley was placed in the temporary, minimum-wage job by the Center for Employment Opportunities, a nonprofit organization in Manhattan that helps ex-convicts transition into law-abiding lifestyles. "I'm not going to lie: $40 a day hurts," said Headley, feeling the squeeze of the $28,000 in child support debt that he accumulated in prison. "But what I need to do is stay on the path I'm on, try to get used to the struggle instead of trying to beat the odds." Terrence Mason, assistant director of participant services at the employment center, described Headley as a "good guy" and a "go-getter." But he acknowledged that many employers will look no further than his rap sheet. "His conviction is a tough sell to employers," said Mason.

Blackwater Said to Pursue Bribes to Iraq After 17 Died - (www.nytimes.com) Top executives at Blackwater Worldwide authorized secret payments of about $1 million to Iraqi officials that were intended to silence their criticism and buy their support after a September 2007 episode in which Blackwater security guards fatally shot 17 Iraqi civilians in Baghdad, according to former company officials. Blackwater approved the cash payments in December 2007, the officials said, as protests over the deadly shootings in Nisour Square stoked long-simmering anger inside Iraq about reckless practices by the security company’s employees. American and Iraqi investigators had already concluded that the shootings were unjustified, top Iraqi officials were calling for Blackwater’s ouster from the country, and company officials feared that Blackwater might be refused an operating license it would need to retain its contracts with the State Department and private clients, worth hundreds of millions of dollars annually. Four former executives said in interviews that Gary Jackson, who was then Blackwater’s president, had approved the bribes and that the money was sent from Amman, Jordan, where the company maintains an operations hub, to a top manager in Iraq. The executives, though, said they did not know whether the cash was delivered to Iraqi officials or the identities of the potential recipients. Blackwater’s strategy of buying off the government officials, which would have been illegal under American law, created a deep rift inside the company, according to the former executives. They said that Cofer Black, who was then the company’s vice chairman and a former top C.I.A. and State Department official, learned of the plan from another Blackwater manager while he was in Baghdad discussing compensation for families of the shooting victims with United States Embassy officials. Alarmed about the secret payments, Mr. Black cut short his talks and left Iraq. Soon after returning to the United States, he confronted Erik Prince, the company’s chairman and founder, who did not dispute that there was a bribery plan, according to a former Blackwater executive familiar with the meeting. Mr. Black resigned the following year.

Every phone call, text message, email and website visit made by private citizens is to be stored for a year and will be available for monitoring by government bodies (In the UK) - (www.telegraph.co.uk) All telecoms companies and internet service providers will be required by law to keep a record of every customer’s personal communications, showing who they have contacted, when and where, as well as the websites they have visited. Despite widespread opposition to the increasing amount of surveillance in Britain, 653 public bodies will be given access to the information, including police, local councils, the Financial Services Authority, the ambulance service, fire authorities and even prison governors. They will not require the permission of a judge or a magistrate to obtain the information, but simply the authorisation of a senior police officer or the equivalent of a deputy head of department at a local authority. Ministers had originally wanted to store the information on a single government-run database, but chose not to because of privacy concerns. However the Government announced yesterday it was pressing ahead with privately held “Big Brother” databases that opposition leaders said amounted to “state-spying” and a form of “covert surveillance” on the public. It is doing so despite its own consultation showing that it has little public support. The Home Office admitted that only one third of respondents to its six-month consultation on the issue supported its proposals, with 50 per cent fearing that the scheme lacked sufficient safeguards to protect the highly personal data from abuse. The new law will increase the amount of personal data that can be obtained by officials through the controversial Regulation of Investigatory Powers Act (RIPA), which is supposed to be used for fighting terrorism. Although most private firms already hold details of every customer’s private calls and emails for their own business purposes, most only do so on an ad hoc basis and only for a period of several months. The new rules, known as the Intercept Modernisation Programme, will not only force communications companies to keep their records for longer, but to expand the type of data they keep to include details of every website their customers visit, effectively registering every online click. While public authorities will not be able to view the contents of these emails or phone calls, they can see the internet addresses, dates, times and identify recipients of calls. Firms involved in storing the data, including Orange, BT and Vodafone, will be reimbursed at a cost to the taxpayer of £2 billion over 10 years. Chris Grayling, the shadow home secretary, said he had fears about the abuse of the data. He said: “The big danger in all of this is 'mission creep’. This government keeps on introducing new powers to tackle terrorism and organised crime which end up being used for completely different purposes. We have to stop that from happening”.

Fannie, Freddie - They Need More Money - (bubblemeter.blogspot.com) Fannie Mae, the federally controlled mortgage finance giant, said Thursday it lost $19 billion in the third quarter and had submitted a request to the Treasury Department for $15 billion in more aid to stay afloat. District-based Fannie Mae and its McLean sibling, Freddie Mac, were seized in early September 2008 by the federal government. Since then, Fannie Mae has lost $111 billion. The $15 billion in aid it has requested comes on top of $45 billion it already received. Freddie Mac has received $51 billion in aid. In total, the seizure of Fannie Mae and Freddie Mac has cost taxpayers $121 billion, among the costliest of the government's interventions to stabilize the financial markets. Fannie Mae said its losses and its need for additional government aid are both likely to continue. And it said activities it was undertaking at the behest of the Treasury Department, such as modifying mortgages to help homeowners avoid foreclosure, were magnifying its losses. ... In its earnings statement, Fannie Mae said its assistance to struggling homeowners "could adversely affect our economic returns, possibly significantly."

LA Times on Michael Ruppert's 'Collapse' Documentary - (www.latimes.com) But what is surely the strangest film about our doomsday fantasies arrives this Friday. Called "Collapse," it features a spellbindingly weird one-man monologue by Michael Ruppert, a former LAPD officer and investigative journalist who believes that we are about to run out of oil, an event sure to plunge the world into a state of collapse since Ruppert is convinced that our entire world economy is built on an unsustainable addiction to petrol. If you ever thought it was impossible to top Beck's over-the-top fantasies, listen to Ruppert, who says that "what I see now is the end of a paradigm that is as cataclysmic as the asteroid event that killed almost all the life on Earth, and certainly the dinosaurs." The film is directed by Chris Smith, who has made a number of documentaries about oddball characters pursuing impossible dreams -- his 1999 film "American Movie" chronicled the story of a hapless slacker trying to make a $3,000 homemade horror film. But what makes "Collapse" so sneakily compelling is that we have no inkling of what Smith thinks of his subject. Filmed with one camera over the course of two days in the basement of an abandoned meatpacking plant in downtown L.A., "Collapse" is a hermetically sealed package, open to whatever interpretation we might bring to it. It allows us the same freedom we have in watching Beck's show -- we can take it as gospel, be appalled by its wild, undocumented claims or simply watch bemused, appreciating Ruppert's gifts as a performer. "I think there is something quintessentially American about Michael," says Smith, who financed the film himself, using the money he's made as a successful commercial director. "He comes out of the culture of the moment, in the same way that we foster all these high-flying entrepreneurs and self-help gurus. When you look at his upbringing, to have gone from being a police officer to someone who questions authority, it fits into a storyline that could only happen in this country." "Collapse" opens Friday in theaters in New York and L.A. while also debuting this weekend on the Film Buff video-on-demand channel. Smith admits that he has "very conflicted feelings" about Ruppert. "A lot of what he says is incredibly thought-provoking, with lots of historical support, but there are things that you'd probably get a lot of criticism for believing," he says. "So I wanted to give the audience the experience of living inside his world for 85 minutes. Even if you can't prove all of his ideas, his passion and belief is definitely concrete." I got hooked on "Collapse" for much the same reason that millions of viewers have fallen for Beck. Every time I'd start to think that Ruppert was a deluded crackpot, he'd reel me back in, grabbing me by the throat with a burst of seemingly persuasive analysis. He poses his oil-collapse scenario in simple, hard-to-refute logic. "Saudi Arabia has 25% of the oil reserves on the planet," he explains in a soothing, almost hypnotic voice. "Why, if Saudi Arabia has all these untapped reserves on shore, are they moving heavily into offshore drilling? If it's 5, 10 or 15 times more expensive to drill offshore than land, doesn't that tell you that Saudi Arabia knows that they've no more oil to find?"

CNN Anchor Lou Dobbs Says He is Leaving Network - (money.cnn.com) CNN host Lou Dobbs, whose outspoken views on U.S. immigration have made him one of the most controversial figures on cable news, said on Wednesday he is leaving the 24-hour cable news network because he wants a freer platform to state his opinion. Dobbs, who announced his decision near the start of his nightly news and commentary show, did not say where he plans to go after finishing nearly 30 years at CNN, now a unit ofTime Warner Inc. "For the past six months it has become increasingly clear that strong winds of change have begun buffeting this country and affecting all of us," Dobbs said. "Some leaders in media, politics and business have been urging me to go beyond the role here at CNN and engage in constructive problem-solving," said Dobbs, referring to himself as one of the last original CNN anchors. A CNN source told Reuters Dobbs will be concentrating on his syndicated radio show, "The Lou Dobbs Show," and would not confirm a New York Times report that he had met with Roger Ailes, chairman and chief executive of the Fox News channel, a CNN rival owned by News Corp.

OTHER STORIES:

Pictures of Brazil's Blackout - (www.dailymail.co.uk)

Here we are approaching 2010 and we have not yet punished the thieves who caused the Greatest Heist in History. - (www.zerohedge.com)

As Foreclosure Nightmares Increase, Will More Homeowners Pay Off Their Bankers in Violence? - (www.alternet.org)

Superfreakonomics Condensed to 677 Words - (www.guardian.co.uk)

FedEx predicts a record for packages shipped - (www.digg.com)

China Signals It May Allow Currency to Rise - (www.cnbc.com)

China Data Show Economic Rebound Picking Up Steam - (www.nytimes.com)

Dodd Bill Aims to Strip Oversight Powers from Fed - (www.bloomberg.com)

The Political Nature of the Fed - (www.nytimes.com)

Kunstler: Dreams Die Hard - (www.kunstler.com)

Nystrom: The Dollar Meltdown - Review – (bullnotbull.blogspot.com)

Monday November 30 Housing and Economic stories

2009-11-29T17:46:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

$100K houses dominate FL market - (www.floridatoday.com) At the beginning of this decade, Brevard County’s real estate market was dominated by homes selling for less than $100,000. The end of the decade is shaping up the same way. In 2000, half of all residential properties in Brevard were sold for less than $100,000 and in 2001, the figure was 42 percent, according to a FLORIDA TODAY analysis of county property sales records. By 2006, soaring real estate prices meant only That shrank to only 3 percent of sales that year were less than $100,000.in 2006 as the real estate prices soared, . This year, as the economy slumped and housing prices dropped, homes in that category are on pace to account for almost 4 out of every 10 sales. “For buyers, they are no longer priced out of the market,” said John Krause, a sales associate with National Realty of Brevard. Much of the trend has been driven by foreclosures and short sales and sales of other “distressed” properties, which now account for about a third of homes sold here. So far this year, 1,550 houses, condos and townhouses were bought from banks or other financial institutions. Another 845 were sold under duress. The median price of those homes was $89,400. Those properties range from a south Melbourne single-family home bought from a bank for $5,000 to a short sale of a Lansing Island home for $1.4 million. Krause said nearly all the buyers he is working with are looking at homes in Palm Bay built in 2005 or 2006 and that are now selling at prices up to 50 percent off their original sales. President Barack Obama on Friday signed a bill that extends up to April 2010 an $8,000 tax credit to first-time homebuyers while adding a provision for buyers who have owned their current homes for at least five years. They could get tax credits of up to $6,500.

46% of South Florida houseowners are underwater - (www.miamiherald.com) Nearly half of all owners of single-family homes in the Miami-Fort Lauderdale metropolitan area were underwater at the end of the third quarter, meaning their homes were valued at less than the mortgages owed against them. Forty-six percent of South Florida homeowners, representing 387,157 homes, were underwater at the end of Sept. 30, compared to 47 percent in the second quarter, according to a new report from Web-based real estate services firm Zillow.com. Nationally, 21 percent of homeowners were underwater as of Sept. 30, down from 23 percent in the second quarter, as home values stabilized in the short term and more underwater borrowers lost their homes to foreclosure, Zillow said. Zillow's home price index showed that the median price of a single-family home in the area was $168,400, down 17.1 percent from the same period a year before. Values were down 2.1 percent from the second quarter. The Zillow index measures values of all homes, not those sold in a particular period. While values continue falling, the firm said September marked the eighth consecutive month of decreasing year-over-year price declines. Additionally, 50 percent of all homes sold in September sold at a loss, the firm said. A small percentage, 5.5 percent, saw their values rise over the past 12 months.

Kill All the Bankers? There's an App for That - (www.dvorak.org) Among the 100,000-plus applications for the iPhone is one that allows users to “kill” bankers. The TARP-inspired Bailout Wars app lets iPhone users “take revenge on bankers” by “throwing them into the air, blowing them up, shooting them down and shaking them so hard their clothes fall off, writes American Banker. The point of the game, made by Gameloft and selling for $.99 on iTunes, is to destroy bankers in order to save both the White House (and US taxpayers’ money) from greedy day traders, high risk investors, and finance CEOs. The game’s description on iTunes reads: Defend the White House and save the US taxpayers’ money before it gets stolen! It’s time for you to give them what they deserve! [...] It’s your only chance to really take revenge on bankers for the recession they caused [...] Explore many different ways to beat bankers: tap, grab, or shake them in the air. Bailout Wars current has a three-and-a-half star rating on iTunes, with 219 users out of 492 giving the app a five-star rating. I just hope it works on the iPod Touch.

Lobbyists get paid to rape America - (www.omaha.com) he recession has taken a toll on corporate bottom lines and public budgets, but lobbying the federal government continues to be a booming enterprise. Midlands companies, universities, nonprofit organizations and local governments spend millions every year to lobby the federal government. While some have pared back recently, many have maintained their lobbying budgets or even increased them significantly. The number of registered federal lobbyists was 14,808 in 2008, a year when overall lobbying expenditures reached a new height of $3.3 billion, according to the Center for Responsive Politics, a nonpartisan research group. Lobbying for 2009 is on pace to match that level or exceed it, fueled, not surprisingly, by substantial lobbying on matters related to health care. For example, Wellmark Blue Cross Blue Shield, Iowa's largest health insurer, has spent $400,000 on lobbying so far in 2009. Overall, Blue Cross has spent $16,727,065 on lobbying this year, making it the fifth-highest spender on lobbying so far this year, according to the Center for Responsive Politics, which tracks money in U.S. politics. The center reports that overall health sector lobbying for the year so far is $396 million. Center spokesman David Levinthal said the fact that lobbyist spending has remained so robust in a recession surprises many people. “But a lot of companies, despite the economy being what it was, sort of take the approach of ‘We need to invest money now in the hopes of potentially getting a windfall later from federal government assistance via friendly legislation,' ” Levinthal said. “If you're a company and you're trying to get something from the federal government, it oftentimes costs a good deal of money.” Lobbyists in general have taken a beating in the public's perception, thanks to various scandals, but Iowans and Nebraskans involved in lobbying say it's important that lawmakers hear from those affected by federal policies. They said that's particularly true when sweeping legislation is considered in areas such as health care, energy and the environment, and financial regulation. Des Moines-based MidAmerican Energy Holdings Co. has been a vocal opponent of legislation that would set a cap on greenhouse gas emissions and establish a trading system for pollution credits. MidAmerican typically spends a few hundred thousand dollars a year on its lobbying. So far this year, the company has spent $1.9 million. The company says the caps are acceptable but that the proposed trading system would place undue burdens on coal-dependent Midwestern utilities such as MidAmerican and that those costs ultimately would be passed on to customers.

The Bailout Has Transformed Into Bad-mortgage Buying Program - (www.businessinsider.com) When the financial crisis hit its high tide last year the Federal Reserve used a couple of blunt instruments to rescue financial institutions. The largest of the credit easing policy tools were the Fed's programs direct lending to financial institutions, including opening the discount window to investment banks and extending an unprecedented credit line to AIG. It also provided credit to "key credit markets" in the form of loans and guarantees to money market funds and asset backed securities markets. But over the course of 2009, those program have shrunk or been phased out. Meanwhile, one program, the Fed's purchase of mortgage back securities, has grown by more than enough to make up for the decline of those program. What this means is that despite the rollback of some Fed bailout programs, the market is still highly leveraged to the balance sheet of the Fed.

Widening gap between gov't data and reality - (www.nytimes.com) A widening gap between data and reality is distorting the government’s picture of the country’s economic health, overstating growth and productivity in ways that could affect the political debate on issues like trade, wages and job creation. The shortcomings of the data-gathering system came through loud and clear here Friday and Saturday at a first-of-its-kind gathering of economists from academia and government determined to come up with a more accurate statistical picture. The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country. American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics. “We don’t have the data collection structure to capture what is happening in a real time way, or what is being traded and how it is affecting workers,” said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., who has done pioneering research in the field. “We have no idea how to measure the occupations being offshored or what is being inshored.” The statistical distortions can be significant. At worst, the gross domestic product would have risen at only a 3.3 percent annual rate in the third quarter instead of the 3.5 percent actually reported, according to some experts at the conference. The same gap applies to productivity. And the spread is growing as imports do.

Apple bans Nancy Pelosi bobble head - (money.cnn.com) Someone at Apple (AAPL) needs to take a refresher course in American history — and maybe a lesson in libel law. Last summer Tom Richmond, one of Mad Magazine's top illustrators and two-time winner of the National Caricaturist Network's "Caricaturist of the Year" award, began drawing a likeness of every Senator and Representative in the 111th Congress — 540 caricatures in all, including non-voting members from Puerto Rico, Guam, etc. The idea, he explains, was to create an illustrated database for the iPhone and iPod touch that would allow users to find the name, party affiliation, phone number and website of their senators and congresspeople via zipcode or GPS. Each head was placed on one of 12 cartoon bodies and would bobble when shaken or flicked with a finger. The project was the idea of Ray Griggs, director of the movie Super Capers (rated PG for mild language, rude humor and brief smoking), for which Richmond did the art. Griggs had shown the finished to app around and stirred up some interest. He was booked to appear as a guest on Fox News next week with Glenn Beck and Mike Huckabee. You can probably guess what's coming next.

Dear Mr. Griggs, Thank you for submitting Bobble Rep – 111th Congress Edition to the App Store. We’ve reviewed Bobble Rep – 111th Congress Edition and determined that we cannot post this version of your iPhone application to the App Store because it contains content that ridicules public figures and is in violation of Section 3.3.14 from the iPhone Developer Program License Agreement which states: “Applications may be rejected if they contain content or materials of any kind (text, graphics, images, photographs, sounds, etc.) that in Apple’s reasonable judgement may be found objectionable, for example, materials that may be considered obscene, pornographic, or defamatory.” A screenshot of this issue has been attached for your reference. If you believe that you can make the necessary changes so that Bobble Rep – 111th Congress Edition does not violate the iPhone Developer Program License Agreement, we encourage you to do so and resubmit it for review.

Regards, iPhone Developer Program

OTHER STORIES:

Stocks poised for a dip - (money.cnn.com)

Free WiFi in 47 airports! Thanks, Google - (money.cnn.com)

Great gadgets for less than $299 - (money.cnn.com)

Dividends for the long run - (money.cnn.com)

No profits, no loans: How to survive - (money.cnn.com)

Treasurys rise ahead of 10-year auction - (money.cnn.com)

The silence of the bears - (money.cnn.com)

Sprint to slash up to 2,500 jobs - (money.cnn.com)

Then and now: 'The worst slum in America' - (money.cnn.com)

Banker's bonuses: 40% bigger this year - (money.cnn.com)

Bay Area Price Change By Zip Code - (www.dqnews.com)

Three decades of subsidized risk - (finance.yahoo.com)

China's Premier Warns Obama to Get America's Deficit to an "Appropriate Size" - (finance.yahoo.com)

Gold Rises to Record as Falling Dollar Boosts Investment Demand - (www.bloomberg.com)

Gold Buying Places Rip You Off - (www.lifehacker.com)

Learn to Fish Or You're F'ed - (www.reallyf'edhomeowner.com)

Roubini's Predictions: Economy, Dollar Carry-Trade, Housing - (www.seekingalpha.com)

IMF Says Low U.S. Rates Funding Carry Trade - (www.bloomberg.com)

Deflation is worth hedging against - (www.app.com)

Federal Reserve opposed as big bank savior by odd allies - (www.washingtontimes.com)

Professor Steve Keen from Australia on Debt and Economy - (rocktrueblood.blogspot.com)

Sunday November 29 Housing and Economic stories

2009-11-28T18:28:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Goodbye to Reforms of 2002‎ - (www.nytimes.com) t took just five weeks after the WorldCom accounting scandal erupted in 2002 for Congress to pass, and President George W. Bush to sign, the Sarbanes-Oxley Act. That law required public companies to make sure their internal controls against fraud were not full of holes. t took three more years for Bernard Ebbers, the man who built WorldCom into a giant, to be sentenced to 25 years in prison for his role in the fraud. Mr. Ebbers will be 85 years old before he is eligible for release from prison. He may be freed, however, before the law is ever enforced on the vast majority of American companies. A Congressional committee voted this week to repeal a crucial part of the law. Other parts are also under attack. Sarbanes-Oxley was passed, almost unanimously, by a Republican-controlled House and a Democratic-controlled Senate. Now a Democratic Congress is gutting it with the apparent approval of the Obama administration. The House Financial Services Committee this week approved an amendment to the Investor Protection Act of 2009 — a name George Orwell would appreciate — to allow most companies to never comply with the law, and mandating a study to see whether it would be a good idea to exempt additional ones as well. Some veterans of past reform efforts were left sputtering with rage. “That the Democratic Party is the vehicle for overturning the most pro-investor legislation in the past 25 years is deeply disturbing,” said Arthur Levitt, a Democrat who was chairman of the Securities and Exchange Commission under President Bill Clinton. “Anyone who votes for this will bear the investors’ mark of Cain.” Those who favored the amendment saw it differently. They were simply out to help small businesses, which would be burdened by having to report on whether they maintained acceptable financial controls, and to have auditors check on whether those controls did work. They also suggested that more foreign companies would list their securities in the United States if they were spared that onerous requirement. No one seems to have asked if investors really would benefit from making it easier to invest in companies that fear such an audit. There are other threats to Sarbanes-Oxley as well. The law set up a long-overdue system of regulating the accounting industry, which had proved time and again that it was incapable of effective self-regulation. The Public Company Accounting Oversight Board has done a credible job, but a month from now the Supreme Court will hear a case that could drive it out of existence. The Sarbanes-Oxley law also took steps to reinforce the independence of the Financial Accounting Standards Board, which writes accounting rules in the United States. By giving the board a secure source of financing, legislators said they were protecting it from the threats of the companies that had previously made donations to keep the board functioning.

Healthcare Reform is Economic Malpractice - (www.safehaven.com) As Washington continues debating healthcare reform the rest of the country is primarily concerned about jobs and the economy. It is still uncertain what policies will be implemented, but I am certain about one thing: It will only further devastate our economy and our dollar. The leadership has come up with a proposal they are confident will be what they consider fiscally responsible, only to have it scored as nearly twice as expensive by the nonpartisan Congressional Budget Office. Estimates of past healthcare spending programs have been off by as much as 100 percent so there is no telling what the actual cost will be. The past century should have taught us one thing: that government intervention is expensive. Government programs lend themselves so easily to waste, fraud and abuse. Combine that with overall inefficiency and it all adds up to a hefty price tag for the taxpayer, with not much leftover for actual services. An outright takeover of an entire sector of the economy, especially one as important as healthcare, is something that we just cannot afford for the government to do right now. Not to mention the fact that it is completely unconstitutional. But Washington insists on torturing the numbers and tinkering around the edges rather than facing this truth. If healthcare reform does indeed pass, we should not be under the illusion that it will be free. The money to pay for it will have to come from somewhere. They say they will get the money from cutting waste, fraud and abuse, but all of that is seemingly intrinsic to government programs. Since they want to expand the government's reach we have to assume we will be trading waste, fraud and abuse for waste, fraud and abuse with a bigger budget. The powers that be have insisted the money won't come from higher taxes, it won't come from rationing of care, and it won't come from higher premiums. This can only then put more pressure on the Fed to print the money out of thin air. We already have a weakening dollar. They are accelerating everything that weakened it in the past. Adding this new, monumental pressure could very well be the straw that will break the dollar's back. Foreign creditors are already nervous about continuing to invest in the US because of our skyrocketing debt. The explosion of debt that is certain to accompany the enactment of this national health care bill can only add to that nervousness. Ironically, enactment of the health care bill could help the cause of liberty by hastening the day when Congress is forced by economic circumstances to stop increasing the welfare-warfare state and return to the Constitution. There are many problems with our current healthcare system, to be sure. There are many tragic stories to be told. However, we need to look at the root of our problems in order to address them properly. More government intervention and bureaucracy injected into healthcare will take a flawed system and make immeasurably worse.

The New Face of American Day Labor - (www.lasvegassun.com) It sounds like a George Lopez joke. “Times are so bad that I saw an Anglo day laborer standing outside Home Depot the other day.” Except it’s true. In the latest sign of the Las Vegas Valley’s economic free fall, U.S. citizens are starting to show up in the early mornings outside home improvement stores and plant nurseries across the Las Vegas Valley, jostling with illegal immigrants for a shot at a few hours of work. Experts say the slow-starting but seemingly inexorable trend is occurring nationwide. “It’s the equivalent of selling apples in the Great Depression,” said Harley Shaiken, chairman of the Center for Latin American studies at the University of California, Berkeley. But it is not only a sign of the times, they add. If the numbers of citizens among the day laborers in cities across the country continue to grow, it’s likely to increase the ire of followers of TV host Lou Dobbs and others who will see illegal immigrants as stealing food off the tables of the nation’s native-born or naturalized poor. Or, it may flip certain canards upside down in the immigration debate, easing tensions in some communities. In the Las Vegas Valley, where the most recent unemployment rate was 13.9 percent, one face of this phenomenon is Ken Buchanan. The 50-year-old describes himself as a “food and beverage” guy, most recently working for four years at Renata’s Sunset Lanes casino and, before that, 30 years in a string of restaurants, hotels and casinos here and in his birthplace, Chicago. But in 2006 Renata’s closed for remodeling. When the casino reopened as Wildfire, the management did not rehire Buchanan, he said. In the months that followed, Buchanan discovered the difficulty of seeking work in his fifth decade, eventually winding up at Green Valley Car Wash, where he stayed for about two years, he said. The banks foreclosed on the house he was renting. In the attempt to grab his things two steps ahead of the constable, he wound up missing work. He lost his job. He became homeless. A Hispanic man Buchanan met in Renata’s sports book told him he had picked up work standing outside the Home Depot on Pecos Road at Patrick Lane. One July day, Buchanan gave it a try. At first, he got nothing but sunburn. But then he started to get work. Now he’s at the Home Depot six days most weeks. Pablo Alvarado, executive director of the Los Angeles-based National Day Laborer Organizing Network, said he has been seeing the same thing elsewhere. “It’s happening, though still not in massive numbers,” Alvarado said. In the past six months or so, he has heard of “americanos” on the street corners and parking lots of Silver Spring, Md., Long Island, N.Y., and Southern California locations.

Israel Proposes Slavery for Illegal Migrants - (www.haaretz.com) The government is considering establishing work camps in the south of the country, where illegal migrant workers will receive shelter, food and medical care, Army Radio reported Wednesday. In exchange, illegal migrants would perform manual labor outside the camps, but would not earn a salary. They would stay at the camp until their asylum claims are decided, which could take months or years. The proposal, part of the effort to address the problems posed by illegal migrants, would place asylum seekers at jobs in communities in the Negev and Arava. Their salaries would go to the state, in order to fund the camps. The issue of illegal foreign migrants and refugees has made the headlines due to the efforts by human rights organizations to block the deportation of 1,200 foreign workers' children. One of the main arguments by deportation advocates, including Interior Minister Eli Yishai (Shas), is that allowing them to stay would bring hundreds of thousands more illegal migrants. They would bring in "a range of diseases such as hepatitis, measles, tuberculosis and AIDS [as well as] drugs," said Yishai. "I fear how far we have fallen," said MK Dov Khenin (Hadash) in reaction to the work camp proposal, adding that he thinks the plan would encourage many more asylum seekers to try to enter Israel. "The plan [would] induce refugees to come to Israel. A bed is an incentive compared to where they come from. Israel has the right to close its borders, but when someone comes here, you cannot fight with him. This shows that we haven't learned a thing, as people living in a country established by refugees for refugees," Khenin added. In addition to the opposition of human rights groups, communities in the south may also not respond favorably to the plan. In April 2008, during a court hearing on the government's policy of putting asylum seekers in the northern and southern peripheries, north of Hadera and south of Gedera, an affidavit was presented to the court on the migrants' employment prospects. In the document, Sigal Rosen of the Hotline for Migrant Workers declared that kibbutzim in the south had not shown an interest in hiring the migrants.

Goldman Sachs: Doing God's Work - (www.reuters.com) Check out the headline at the bottom left of the Sunday Times front page. The man the London paper calls the most powerful banker on Earth says he is “just a banker ‘doing God’s work’”. The report says Goldman Sachs chief executive Lloyd Blankfein“proudly pays himself more in a year than most of us could ever dream of — $68m in 2007 alone, a record for any Wall Street CEO, to add to the more than $500m of Goldman stock he owns” . Goldman Sachs looks set to pay about $20 billion in bonuses for its top traders this year, at a time when the fallout from last year’s financial crisis is still being felt and the United States unemployment rate has hit 10.2 percent, a 26-1/2-year high. In his defence, Blankfein said in the interview: “We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle … We have a social purpose.”

OTHER STORIES:

Ron Paul in South Carolina, November 9, 2009: "The Politics of Tolerance" - (www.dailypaul.com)

China Hopes US Will Keep Deficit to Appropriate Size - (www.reuters.com)

Broader Measure of U.S. Unemployment Stands at 17.5% - (www.nytimes.com)

Freddie Mac Posts $5 Billion Loss - (finance.yahoo.com)

Consumer Credit Shrinking - (themessthatgreenspanmade.blogspot.com)

Newsweek: Are the United States, Japan, Great Britain, and other first-world nations in danger of defaulting on their debt? - (www.newsweek.com)

GATA: Gold Suppression is Public Policy and Public Record - (www.gata.org)

Nystrom: The Dollar Meltdown - Review - (bullnotbull.blogspot.com)

India's Big Vote for a Gold Rally - (www.moneycentral.msn.com)

John Rubino: Reaons To Worry About Gold (In The Short Run) - (www.dollarcollapse.com)

Dow Jumps 200; Hits New High - (www.marketwatch.com)

Greenspan: Market Rally "Re-Liquifying" US Economy... - (www.bloomberg.com)

...While Americans' Access to Credit Cards is Falling Sharply - (www.nytimes.com)

Americans are Financially Functionally Illiterate - (news.yahoo.com/s/bw)

Murdoch Threatens to Block Google Searches of His Content Entirely. Sounds Dumb. - (www.guardian.co.uk)

NASA on Crusade to Debunk 2012 Apocalypse Myths - (www.breitbart.com)

Saturday November 28 Housing and Economic stories

2009-11-27T18:16:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Wildlife returns to abandoned Contra Costa County subdivisions - (www.contracostatimes.com) Just like any residential street in Antioch, Gateway Drive has sidewalks, a paved road, retaining walls separating yards and sewer pipes. What it doesn't have is residents. Not human ones, anyway. Instead, it's burrowing owls, coyotes, jackrabbits and kestrels that have moved in. This tract of land on the edge of development in Southeast Antioch has stood primed for new houses for more than two years, since the housing market collapsed and construction halted. Now, native species have reclaimed the land — a reminder that until recently this part of Contra Costa County, now blanketed with development, was habitat for wildlife. "Just little by little they started turning up," said Scott Artis, a nearby resident who has taken an interest in protecting the burrowing owls. This abandoned construction site is not the only one in the East Bay that has been repopulated by wild species since the building boom went bust. Seth Adams, director of land programs for Save Mount Diablo, said wildlife has returned to land once trod by bulldozers in sidelined subdivisions in Clayton and Pittsburg. A visit to the Delta Coves subdivision in Bethel Island found shorebirds by the dozens perched on the boat launches that were supposed to back up to more than 400 homes. And at Trilogy in Brentwood, Shea Homes' Dan O'Brien said his engineers check for critters every time they start construction on a parcel where building has been delayed. "It's happening all over the place," Adams said. "You can point to just about anywhere on the edge of cities." In Antioch, Artis has made sure local conservation groups know about the presence of burrowing owls in the abandoned subdivision, so they're not harmed when development there eventually resumes. Shea Family, a division of Shea Homes, developed the first phase of the neighborhood but sold the parcel to Kiper Homes when the housing market turned, according to a Shea representative. Officials at Kiper did not return calls seeking a comment. Artis has monitored the owl population in the stalled subdivision for two years during regular walks. Last week, he tallied 11 owls in the area, including four pairs. That doesn't count the fledglings that hatched last spring and since have left their nests. Burrowing owls are on the California Department of Fish and Game's list of Species of Special Concern, meaning their numbers are shrinking. "As we build out toward agricultural lands, their habitat is sort of becoming our habitat more and more," said Mike Lynes, conservation director for Golden Gate Audubon. "We sort of have to pay more attention to them now." Burrowing owls are abundant in East Contra Costa's grassy hills and have been on Antioch's radar for years, since residents pushed for protections for those displaced by the community center at Prewett Park. In response, the city set up designated habitat for the birds protected by deed. "Antioch is the first (city) in the East Bay that has done something like this," said resident Dee Vieira, who spearheaded the effort. For his part, Artis says he'll continue to watch over, and raise awareness of, his nonhuman neighbors.

Looming foreclosure wave will derail recession recovery in California - (www.centralvalleybusinesstimes.com) Hold the thought that California might be part of the nation’s recovery from the Great Recession, says the Center for Responsible Lending. It says a tsunami of new foreclosures looms over California, ready to swamp any “green shoots” of an economic recovery. “Indeed, with over one million mortgage foreclosures looming, continuing record levels of unemployment and a worsening state budget that will bring more reductions in state and local services, California is not yet out of the woods,” it says. CRL points to record levels of unemployment, record levels of mortgage delinquencies, and precipitous declines in housing values as precursors to a further deepening of the state’s economy. It says that “defective mortgage products” have left many California homeowners in mortgages that exceed the value of their homes – “under water.” “For California, Deutsche Bank projects that as of Q1 2009, 54.3 percent California homeowners were underwater on their mortgages, and that within two years, 67.9 percent will be under water. Projections for areas like Modesto and Stockton are more extreme with 2011 estimates at nearly 90 percent,” the report says. The much-vaunted loan modification programs touted by the government are more difficult to obtain and less likely to succeed when properties are under water, the report says. “California is also home to the largest share of very risky loans called Payment Option Arms, which the data show are not faring well. Many of those types of loans, made primarily in 2004-2007, will have their payments reset in the next few years, drastically raising mortgage payments for borrowers and leading to a new wave of foreclosures,” the report says. The state is in a “spiral of bad news,” CRL says, that has no upside. “Unemployment-driven defaults are putting further downward pressure on the housing prices and preventing a more robust economic resurgence,” it says. The Center for Responsible Lending says waiting for Washington’s cavalry to ride in over the horizon is waiting for disaster. “If we are to get the economy on solid footing again, California must adequately address the mortgage crisis by preventing avoidable foreclosures and stabilizing the housing market for the long-term,” it says.

Santa Cruz borrowers may not benefit from Fannie Mae's Deed for Lease - (www.santacruzsentinel.com) The housing bubble that pushed prices above $700,000 in Santa Cruz County appears to preclude most local borrowers from taking advantage of a new program designed to help borrowers on the verge of foreclosure stay in their homes. Fannie Mae, the nation's largest mortgage-holder, announced the "Deed for Lease" program Thursday for borrowers who do not qualify for a loan modification. Essentially, the home-owners would become renters, transfer-ring their property to the lender by complet-ing a deed in lieu of foreclosure, and then leasing back the house at a market rate. The lease can be up to 12 months, with the possibility of renewal or month-to-month extensions. If the home is sold, the buyer picks up the lease. Jay Ryan, vice president of Fannie Mae, said the new program would help eliminate some of the uncertainty of foreclosure and keep families in their homes at least temporarily. It also would eliminate the cost of moving and renting storage spaces, additional expenses for those evicted after foreclosure and prevent more homes from going vacant and unkempt. Dean Baker, analyst with the Center for Economic and Policy Research, has been advocating such a law. In Santa Cruz County, 30 to 40 borrowers a week are getting notices of default for failure to pay -- 1,764 so far this year, according to the Santa Cruz Record. Baker's point is that the cost to own is far higher than the cost to rent, if the homeowner bought near the peak of the market, and homeowners would be better off renting. His example: A median-priced home bought for $747,500 in San Jose costs $4,000 or more a month compared to $1,660 a month for rent. Figures for Santa Cruz County are comparable. The median price for a single-family home topped $700,000 for a three-year stretch starting in 2005, and median rent in the last quarter was the most expensive rent in the state at $1,569 a month. However, the Fannie Mae program is not open to homeowners with second mortgages. According to Seb Frey, a real estate agent with Thunderbird Real Estate in Capitola specializing in bank-owned properties, most heavily indebted property owners in the county do in fact have second loans. Here's why: When the median price shot up, many buyers resorted to piggyback loans, consisting of an 80 percent first mortgage and a 20 percent second mortgage, to get their foot in the door.

Congress dumps another $24 billion into same perverse incentives - (www.northstarnational.com) The Associated Press described it glowingly as “rare bipartisan agreement over the seriousness of the jobless situation.” But there is nothing rare about what Congress did yesterday. When unemployment is high, Washington spends. You probably know that there is supposedly a 13-week limit on unemployment benefits. You may or may not know that the limit is largely meaningless, because Congress extends it any time Congress wants to, regardless of which party is in control. And as we saw from yesterday’s 403-12 vote in the House, it doesn’t matter which party runs the show anyway. Few members of Congress are willing to oppose an extension of unemployment benefits when unemployment is, for all intents and purposes, 10 freaking percent. But yesterday’s vote is a quintessential example of how Congress and the Obama Administration are doing nothing to make the situation better, and a lot to make it worse. Yesterday’s $24 billion spendfest does two things: A) It extends unemployment benefits another 13 weeks. The price tag for that is $2.4 billion – chump change by Washington standards, which is of course the kind of thinking that leads us to deficits north of $1 trillion. And they’re already declaring that they’re going to do it again in another 13 weeks. B) It extends the $8,000 homebuyer tax credit, which the National Association of Realtors estimates has resulted in 350,000 people buying home who would not otherwise have done so. That one costs $21 billion. So what could be wrong with this? Jobless people getting $300 a week to buy groceries? That glut of homes finally starting to sell? This is what we want, right? No. First of all, with respect to unemployment, the solution for unemployment is that people find work – whether that means they get hired by someone else or they create their own entrepreneurial opportunities. In either case, the ability of the business sector to spend cash on products and services is crucial to people’s ability to do this. Guess how Congress “paid for” the extension of these two generous offerings. They did it by “delaying” a tax break for multinational companies that pay foreign taxes. Who could object to that? Multinational companies have a lot of nerve expecting a tax break when people are out of work, right? Wrong. The reason they’re supposed to get the tax break in the first place is that they’re essentially being double-taxed on their income. It’s not so much a tax break as it is a correction of an unfair glitch in the system. The result of that correction would be to free up capital these companies can invest in whatever allows them to grow the businesses, which in many cases would include either hiring new people, bringing back people who were laid off or contracting for services offered by independent contractors.

Senator Proposes Legislation to Break Up Large Firms (but not Fannie Mae?) - (www.bloomberg.com) U.S. Senator Bernie Sanders unveiled legislation requiring Treasury Secretary Timothy Geithner to name banks whose collapse may shake the economy and break up the firms in a year, fueling efforts to end taxpayers bailouts. “If an institution is too big to fail, it is too big to exist,” said Sanders, a Vermont independent. “We should break them up so they are no longer in a position to bring down the entire economy.” The legislation would give Geithner 90 days to list the commercial and investment banks, hedge funds and insurance companies deemed “too big to fail.” Those firms would be broken up within a year, he said. Representative Paul Kanjorski, a Pennsylvania Democrat, is considering a measure in the House that would break up large financial firms. Lawmakers seeking to end taxpayer bailouts are considering measures aimed at limiting the size of companies that pose a risk to the financial system. Congress last year set up the $700 billion Troubled Asset Relief Program to shore up Citigroup Inc., Bank of America Corp. and other firms. “We should end the concentration of ownership that has resulted in just four huge financial institutions holding half the mortgages in America, controlling two-thirds of the credit cards, and amassing 40 percent of all deposits,” Sanders said, citing Bank of America, Citigroup, JPMorgan Chase & Co. and Wells Fargo & Co. Kanjorski, chairman of a House Financial Services Committee panel on capital markets, this week said he was preparing a measure giving the government power to break apart large firms.

Congress Rescued The Very Rich, Left The Bottom To Fend For Itself - (www.huffingtonpost.com) Video link provided: Elizabeth Warren, the chair of the Congressional Oversight Panel charged with monitoring the bank bailout, was on Morning Joe Friday morning to dig in to the newly released unemployment report. The numbers are bleak -- unemployment has surpassed 10 percent for the first time since 1983 -- and Warren is not surprised. "Let's face it," Warren said, "This is sort of how we went about the rescue -- we rescued at the top and we left the bottom to kind of fend for itself -- and that's showing up in the unemployment numbers." Warren went on to explain that the report is really about the guarantees the Government made to protect banks' assets while leaving the public out to dry. "Look, it saved the top of the system," Warren acknowledged. "It helped stabilize it, but not so much for families who are hard hit down on the ground, the real economy." There's always the question, Warren explains, about how you save the top -- in this case, the public pays for the banks' guarantees and the top executives benefit. "We said, in effect, at the top, there's really not any pain in return for taxpayer support. Not so much so when it comes to folks at the bottom. We said wait a year, we'll get there, we'll do what we can." Morning Joe host Joe Scarborough suggested that it was the old "socialize the profits, privatize the gains" scenario, but Warren took it one step further. "The way I think of it is: they say something like 'Give me your money, investors and I'm going to Las Vegas and put it all on red 22. And if red 22 comes in -- woo! we are RICH. If red 22 doesn't come in, don't worry because the tax payers will pay you back the money you invested."

OTHER STORIES:

Greatest real estate turnaround ever - (money.cnn.com) New York City's Charlotte Street in was once the epicenter of urban blight. No longer. Now single-family homes line the strip and boats sit in driveways. More

Then and now: 'Worst slum in America' - (money.cnn.com)

California's best years have passed, voters say - (www.latimes.com)

This Just In... More Borrowers Behind in San Diego - (www.voiceofsandiego.org)

Hawaii real estate continues decline - (www.westhawaiitoday.com)

Gold continues its record run - (money.cnn.com)

Dollar weakens broadly - (money.cnn.com)

GE, Comcast agree on NBC Universal's worth - (money.cnn.com)

A scandal rocks the polo set - (money.cnn.com)

Even the Rich Are Treating Their Houses Like Piggy Banks - (www.online.wsj.com)

Default notices rising in upper echelon ZIPs - (www.sfgate.com)

The 237 millionaires in Congress: Do they vote in YOUR best interest? - (www.politico.com)

Broader Measure of U.S. Unemployment Stands at 17.5% - (www.nytimes.com)

Bought for $50,000 - selling for $500,000 - (money.cnn.com)

Deals could buoy Wall Street - (money.cnn.com)

Kraft makes hostile bid for Cadbury - (money.cnn.com)

Reinflating the housing bubble makes no sense - (www.except for banksters) - (www.twincities.com)

Why the new $6,500 homebuyer tax credit is wrong - (www.news.yahoo.com)

Ticking Prime Bomb: Fannie Mae - (www.seekingalpha.com)

Fannies Draws From Emergency Treasury Fund Reach $60 Billion - (www.bloomberg.com)

Richmond Fed: GSEs Encourage Mortgage Defaults - (www.seekingalpha.com)

Radical fixes for 'too big to fail' gain support - (www.marketwatch.com)

Foreclosures crisis caused by investors. And lenders. And politicians. And buyers. - (www.tampabay.com)

Friday November 27 Housing and Economic stories

2009-11-26T18:02:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Even the men who created the internet are beginning to fear its power to destroy freedom - (www.dailymail.co.uk) Fast-forward 40 years. It is November 2049 and privacy is a distant memory. Every telephone call you make, every text you send on your mobile phone, every email and videocall, every financial transaction is recorded, stored, analysed and can potentially be used against you. Each waking hour you are also deluged with marketing calls and sales pitches - which pop up on your mobile, your hand-held computer and even in your car. You walk into a shop and not only do the salesmen know who you are, they know what you want - before you even open your mouth. This is a world in which you are constantly worried about who is reading your emails and analysing your phone calls. Come election time, you are bombarded with video texts of the party leaders addressing your concerns. The powers that be know how much tax you pay, what you spend your money on, how many children you have and who your friends are. It is a Britain, indeed a world, where the private individual has ceased to exist, and one in which an unholy alliance of the state and Mammon rules our lives with powers that would have made Stalin sick with envy. This dystopian nightmare is a distinct possibility thanks to what is probably the most significant invention of the 20th century - the internet. And although this nightmare is set in the future, much of it is starting to happen. The net, which turned 40 years old last week, is often touted as the ultimate tool of freedom and knowledge. The computer from which 40 years ago the first message was sent over the internet, between the University of California Los Angeles (UCLA) and Stanford University But in another 40 years' time, will we still be celebrating this extraordinary electronic marvel - or rueing the creation of a monster? That is the troubling question being asked not just by technological luddites, but by the founders of the internet itself. Although most people became aware of the net only in the early Nineties, the global 'network of networks' has a history stretching back to the earliest days of computing. The first network connection was made on October 29, 1969, when an undergraduate called Charley Kline attempted to make a computer in Los Angeles communicate with another computer at Stanford up the coast. The first word communicated on the net was 'Lo' - Kline was attempting to type the word 'Login' when the system crashed. They got it working again and, for nearly three decades, what became known as the 'internet' (the actual term was first used in 1974) remained mostly a tool of academia and the military, gradually spreading its tentacles across the globe. But then came the invention of the world wide web - the means by which anyone, anywhere could easily access this brave new online world. This was the creation of British scientist Tim Berners-Lee and Robert Cailliau, his Belgian colleague at the CERN nuclear research institute in 1989. Thanks to them, we are now in an age when it is almost impossible to imagine life without the net. With every passing year, its power and importance increases. And herein lie the doubts of its founders. For while the net has been championed as the ultimate expression of 'people power', there is a more sinister possibility. Its dominance in our lives has led its architects to fear it could be used as a weapon of intrusion, suppression and exploitation. Already, anti-democratic regimes are increasingly subverting the openness of the net and using it as a weapon against their enemies. Take China, which went online in 1993 and now has the greatest number of internet users of any nation - about a third of a billion.

Pentagon: Most of US Youth Too Fat, Dumb, Sickly or Drugged Out to Serve – (www.usatoday.com) More than a third of American youth of military age are unfit for service, mainly because they are too fat or sickly, the Army Times reports, quoting the latest Pentagon figures. Most of the rest are too dumb or have used too many drugs to qualify, the study shows. The report says 35% of the 31 million Americans aged 17 to 24 are unqualified because of physical and medical issues. "The major component of this is obesity," Curt Gilroy, the Pentagon's director of accessions, tells the Times. "We have an obesity crisis in the country. There's no question about it." He also said young people, by and large, can't do push-ups. "And they can't do pull-ups," Gilroy says. " And they can't run."

The Times says the Pentagon gets its data from the Centers for Disease Control, which has found that the percentage of youth 18 to 34 who are considered obese has jumped from 6% in 1987 to 23% now. Here's the Pentagon's breakdown of the ineligible population, according to the Times:

· Medical/physical problems, 35%.

· Illegal drug use, 18%.

· Mental Category V (the lowest 10% of the population), 9%.

· Too many dependents under age 18, 6%.

· Criminal record, 5%.

Message from the Midway Gyre (The Great Pacific Garbage Patch) - (www.chrisjoran.com) These photographs of albatross chicks were made just a few weeks ago on Midway Atoll, a tiny stretch of sand and coral near the middle of the North Pacific. The nesting babies are fed bellies-full of plastic by their parents, who soar out over the vast polluted ocean collecting what looks to them like food to bring back to their young. On this diet of human trash, every year tens of thousands of albatross chicks die on Midway from starvation, toxicity, and choking. To document this phenomenon as faithfully as possible, not a single piece of plastic in any of these photographs was moved, placed, manipulated, arranged, or altered in any way. These images depict the actual stomach contents of baby birds in one of the world's most remote marine sanctuaries, more than 2000 miles from the nearest continent.

Lobbyists Defeat America: Homedebtor Tax Credit Extension - (www.housingwire.com) The Senate voted today to pass an extension of the first-time homebuyer tax credit until April 2010. In all, 98 Senators voted in favor of H.R. 3548, with zero votes against (two Senators did not vote). H.R. 3548 is a bill is primarily purposed with extending unemployment benefits. The bill is currently amended to include the extension of an $8,000 tax credit for those buying their first homes as well as an $6,500 tax credit for some borrowers buying a home for a second time. The move comes as no surprise, as HousingWire reported last week. The bill now requires President Obama’s signature into law. Business Roundtable, an association of CEOs of leading U.S. companies, with nearly $6trn in annual revenues and more than 12m employees, commended the vote in a statement. “This critical program has already enabled hundreds of thousands of Americans to become first-time homebuyers,” they report. “Encouraging additional home purchases will create a cascade effect, not only boosting the housing sector, but also creating jobs and hastening broad recovery of the U.S. economy – more than 20 percent of which is tied to residential real estate and housing-related industries.” Passed as an amendment, the tax credit can still be removed from the final wording of the bill, if placed under further review. However given recent lobbying efforts in the industry and a feeling of presidential support, this remains unlikely.

L.A.-area agents holding open mansions - (www.latimes.com) For Florence Mattar, each open house has a routine. She drives around the neighborhood placing signs, brings in fresh flowers, stocks the refrigerator with bottled water and sets out a sign-in sheet.
Similar scenes play out across Southern California every weekend, with one expensive exception. The Tuscan-style house she is "sitting," to use the industry term, is listed at $21.9 million. And anyone is welcome to see it. All 9,691 square feet of it. Whether spurred by the down housing market, the opportunity to promote themselves or a determination to make a sale, a select group of area real estate agents has raised the bar on public open houses above $10 million -- to $12.9 million in Beverly Hills, Malibu and Brentwood Park, $18.9 million in Pacific Palisades and even higher in the "bird streets" area of the Hollywood Hills, where Mattar's reclaimed stone, brick and wood listing sits serenely at the end of a cypress-lined driveway. "You get more people because they are curious," the Coldwell Banker agent said. "They've never stepped in a house that price." Through bubbles and busts, the open house has remained a key tool for buyers and sellers, at least for properties with price tags that are less than gold-plated. Nearly half of recent buyers used open houses for information during their home search, according to the National Assn. of Realtors, and 15% found a home through an open house, a number that has held fairly steady since 2001.

Top Bailout Recipients Spent $71 Million Lobbying Since Bailout - (www.huffingtonpost.com) Twenty-five top recipients of government bailout funds spent more than $71 million on lobbying in the year since they were rescued, an extensive review of federal lobbying records by the Huffington Post reveals. A year after taxpayers forked over $700 billion to help rescue the biggest names in banking, insurance and the automotive industry, those same institutions are using portions of the cash to influence legislation with a direct impact on taxpayers. In all, during the last quarter of 2008 and the first three quarters of 2009, those 25 institutions spent $71,199,000 on lobbying. The list includes General Motors ($11.95 million), Citigroup ($8.915 million), Bank of America ($6.427 million), J.P. Morgan Chase ($7.735 million), Goldman Sachs ($4.38 million) and AIG ($3.47 million). Some of these companies have paid federal money back. Not all of the top bailout recipients, meanwhile, spent money on lobbying. The amount that was spent, however, is nearly identical to the lobbying expenditures these same companies made during the year preceding the federal bailout. According to the Center for Responsive Politics, bailout recipients paid approximately $76.7 million for the services of lobbyists in 2008. All of which has sparked angry pushback from good government groups and lawmakers on the Hill, who ask whether the expenditures are appropriate after these institutions took the nation's economy to the brink of collapse.

OTHER STORIES:

Former UK ambassador: CIA sent people to be ‘raped with broken bottles’ - (www.rawstory.com)
Huge Bonuses at Investment Banks Set to Rise Further! - (www.marketwatch.com)
Four Reasons Hyperinflation Hasn't Hit - Yet - (www.minyanville.com)
You don’t eat the hamburger at McDonalds because it’s a dollar: It’s a dollar to get you to eat it. - (www.dissidentvoice.org)
Get Serious About Selling Your House: Lower The Price - (www.nytimes.com)

Personal bankruptcies climb 9% in October - (money.cnn.com)

Fannie Mae offers borrowers rental option instead of foreclosure - (news.yahoo.com)

Fannie Mae seeks $15 bln to flush down toilet after 3Q loss - (finance.yahoo.com)

Ron Paul explains CORPORATISM vs Captialism - (www.dailybail.com)

The 4 Things Needed To Fix Banking In The USA - (rocktrueblood.blogspot.com)

Roubini Says Bank Mergers May Create Bigger Monster - (www.bloomberg.com)

Legislation coming to break up big banks? - (blogs.reuters.com)

Homedebtor Subsidy Should Expire - (www.examiner.com)

Senate bill to make housing more expensive, using your taxes against you - (www.washingtonpost.com)

Bankers Get Flu Shots First, Because They Own The Government - (www.cnbc.com)

Reglar Americans now competing with Mexicans for day-labor jobs - (www.lasvegassun.com)

GMAC posts third-quarter loss on its mortgage loans - (www.cityam.com)

Commercial property market to hit bottom in 2010 - (www.latimes.com)

How the Colt Peacemaker outshone gold - (www.marketwatch.com)

Making Health Care Better - (www.nytimes.com)

Thursday November 26 Housing and Economic stories

2009-11-25T17:46:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Freddie to Request Further Handouts - (online.wsj.com) Freddie Mac said it didn't need any additional federal aid for the second straight quarter as it reported a loss of $6.3 billion for the third quarter on Friday. But the company said it expected to ask for more handouts from the U.S. Treasury in the future as rising unemployment and falling home prices continue to drive higher credit-related losses for both Freddie and its larger rival, Fannie Mae. Together with Fannie Mae, which said on Thursday it would need a $15 billion capital injection, the tab for the U.S. government's bailout of both mortgage-finance giants has climbed over the past year to $112 billion, making it one of the costliest government interventions ever to stabilize housing and financial markets. The U.S. Treasury has agreed to provide as much as $200 billion in capital to each company by buying preferred stock that pays 10% dividends. Regulators took control of Fannie and Freddie through a legal process known as conservatorship 14 months ago. Both companies have posted losses over the past year as they build up reserves to handle rising volumes of bad loans. Freddie posted credit-related losses of $7.6 billion, compared to $22 billion for Fannie. The third-quarter loss narrowed from a net loss of $25.3 billion in the same period last year. Freddie's losses came during a quarter in which it filled three top vacancies, all with external hires. The company named new chief executive, financial, and operating officers. "There's general consensus among us in the industry that there is need for more" housing aid," said Charles "Ed" Haldeman Jr., Freddie's chief executive, during an interview last month. "We're not home free yet." The biggest losses for both companies have come from riskier subprime and Alt-A mortgages that they bought and guaranteed at the height of the housing boom in 2006 and 2007. Alt-A loans, for example, account for 9% of all loans guaranteed by Fannie, but represented 39% of all third-quarter credit losses.

New round of bank closures to cost FDIC $1.5 billion - (www.marketwatch.com) A California-based bank that focused on the Chinese-American market was the largest of five failures on Friday that cost U.S. taxpayers more than $1.5 billion. United Commercial Bank of San Francisco, whose parent company was UCBH Holdings Inc., was shut down by federal banking regulators late Friday, along with four other banks. The shutdown of the five banks brings the number of bank failures for 2009 to 120. The 63 U.S. branches of United Commercial were set to reopen Saturday under the ownership of Pasadena, Calif.-based East West Bancorp Inc. United Commercial, which specialized in serving the Chinese community throughout the U.S. and American companies doing business in China, had assets of $11.2 billion and deposits of $7.5 billion as of Oct. 23. The seizure of the bank by regulators comes after it had already received $299 million in federal financial aid last year. Its closure will cost the insurance deposit fund $1.4 billion, said the Federal Deposit Insurance Corp. The company had a banking license in China, a branch in Hong Kong and a subsidiary in Shanghai, and those will be assumed by East West Bancorp. The Hong Kong Monetary Authority said deposits at UCB Hong Kong will be fully covered, according a report on Saturday by the Xinhua news agency. East West said in a statement that the United Commercial transaction will create the largest bank in the U.S. focusing on the Asian American community, and the second-largest independent bank based in California. East West operates 137 branches throughout the U.S. and China. "This is a transformational event for both institutions and represents an exciting growth opportunity for East West," East West Chairman and Chief Executive Dominic Ng said in a statement.

Britain and U.S. Clash at G-20 on Tax to Insure Against Crises - (www.nytimes.com) The United States and Britain voiced disagreement Saturday over a proposal that would impose a new tax on financial transactions to support future bank rescues. Prime Minister Gordon Brown of Britain, leading a meeting here of finance ministers from the Group of 20 rich and developing countries, said such a tax on banks should be considered as a way to take the burden off taxpayers during periods of financial crisis. His comments pre-empted the International Monetary Fund, which is set to present a range of options next spring to ensure financial stability. But the proposal was met with little enthusiasm by the United States Treasury secretary, Timothy F. Geithner, who told Sky News in an interview that he would not support a tax on everyday financial transactions. Later he seemed to soften his position, saying it would be up to the I.M.F. to present a range of possible measures. “We want to make sure that we don’t put the taxpayer in a position of having to absorb the costs of a crisis in the future,” Mr. Geithner said after the Sky News interview. “I’m sure the I.M.F. will come up with some proposals.” The Russian finance minister, Alexei Kudrin, also said he was skeptical of such a tax. Similar fees had been proposed by Germany and France but rejected by Mr. Brown’s government in the past as too difficult to manage. But Mr. Brown is now suggesting “an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial transaction levy.” Supporters of a tax had argued that it would reduce the volatility of markets; opponents said it would be too complex to enact across borders and could create huge imbalances. Mr. Brown said any such tax would have to be applied universally. “It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,” Mr. Brown said at the summit. “There must be a better economic and social contract between financial institutions and the public based on trust and a just distribution of risks and rewards.”

Small Businesses Hunker Down to Survive - (www.nytimes.com) New data show that small businesses have battened down the hatches in response to the recession. From the beginning of this year through Sept. 30, sales at small businesses (privately held companies with revenue of $10 million or less) have fallen 3.75 percent, according to figures from Sageworks Inc. At the same time, net profit at these businesses has risen to 6.5 percent. How have they accomplished this? By cutting their costs. Overhead, payroll and advertising as a percentage of sales have all declined. The numbers show that small companies have “reacted strongly and appropriately” to survive the downturn, said Drew B. White, the chief financial officer of Sageworks. When you are a small business and your survival is at stake, it is hard to take financial and strategic risks, which generally require extra spending. “I am not looking to privately held small business to lead us out of this recession,” Mr. White said.

U.S. Unemployment Rate Hits 10.2%, Highest in 26 Years - (www.nytimes.com) As the unemployment rate surged to 10.2 percent in October, reaching double digits for the first time in 26 years, it suddenly seemed possible that the nation might yet confront the worst joblessness since the Great Depression. In the six decades since the government began compiling such data, the highest level of unemployment came at the end of 1982, when it hit 10.8 percent. Despite the widespread assumption that the recession has already ended, and even as the economy has resumed growing, the government’s latest snapshot of the labor market released Friday testified to the uncomfortable truth that expansion had yet to translate into jobs. “The guy on the street is going to ask, ‘What recovery?’ ” said Stuart Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “The job market is still in reverse.” The sharp rise in unemployment — which climbed from 9.8 percent in September, as the nation lost another 190,000 net jobs — intensified pressure on the Obama administration to show results from the $787 billion package of spending measures unleashed early this year to spur the economy. On Friday, President Obama signed into law a bill that that extends both unemployment benefits and temporary tax credits for home buyers, adding that he was on the lookout for other ways to generate job growth. Hilda Solis, the labor secretary, noted a slowdown in the pace of deterioration in arguing that better days were already on the way, while dismissing suggestions that the stimulus had proved disappointing. “I don’t think it’s a matter of things going wrong,” she said in a conference call with reporters. “We’re making a tremendous turning point here.” But the stark reality of double-digit unemployment seemed certain to inject fresh tension into the economic policy debate, offering Republicans a prop as they assert that the administration’s spending package has failed to create jobs. Labor unions and some Democrats have called for more spending to create jobs — a course that runs headlong into worries about swelling federal budget deficits.

Investigation Is Sending Shock Waves Through Silicon Valley - (online.wsj.com) A widening insider-trading probe is causing new tremors in Silicon Valley, as prosecutors say a network of employees at technology companies acted as paid informants for managers of a San Francisco hedge fund implicated in the case. A criminal complaint filed Thursday by the Manhattan U.S. Attorney's office says employees at six unnamed technology companies provided information to Richard Choo-Beng Lee, co-founder of the hedge fund Spherix Capital LLC. Employees at four unnamed companies provided information to Ali Far, Mr. Lee's partner at Spherix, according to a separate complaint. It isn't clear whether some or all of those companies are ...

OTHER STORIES:

Inside the Global Gold Frenzy - (www.nytimes.com)

Greenlight Capital founder calls for CDS ban - (www.ft.com)

SEC sees evolution in insider trading - (www.reuters.com)

Hedge-Fund Giant Surfaces in Trading Probe - (online.wsj.com)

Why gold is shining brighter - (www.latimes.com)

China brands US ‘protectionist’ - (www.ft.com)

Zhou Seeks to Deflect European, Japanese Calls For Yuan Gain - (www.bloomberg.com)

Britain urges steps to insure financial system - (news.yahoo.com/s/ap)

Brown Calls For Global Transaction Tax - (online.wsj.com)

Enthusiasm for I.P.O.'s Starts to Fade Across Asia - (www.nytimes.com)

Fed losing support on bank oversight - (www.washingtonpost.com)

U.S. Consumer Credit Fell in September, Eighth Drop - (www.bloomberg.com)

Federal Reserve Says Judge Erred in Requiring Bank Disclosure - (www.bloomberg.com)

House Passes $1 Trillion U.S. Health-Care Overhaul Legislation - (www.bloomberg.com)

UCBH Holdings’ Bank Is Seized, 120th U.S. Lender Shut This Year - (www.bloomberg.com)

Freddie Mac posts $5 billion loss - (www.reuters.com)

Fannie Mae’s Sale of Tax Credits Is A Bad Deal, Treasury Says - (www.bloomberg.com)

Big California bank fails, has China branches - (www.reuters.com)

Car Buyers Come Back, but Not in Droves - (www.nytimes.com)

Wednesday November 25 Housing and Economic stories

2009-11-24T21:34:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

FHA delays the release of disputed audit of its finances - (www.washingtonpost.com) The Federal Housing Administration abruptly delayed the release of a long-awaited independent audit of the financial soundness of the agency, citing potential problems with the accuracy of some of the study's economic models. The audit, compiled by Integrated Financial Engineering of Rockville, was scheduled to be released Wednesday, and the agency's top officials planned to brief reporters on its results. But on Tuesday evening, the agency postponed the event, saying the report had yet to be finalized. In a separate statement Wednesday, FHA Commissioner David H. Stevens said the delay was related to economic scenario tests that the agency requested "above and beyond" what was originally to be included in the audit so that the FHA could "better understand a broader range of risk scenarios." "Based on these results, we raised questions about the accuracy of IFE's modeling, and IFE therefore advised us that we should not treat the report as final," Stevens said. "IFE is now running additional tests to ensure that the final report is accurate." FHA's financial health has been a topic of growing concern as the agency's loan volume exploded and its default rate climbed. Congress has been worried about the prospect of a taxpayer bailout. FHA officials have said the agency will not need one. But Reps. Darrell Issa (R-Calif.) and Spencer Bachus (R-Ala.) asked Housing and Urban Development Secretary Shaun Donovan on Monday to provide data backing up that claim. In September, Stevens said the audit would show that the agency's cash reserves had dropped below federally mandated levels. As of Oct. 1, the reserve fund no longer had enough cash to cover at least 2 percent of the agency's outstanding loans, as required by law, he said.

Municipal bond case settled by J.P. Morgan - (www.washingtonpost.com) J.P. Morgan Chase agreed to a $722 million settlement with federal regulators over accusations that the bank and two former executives made illegal payments to win municipal bond business from Jefferson County, Ala. The Securities and Exchange Commission said Wednesday that J.P. Morgan and former managing directors Charles E. LeCroy and Douglas W. MacFaddin paid $8 million to friends of Jefferson County commissioners who voted to hire the bank to carry out municipal bond offerings and other transactions to finance a new sewer system. The friends worked for local financial firms, but did not work on the deal. The SEC said the bank passed on the costs of these payments to Jefferson County, but did not disclose the payments or conflicts of interest. "The transactions were complex but the scheme was simple. Senior J.P. Morgan bankers made unlawful payments to win business and earn fees," Robert Khuzami, the SEC's enforcement director, said in a statement. The financial deals arranged by J.P. Morgan ultimately resulted in millions of dollars in losses and pushed the county to the brink of bankruptcy, causing residents to pay much higher rates for water and sewer services. The SEC charges are a blot on J.P. Morgan, which has had a cleaner record than other financial companies because it avoided many dangerous bets and swooped in to buy two banks, Bear Stearns and Washington Mutual, as they were collapsing. Last year, the SEC filed civil charges against Birmingham, Ala., Mayor Larry Langford, a former president of the Jefferson County Commission, on allegations that he accepted payments in connection with the matter. He was also found guilty of bribery, fraud and other charges in a criminal case and awaits sentencing.

Default Rate Rises to Most Since Great Depression, Moody’s Says - (www.bloomberg.com) The global speculative-grade default rate rose to 12.4 percent in October, the highest proportion of defaults since the Great Depression, according to Moody’s Investors Service. The annual rate at which companies worldwide fail to meet their commitments may peak at 12.5 percent next month, Moody’s said in a report today. The New York-based firm revised its September figure to 12.3 percent, also higher than the 12.2 percent rate reached in 1991. The total number of defaults declined to eight in October, the lowest monthly count this year and down from 19 in September, Moody’s said. “The global default rate is now likely near its cyclical peak, as indicated by a rapidly slowing pace of defaults in recent months,” said Kenneth Emery, the director of corporate default research at Moody’s. The firm’s model predicts eight to 10 defaults per month on average for the coming year, down from the rate of 20 per month for the past year. While stocks have rallied, with the Morgan Stanley World Index gaining 21 percent this year, the economy remains weak and credit is scarce. The Federal Reserve yesterday pledged to keep interest rates “exceptionally low” for an “extended period,” and the Bank of England said today it’s extending its bond- purchase plan by a further 25 billion pounds ($41 billion), the third increase since March. U.S. banks tightened standards on loans in the second quarter and expect to restrict lending until at least the second half of 2010, the Fed’s quarterly Senior Loan Officer survey showed in September.

Dubai Shares Fall Most in World on Moody’s Cuts, Oil Decline - (www.bloomberg.com) - Dubai shares dropped for a third time this week, led byEmaar Properties PJSC and Dubai Islamic Bank PJSC, after Moody’s Investors Service downgraded five of the emirate’s state-run companies and as oil retreated. Emaar, the United Arab Emirates’ biggest developer, fell 3.5 percent, erasing much of yesterday’s gain. Dubai Islamic Bank declined for the third time this week. The DFM General Index has fluctuated this week, alternating between losses and gains of as much as 5.5 percent. The measure lost 1.9 percent to 2,097.63, bringing the drop for the week to 4.6 percent. “There seems to be some nervousness around the Moody’s downgrade on some Dubai Inc. names,” Mark Friedenthal, fund manager at Abu Dhabi Commercial Bank, wrote in an e-mail. “It was anticipated but there is always some reaction, especially from retail investors, to this kind of headline.” DP World Ltd. and Dubai Electricity & Water Authority were among the companies downgraded at Moody’s during yesterday’s trading day. The rating company cited tighter government criteria for supporting state-controlled entities. Dubai, the second-biggest of seven states that make up the U.A.E., and its government-owned companies borrowed $80 billion to finance its transformation into a financial and tourist hub before credit markets froze. Burj Dubai: The emirate borrowed $10 billion by selling bonds to the U.A.E. central bank in February and may raise another $10 billion in November, Mohammed Alabbar, the chairman of Emaar who headed the government committee evaluating the impact of the credit crisis on Dubai, said last month. Crude oil dropped for the first time this week, declining as much as 1 percent to $79.58 a barrel. The six states in the Gulf Cooperation Council supply about 20 percent of the world’s oil.

Fannie Mae to rent out homes instead foreclosing - (www.google.com/hostednews/ap) Thousands of borrowers on the verge of foreclosure will soon have the option of renting their homes from Fannie Mae, under a policy announced Thursday. The government-controlled company, through its new "Deed for Lease" program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that. The program will "eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities," Jay Ryan, a Fannie Mae vice president, said in a statement. But the effort is likely to affect a relatively small number of homeowners. In the first half of the year, Fannie Mae took back about 1,200 properties through this process, known as a deed-in-lieu of foreclosure. That pales in comparison to the 57,000 foreclosed properties the company repossessed in the period. While neither option is particularly attractive for the homeowner, a deed-in-lieu does less harm to the borrower's credit record. The rental program is designed to help homeowners who don't qualify for a loan modification under the Obama administration's plan, but still want to remain in their homes. Fannie Mae is not planning to market the homes for sale during the one-year rental period. Fannie Mae has hired an outside company, which officials declined to identify, to manage the properties. To qualify, homeowners have to live in the home as their primary residence and prove that they can afford the market rent, which would be determined by the management company. The rent can't be more than 31 percent of their pretax income. Fannie Mae's sibling company, Freddie Mac, launched a similar effort in March. That policy, however, requires the foreclosure to be complete and only allows month-to-month leases. A Freddie Mac spokesman declined to say how many borrowers have participated.

Boomers in Denial About Retirement Savings - (www.cnbc.com) No doubt last year’s financial crisis dealt a body blow to many investors, but many Boomers approaching retirement have yet to turn their reaction to last year’s events into action. Wells Fargo just released the results of its Retirement Fitness survey and looked hard at the investment habits of pre-retirees ages 50 to 59. What did they find? “There is a sense of denial among the pre-retirees,” said Lynne Ford, head of Wells Fargo Retail Retirement. Even after suffering significant losses last year, many remain overly optimistic about their investment returns and the ability of their savings to fund their expenses after they stop working. Only 23 percent of pre-retirees are saving more for their retirement than they were a year ago, the survey found. Most, some 57 percent, are saving the same amount, and 20 percent are saving less. Perhaps even more startling is the extent to which their savings are falling short of their goals. On average, these pre-retirees expected they would need $800,000 to fund their retirement. However, most had only saved about $300,000. Despite their inadequate savings, nearly two-thirds of the group lack any formal plans for retirement savings or spending strategies. Of the 35 percent of those who had a written plan for retirement, only slightly more than half — about 52% percent — say they had updated it in the past year during the market downturn.

Countrywide ex-CEO Mozilo must face SEC fraud case - (www.reuters.com) A federal judge rejected a request by Angelo Mozilo, the former chief executive of mortgage lender Countrywide Financial Corp, to dismiss a U.S. Securities and Exchange Commission lawsuit accusing him of securities fraud and insider trading. In a Tuesday court filing, U.S. District Judge John Walter in Los Angeles also rejected requests by David Sambol and Eric Sieracki, respectively Countrywide's former chief operating officer and former chief financial officer, to dismiss related SEC fraud charges. Countrywide had been the largest U.S. mortgage lender before liquidity dried up in summer of 2007, leading to its acquisition the following year by Bank of America Corp (BAC.N) for $2.5 billion. Mozilo's lawyer David Siegel did not immediately return a call for comment. Walter Brown, who represents Sambol, declined to comment. Nicolas Morgan, who represents Sieracki, also did not immediately return a call. The SEC sued the defendants in June, accusing them of misleading investors about the quality of Countrywide's loans, including tens of billions of dollars of risky subprime and adjustable-rate mortgages. "The specific allegations of the complaint relied on by the SEC describe in great detail the virtual abandonment of prudent underwriting guidelines and the resulting proliferation of poor quality loans, during the same period Countrywide was touting the superior quality of its underwriting guidelines and its loan portfolio," the judge wrote. "Moreover, given that Countrywide's core business, i.e., selling mortgages into the secondary market, admittedly depended upon the quality of its loan production, it is certainly not difficult for the court to conclude that the poor quality of Countrywide's underwriting practices and loan portfolio would be material to investors," he added. The insider trading charge concerned Mozilo's alleged exercise in 2006 and 2007 of more than 5.1 million stock options and sale of the resulting shares, leading to more than $139 million of profit.

OTHER STORIES:

Feds: 14 charged in insider trading case - (finance.yahoo.com)

Clash Looms on Banks - (online.wsj.com)

Trichet Says ECB to Phase Out Emergency Measures - (www.bloomberg.com)

Bank of England Raises Bond-Purchase Plan to 200 Billion Pounds - (www.bloomberg.com)

Trichet, King Signal Moves Toward Exit on Recovery - (www.bloomberg.com)

ECB Keeps Key Rate at Record Low of 1%, May Move Closer to Exit - (www.bloomberg.com)

Chinese Official Yao Warns of Threat From Inflation - (www.bloomberg.com)

U.S., EU Seek Trade Probe of China Raw-Material Curbs - (www.bloomberg.com)

Meirelles Says Investors May Create Brazil Bubble - (www.bloomberg.com)

Jobless Claims in U.S. Decrease More Than Forecast - (www.bloomberg.com)

U.S. Worker Productivity Jumps, Costs in Record Drop - (www.bloomberg.com)

Fed Signals Return to Growth Alone Won’t Warrant Rate Increase - (www.bloomberg.com)

Fed spells out stance on rates - (www.ft.com)

Fed Sees No Need to Raise Interest Rates Soon - (www.nytimes.com)

Big Bonuses Are Back for Many on Street - (online.wsj.com)

Cuomo Files Intel Antitrust Suit - (www.nytimes.com)

Valuing Bonds, Dollar Is Crazy in World Gone Mad: Mark Gilbert - (www.bloomberg.com)

Tuesday November 24 Housing and Economic stories

2009-11-23T17:32:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Clunker' data show pickup-for-pickup trades - (news.yahoo.com/s/ap) Billed as a way for the government to put more fuel-efficient vehicles on highways, the popular $3 billion Cash for Clunkers program mostly involved swaps of old Ford or Chevrolet pickups for new ones that got only marginally better gas mileage, according to an analysis of new federal data by The Associated Press. The single most common swap — which occurred more than 8,200 times — involved Ford F150 pickup owners who took advantage of a government rebate to trade their old trucks for new Ford F150s. They were 17 times more likely to buy a new F150 than, say, a Toyota Prius. The fuel economy for the new trucks ranged from 15 mpg to 17 mpg based on engine size and other factors, an improvement of just 1 mpg to 3 mpg over the clunkers. Owners of thousands more large, old Chevrolet and Dodge pickups bought new Silverado and Ram trucks, also with only barely improved mileage in the middle teens, according to AP's analysis of sales of $15.2 billion worth of vehicles at nearly 19,000 car dealerships in every state. Those deals helped the Ford F150 and Chevy Silverado — along with Ford's Escape midsize SUV — climb into the Top 10 most-popular vehicles purchased with the government rebates. The most common truck-for-truck and truck-for-SUV deals totaled at least $911 million. In scores of deals, the government reported spending a total of $562,500 in rebates for new cars and trucks that got worse or the same mileage as the trade-ins — in apparent violation of the program's requirements. The government said it is investigating those reports and said in some cases they were probably entered incorrectly by dealers or based on outdated fuel economy figures. The National Highway Traffic Safety Administration is still reviewing the reports, and any dealers that submitted invalid trade-ins will be directed to return the government rebate, spokesman Eric Bolton said. The new data, obtained by the AP under the Freedom of Information Act, include details of 677,081 clunker trade-ins processed by the government through Oct. 16. More than 95,000 of the new vehicles purchased under the program — or about 1 in 7 — got less than 20 mpg, according to the data.

BOE May Expand Bond Plan as Officials ‘Throw Money’ at Economy - (www.bloomberg.com) The Bank of England may increase its bond-purchase plan by 50 billion pounds ($83 billion) today as central bankers and politicians scramble to shore up Britain’s banking system and drag the economy out of recession. Governor Mervyn King’s nine-member Monetary Policy Committee will expand the asset-buying program to 225 billion pounds at 12 p.m. in London, the median of 48 forecasts in a Bloomberg News survey shows. That follows Prime Minister Gordon Brown’s pledge this week to spend almost 40 billion pounds in a second bailout of two the nation’s biggest banks. Any increase in the Bank of England’s emergency program would be the third since King unveiled the plan in March. Brown’s first bank bailout, the government’s fiscal stimulus measures and an injection of 175 billion pounds in newly printed central bank money have so far failed to end Britain’s longest recession on record. “They’ve got to throw money at it,” said Neil Mackinnon, an economist at VTB Capital Plc and a former U.K. Treasury official. “The fact of the matter is that the U.K. economy is lagging behind. As to whether quantitative easing is working, the jury is still out.” The central bank will keep its benchmark interest rate at a record low of 0.5 percent, according to all 60 economists in a Bloomberg survey. The European Central Bank, which also meets today, will maintain its main rate at 1 percent at 1:45 p.m. in Frankfurt, a separate survey showed. Vote Split: The Bank of England’s bond plan already split the rate panel once this year when King’s push to increase the plan to 200 billion pounds was defeated in August. While he argued that being too cautious was less of a risk than spending too much, Chief Economist Spencer Dale says that there is a danger of stoking asset prices too much. “It is a lot of money, but if it does restart the economy and gets it moving again then it’s worth it,” said George Buckley, an economist at Deutsche Bank AG in London. “It’s very difficult to say if quantitative easing is working, but it is doing something.”

This Loan Is Example Of What Went Wrong In America - (www.huffingtonpost.com) Last December, Virginia Naill learned that the monthly mortgage payment for her three-bedroom home on Ordinary Road in tiny Mineral, Va., would jump by hundreds of dollars. "I started crying," she said, "'Oh no, what did I do?'" In 2006, it turned out, she'd unwittingly gotten herself into an adjustable-rate mortgage with a two-year teaser rate. As a result, in December, the interest rate shot up from 7.5 percent to just over 10.1 percent, and the monthly payment on her $280,000 loan went from $1,800 to more than $2,300. She and her husband didn't know how they were going to pay it. Naill, 50, thought she'd refinanced into a fixed-rate mortgage. Back in 2006, that's what she'd told the broker she wanted. But she signed the documents that were put in front of her, and what she got was a case study in irresponsible lending -- a debt trap that even the broker has admitted was based on a fraudulent application. Naill works at a Wal-Mart distribution center. Her husband, Donald Naill, is a roofing contractor. "They knowed me and my husband were illiterate, that we had a hard time reading and understanding what we read," Naill told the Huffington Post. "We told 'em straight up they'd have to read it to us, and they said that they would." In a September deposition for a lawsuit filed on behalf of Donald Naill, the Naill's broker said she knew the loan application contained bogus information -- an inflated income statement that qualified them for a loan virtually guaranteed to blow up in Virginia Naill's face when the interest rate adjusted. "This loan is an example of what went wrong in America," said Tom Domonoske, a lawyer on contract for the Virginia Legal Aid Justice Center who is representing Donald Naill in the lawsuit against the broker, Lincoln Mortgage. Through the lawsuit, Domonoske obtained documents showing how the loan was put together. The Naills first refinanced their mortgage in 2005, when Lincoln Mortgage, which had been recommended by a friend, cobbled together an unusual deal. The Naills owned another house in Mineral (a town of under 500 people about an hour from Richmond) where one of their grown sons lived and paid rent. To inflate the size of their new loan, said Domonoske, the broker had the Naills borrow to pay off the $138,000 mortgage on their son's house and pile the debt onto their own house, on which they owed less than $50,000. The Naills wound up with one much larger $250,000 mortgage, the additional debt either covering other liabilities or providing cash. Virginia Naill said she does not remember exactly why she refinanced the way she did or what she got out of it. All she remembers is that it was a snap. "A friend told me about Lincoln Mortgage and she took me over to meet 'em," said Virginia Naill, "and then one lady called and got some information and said, 'Come in and we're gonna close 'em.'" Domonoske, the attorney, called the arrangement "bizarre." "I've just never seen any transaction where they refinanced a loan from another piece of property without also taking a security interest on the other piece of property," he said. But there was nothing bizarre about why the broker wanted to do it that way: "The broker added that other one to inflate the size of the loan so they could get a higher commission." Lincoln Mortgage did not respond to multiple requests for comment left at its Winchester, Va., office or with its lawyer. Multiple attempts to reach the broker were unsuccessful. When Virginia Naill reconnected with Lincoln Mortgage in 2006, she wanted a fixed rate. The broker, a woman named Monica Gregory (who has since left the company), started off by making notes on the 2005 loan application based on conversations with the Naills, which the lawyers obtained in the process of the lawsuit. Beneath a field indicating that the existing loan had an adjustable rate, Gregory wrote, "Want a fixed rate this time!!"

FHA Digging Out After Loans Sour - (www.online.wsj.com) Last fall, as the financial system was teetering and the biggest banks were tightening credit, Karen DeForte couldn't find a lender to refinance the two mortgages on her New York home, until she received a phone call from Lend America. Most banks rejected Ms. DeForte because her debt level was too high and her credit score too low. But Lend America put Ms. DeForte into a $402,000 loan backed by the Federal Housing Administration, a New Deal-era agency that Washington and Wall Street were relying upon to pick up the slack in the mortgage market as private lenders pulled back. Ms. DeForte fell behind on payments six months later and is seeking a loan modification. Taking the loan was "a stupid mistake," the 46-year-old office manager said. In late 2007 and early 2008, thousands of borrowers with marginal credit were allowed to refinance via the government-insured FHA program, just as home-price declines began to accelerate. Policy makers were urging the agency to fill the gap left by the exit of private lenders, refinancing subprime borrowers out of loans that threatened to reset to unaffordable payments. Although the FHA has tightened credit standards, many of the 2007 and early 2008 mortgages are going bad. The agency expects defaults on 24% of all loans insured in 2007, and 20% of those backed in 2008. "The orders from Congress and us were clear: We want to save as many families as we can, recognizing that a lot of loans people were looking to refinance out of should never have been made in the first place," said Brian Montgomery, who served as the agency's commissioner for four years ending in July. This month, the FHA is to release the findings of its annual audit, which will show that the projected value of the agency's reserves has fallen below a federally mandated level, raising concerns that the FHA may need taxpayer money for the first time in its 75-year history. FHA officials say the agency has enough capital to withstand expected losses. The report is likely to reignite a debate over how aggressively the government should move to prop up the housing market by providing a steady source of mortgages that require little money down. The FHA, which doesn't make loans but insures lenders against losses if a borrower defaults, is guaranteeing half of all home-purchase loans in some of the nation's hardest-hit housing markets. That is helping to heal housing markets but puts taxpayers at risk if home-price declines resume. Refinance loans are hitting the FHA hard. While delinquencies on refinance loans have been lower than those for purchases, that began to change in 2006, and delinquencies on refinance loans have risen faster than those on new loans in the past three years, according to First American CoreLogic. The FHA began to take on riskier loans in 2007. By the end of 2007, the share of borrowers with credit scores of less than 600 had grown to 37%, up from 30% a year earlier, according to LPS Applied Analytics. The FHA says it is insuring better loans today, but that is primarily because lenders that originate FHA-backed loans began instituting their own minimum standards in 2008, several months after FHA volume surged. Average credit scores have jumped by nearly 70 points, to around 690.

Feds Try To Prop Up House Prices, $729,750 At A Time - (www.cbsnews.com) Never mind the debate about whether to prop up the U.S. housing market by extending the $8,000 home-buying tax credit. (See related CBS News video about the credit, which is scheduled to expire on December 1.) A more important housing subsidy has already snuck into law without many people noticing. Last Thursday, President Obama signed legislation, H.R.2996, that was billed as providing funding for the Forest Service and the Indian Health Service and temporary cash for the rest of the government. It also extended, substantially, the federal government's support for higher housing prices for another year. You won't see any mention of housing policy in the Congress' official summary or the White House's announcement that Obama had signed the measure. But if you look carefully, you'll find it buried in the middle of the 31,332-word bill (which can claim the dubious virtue of topping out at over 1,000 words longer than George Orwell's novel Animal Farm). If Congress had done nothing, the maximum government-backed loan for a house or condo in the continental United States would have dropped from $729,750 to $625,500 on January 1, 2010. Other loans -- known as "non-conforming" loans -- would still be available, but they'd be more expensive. TotalMortgage.com, for instance, puts the difference at around 1.1 percentage points as of this week. It's true that the extension applies mostly to coastal areas (and it's even higher in Alaska, Guam, Hawaii, and the Virgin Islands), deemed sufficiently "high cost" to exceed the normal $417,000 limit. Home-buyers in the wastelands of Detroit, where you can buy houses for a few thousand dollars, won't be affected. Not so ones in Washington, D.C., New York, Boston, and San Francisco. Nevertheless, letting the maximum loan amount fall back to normal levels would have been wise. First, it would reduce the cost of any possible future taxpayer-funded bailout if housing prices continue to fall. Or have we forgotten how taxpayers bailed out Fannie Mae and Freddie Mac in over $400 billion of stock and debt guarantees? That's despite the federal law creating them in the first place, which clearly says: "This chapter may not be construed as obligating the federal government, either directly or indirectly, to provide any funds... or to honor, reimburse, or otherwise guarantee any obligation or liability..." Second, it would rescind a sliver of one of the government distortions of the market that gave us the housing bubble and bust, coupled with all the economic pain of the past year or two. Without cheap loans, it's more difficult to have excessive speculation and a housing frenzy.

Al Gore Could Become World's First Carbon Billionaire - (www.telegraph.co.uk) Last year Mr Gore's venture capital firm loaned a small California firm $75m to develop energy-saving technology. The company, Silver Spring Networks, produces hardware and software to make the electricity grid more efficient. The deal appeared to pay off in a big way last week, when the Energy Department announced $3.4 billion in smart grid grants, the New York Times reports. Of the total, more than $560 million went to utilities with which Silver Spring has contracts. The move means that venture capital company Kleiner Perkins and its partners, including Mr Gore, could recoup their investment many times over in coming years. Few people have been as vocal about the urgency of global warming and the need to reinvent the way the world produces and consumes energy as Mr Gore. And few have put as much money behind their advocacy and are as well positioned to profit from this green transformation, if and when it comes. Critics, mostly on the political right and among global warming sceptics, say Mr. Gore is poised to become the world's first "carbon billionaire," profiteering from government policies he supports that would direct billions of dollars to the business ventures he has invested in. Representative Marsha Blackburn, Republican of Tennessee, has claimed that Mr Gore stood to benefit personally from the energy and climate policies he was urging Congress to adopt. Mr Gore had said that he is simply putting his money where his mouth is. "Do you think there is something wrong with being active in business in this country?" Mr. Gore said. "I am proud of it. I am proud of it."

OTHER STORIES:

Jay Taylor Envisions Scary Specter of '30s-Style Depression - (www.goldseek.com)
Deflation fears as Eurozone and US credit contracts - (www.telegraph.co.uk)
Black Monday: Ancient History Or Imminent Future? - (www.elliottwave.com)
Fed Announcement Today, 2:15pm: Expected to Stay on Easy Money Path - (www.reuters.com)
Jim Rogers Says Roubini is Wrong about Bubbles - (www.bloomberg.com)
Owning a Home in the US Becomes Financially Perilous - (www.bloomberg.com)

More walk away from mortgages after neighbors do too - (www.usatoday.com)

Shame and Fear Benefit Banks - (PDF – www.online.wsj.com)

High-end House Down 55% On SF Peninsula - (www.patrick.net)

Price Slump to Last to Mid-2010, Pimco Says - (www.bloomberg.com)

Florida class-action suit accuses builder of inflating prices - (www.tampabay.com)

The Recession and the Paradox of Thrift - (www.economix.blogs.nytimes.com)

Wall Street Banksters Cry "Feed Me or World Will End" - (www.bloomberg.com)

Arrogance, Ignorance Recurring in Economic History - (www.pbs.org)

Australia lifts interest rate to 3.5 percent - (www.google.com)

Fed sees rates near zero for extended period - (www.reuters.com)

The significance of the IMF-RBI gold sales - (www.themessthatgreenspanmade.blogspot.com)

Treasury expects to hit debt limit next month - (www.msnbc.msn.com)

Is Debt-Deflation Just Beginning? - (www.Mish)

History of Banking and Money - (www.long) - (www.wanttoknow.info)

Predicting the Future with Harry S. Truman - (www.dvorak.org)

'Money-Driven Medicine': How we got this mess - (www.sfgate.com)

Monday November 23 Housing and Economic stories

2009-11-22T17:40:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Geithner "Burned Billions," Shafted Taxpayers on CIT Loan - (finance.yahoo.com) Another one of the nation's largest lenders has filed for bankruptcy. On the brink for months, CIT filed for Chapter 11 protection on Sunday. The prepackaged plan allows CIT to restructure its debt while trying to keep badly needed loans flowing to thousands of mid-sized and small businesses. The plan keeps CIT's operations alive and makes it possible for the company to exit bankruptcy by year's end. But here's the bad news: While senior debt holders will only lose 30% of their investment, we, the U.S. taxpayer, will lose the entire $2.3 billion we lent the company this summer. William Black, professor at the University of Missouri-Kansas City School of Law is dumbfounded. "We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers." Black, a former top federal banking regulator, blames Treasury Secretary Timothy Geithner for negotiating such a bad deal on behalf of the American public. His argument goes as follows: The government was in no way obligated to lend the struggling CIT money and, in fact, initially refused to provide it bailout funds. More importantly, being the lender of last resort, the government should have guaranteed we'd be the first to get paid if CIT eventually filed Chapter 11. By failing to do so, "it's like he [Geithner] burned billions of dollars again in government money, our money, gratuitously," says Black. Black believes the problem stems from regulators' fears that if the banks recognize a loss on the bad assets it will create a domino effect that will wipe out the entire financial system. "If that's true we've got to get rid of capitalism," he warns, "because if we can't recognize losses in a capitalist system we have no future."

Wall Street Cries ’Feed Me’or World Will End – (www.bloomberg.com) In the musical comedy “Little Shop of Horrors,” a dangerous and gluttonous plant dubbed “Audrey II” signals its insatiable appetite for human blood with a baritone demand, “feed me.” In the real-life Shop of Horrors, the evil plant is gone. In its place is our voracious financial industry, which has been partaking in menacing feedings while stirring up fear of the havoc to come if it doesn’t keep getting what it wants. A year after the world’s banking system almost collapsed, you might think financial bosses would be agonizing over how they would be depicted in history books, and anyone with a job would be offering to stick around and clean up the mess for a pittance. You’d be both silly and wrong, as we all know by now. Finance’s version of Audrey II is thrashing about with threats that, crisis or not, they’d better get their extravagant pay and light-touch regulation. Anything less and -- real horrors -- financial innovation will decline and the world as we know it will end. We’ll get to that financial innovation silliness in a minute. A poll of Bloomberg customers released last week revealed that 21 percent of traders, analysts and fund managers polled in the U.S. expect their 2009 bonuses to be bigger than last year. Another 24 percent expect their bonuses to be about the same, which is pretty good when you consider the employment woes of the rest of the nation. Frustrated taxpayers wonder how they got into a mess where $700 billion of their money went to bailing out people who today are poised to pocket record amounts in some cases (9 percent in the Bloomberg survey). Argument Trumped: In the financial industry, though, the attitude of entitlement trumps any argument that there would be no job, no employer and no paycheck without the bailouts. In fact, those Bloomberg customers said any limits on pay will boomerang. Asked “Do you think limits on executive compensation in the financial industry will do more to control excessive risk-taking or more to discourage useful innovation?” 65 percent of the ones working in the U.S. said limits on pay would choke innovation.

Candidates for Scrutiny Under Barney Frank's Corporate 'Death Panel' - (www.politicsdaily.com) At Thursday's House Financial Services Committee hearing on systemic regulation, Chairman Barney Frank, Democrat of Massachusetts, argued that it is time to stop using taxpayer funds to save firms that pose a systemic risk to the U.S. economy. Frank knows exactly how he wants to put this practice to an end: "There will be 'death panels' set up by Congress to put these institutions out of business," he said. Frank has not yet provided details about how the "death panel" would make its decisions, nor can we even say if such a panel will in fact be created. But, a discussion draft the committee released on Tuesday proposed creating a Financial Services Oversight Council that will evaluate companies posing a risk to the U.S. economy. The council would have nine voting members. Based on their current positions, the membership would include Treasury Secretary Timothy Geithner, Chairman of the Federal Reserve Board Benjamin Bernanke, Comptroller of the Currency John Dugan and six others. The panel also would have two non-voting members from the state banking and insurance regulatory bodies. The council's broad responsibilities would include the authority "to advise the Congress on financial regulation and make recommendations that will enhance the integrity, efficiency, orderliness, competitiveness, and stability of the United States financial markets; and to monitor the financial services marketplace to identify potential threats to the stability of the United States financial system." The discussion draft also says that the identity of the companies would remain secret. Despite that intent, it might not be difficult to determine which companies would fall under federal scrutiny. For reasons explained below, the council might consider the following entities as candidates. First, to identify potential threats to the stability of the financial system, the council should take a look at the most recent quarterly report from Dugan's Office of the Comptroller of the Currency (OCC). U.S. commercial banks now hold more than $200 trillion in derivatives, or nearly double the level at the end of 2005. Just five commercial banks account for 97 percent of that amount in notional derivatives and 88 percent of net credit exposure. While the OCC data do not cover the entire derivatives market, when just five banks control such a large percentage of a market, we should be concerned. In order of their credit exposure to risk-based capital, these five are Goldman Sachs, J.P. Morgan Chase, Citibank, Bank of America and Wells Fargo Bank.

Some banks hoarding cash, " as if another financial crisis were on the way," - (www.huffingtonpost.com) Call it the Great Cash Hoard. The Wall Street Journal reports this morning that, in response to the financial crisis, U.S. companies are hoarding more cash than they have in the last 40 years. Among these corporate cash-savers are banks like Citigroup and JPMorgan Chase, two institutions are holding onto funds "as if another financial crisis were on the way," reports Bloomberg. Citigroup has almost doubled its cash reserves since Lehman's fall last year, a move which seems to be very popular move among Wall Street's mega-banks: "The four largest U.S. banks by assets -- Bank of America Corp., JPMorgan, Citigroup and Wells Fargo & Co. -- have increased their combined liquidity by 67 percent to $1.53 trillion as of Sept. 30 from $914.2 billion in June 2008, before Lehman's collapse, according to the companies' third-quarter reports. The amount equals 21 percent of the banks' total assets, up from 15 percent." In fact, as Bloomberg points out, Citigroup's massive cash holdings are more than five times great than those held by Warren Buffett's Berkshire Hathaway. Here's one particularly striking quote from Bloomberg: "In my 44 years in the business, I have never seen a company with remotely as much cash as this," said Richard X. Bove, an analyst at Rochdale Securities in Lutz, Florida. For its part, JPMorgan is maintaining what has been called "a fortress balance sheet," with $456 billion in liquidity. JPMorgan's cash holdings have shot up to 22 percent of its total assets, up from 9.5 percent before the financial crisis took hold. The WSJ points out that the trend isn't just happening on Wall Street: "In the second quarter, the 500 largest nonfinancial U.S. firms, by total assets, held about $994 billion in cash and short-term investments, or 9.8% of their assets, according a Wall Street Journal analysis of corporate filings. That is up from $846 billion, or 7.9% of assets, a year earlier. The trend appears to have continued in the third quarter, despite an improving economy. Of those 500 companies, 248 have reported third-quarter results. Their cash increased to 11.1% of assets, from 10.1% in the second quarter. Companies as diverse as Alcoa Inc., Google Inc., PepsiCo Inc. and Texas Instruments Inc. all reported big third-quarter increases in cash holdings."

Roubini sounds another dire warning - (www.moneyweb.co.za) - Investors worldwide are borrowing dollars to buy assets including equities and commodities, fuelling "huge" bubbles that may spark another financial crisis, said New York University professor Nouriel Roubini. "We have the mother of all carry trades," Roubini, who predicted the banking crisis that spurred more than $1,6trn of asset write downs, said. "Everybody's playing the same game and this game is becoming dangerous." Roubini explains that investors who're "shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates - as low as negative 10 or 20% cent annualised - as the fall in the US dollar leads to massive capital gains on short dollar positions". "Let us sum up: traders are borrowing at negative 20% rates to invest on a highly leveraged basis on a mass of risky global assets that are rising in price due to excess liquidity and a massive carry trade. Every investor who plays this risky game looks like a genius - even if they are just riding a huge bubble financed by a large negative cost of borrowing - as the total returns have been in the 50-70% range since March," he writes in the FT. In effect, say Roubini, this has become "one big common trade - you short the dollar to buy any global risky assets". The dollar has dropped 12% in the past year against a basket of six major currencies as the Federal Reserve, led by Chairman Ben Bernanke, cut interest rates to near zero in an effort to lift the US economy out of its worst recession since the 1930s. Roubini said the dollar will eventually "bottom out" as the Fed raises borrowing costs and withdraws stimulus measures including purchases of government debt. That may force investors to reverse carry trades and "rush to the exit", he said. He supposes that the "combined effect of the Fed policy of a zero Fed funds rate, quantitative easing and massive purchase of long-term debt instruments is seemingly making the world safe - for now - for the mother of all carry trades and mother of all highly leveraged global asset bubbles".

OTHER STORIES:

Forget Inflation, Deflation Is a Bigger Danger - (www.usnews.com)

More walk away from homes, mortgages - (www.usatoday.com)

Be Prepared for the Worst - (www.forbes.com)

It is Japan we should be worrying about, not America - (www.telegraph.co.uk)

Too Little of a Good Thing - (www.nytimes.com)

Debt-slave Bait Still In Congress (Please Protest Now!)
Housing Needs To Keep Falling - (www.businessinsider.com)

Economist says housing remains in crisis - (www.missourinet.com)

U.S. Houseownership Has Become Financially Dangerous - (www.bloomberg.com)

Foreclosure filings spike in affluent Chicago counties - (www.chicagotribune.com)

October Personal Bankruptcies Highest Since 2005 Law Changes - (www.bloomberg.com)

Housing-bubble states lag in recovery - (www.statesmanjournal.com)

Canada may slash monopolistic real estate fees - (www.yourhome.ca)

Australian house prices surge, may force interest rate hikes - (www.marketwatch.com)

Commercial Real Estate Loans Growing Problem For Banks - (www.investors.com)

Treas. Sec. Geithner "Burned Billions," Shafted Taxpayers - (www.finance.yahoo.com)

At What Point Is A Bank Bailout A Crime? - (www.dailybail.com)

States Are Pondering Fraud Suits Against Banks - (www.dealbook.blogs.nytimes.com)

Has the Government Been Bailing Out Sprawl? - (www.dc.streetsblog.org)

Goldman Eyes Tax Credits Fannie Mae Doesn't Need - (www.nytimes.com)

Goldman left foreign investors holding the subprime bag - (www.mcclatchydc.com)

Keeping America afloat with hot air - (www.haaretz.com)

Dollar "Carry Trade" Creates Global Asset Bubble That Will Burst - (www.sandiegoreader.com)

Health "Insurance": A Criminal Enterprise - (www.huffingtonpost.com)

Sunday November 22 Housing and Economic stories

2009-11-21T18:23:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Prichard Alabama Files For Bankruptcy - (www.wkrg.com) Prichard Mayor Ron Davis released the following statement Wednesday morning: “I have looked at every opportunity available to obtain money to help fund the retirement plan for the City of Prichard. After careful review of all of our options, bankruptcy protection seems to be the only solution left at this time. Over the past 50 years, the pension plan was amended by the Legislature more than fifteen times, and always the economic burden on the City was increased. This has been a long term problem that was unfortunately inherited by this administration. After several lawsuits filed by pensioners, it has forced us to come to this decision, one that will protect the city and its residents. I hope that a solution can soon be found that will be fair to all. As Mayor, it is my duty to make sure that the City of Prichard continues to move forward by providing essential municipal services and to operate for the benefit of its citizens.” Tuesday 6:45 p.m.The city of Prichard's financial troubles have hit rock bottom. Late Tuesday afternoon the city filed for bankruptcy protection in Mobile County Circuit Court. The petition, which was filed at 4:54 p.m., comes one day before Prichard Mayor Ron Davis and Finance Director Rex Williams were scheduled to be depositioned in an ongoing pension dispute. Robert Hedge, who represents more than fifty retired city workers in a lawsuit filed in August, says Mayor Davis is "playing games." Hedge says under the bankruptcy protection, the city gets an "automatic stay" on the pending litigation. "The whole thing is a creature of the Mayor," said Hedge. "This is not going to deter us." Prichard city officials were not immediately available for comment.

“Not-So-Safe-Deposit Boxes: States Seize Citizens' Property to Balance Their Budgets” - (www.abcnews.go.com) The 50 U.S. states are holding more than $32 billion worth of unclaimed property that they're supposed to safeguard for their citizens. But a "Good Morning America" investigation found some states aggressively seize property that isn't really unclaimed and then use the money -- your money -- to balance their budgets.” “Not-So-Safe-Deposit Boxes San Francisco resident Carla Ruff's safe-deposit box was drilled, seized, and turned over to the state of California, marked "owner unknown." "I was appalled," Ruff said. "I felt violated." Unknown? Carla's name was right on documents in the box at the Noe Valley Bank of America location. So was her address -- a house about six blocks from the bank. Carla had a checking account at the bank, too -- still does -- and receives regular statements. Plus, she has receipts showing she's the kind of person who paid her box rental fee. And yet, she says nobody ever notified her. " “They are zealously uncovering accounts that are not unclaimed," Ruff said. To make matters worse, Ruff discovered the loss when she went to her box to retrieve important paperwork she needed because her husband was dying. Those papers had been shredded.” And that's not all. Her great-grandmother's precious natural pearls and other jewelry had been auctioned off. They were sold for just $1,800, even though they were appraised for $82,500. "These things were things that she gave to me," Ruff said. "I valued them because I loved her." “Bank of America told ABC News it deeply regrets the situation…” “…Ruff is not alone. Attorney Bill Palmer represents her and countless other citizens in a class action lawsuit against the state of California. "They figured the safety-deposit box was safer than keeping it under the mattress," Palmer said. "In the case of a lot of citizens, they were wrong, weren't they?" California law used to say property was unclaimed if the rightful owner had had no contact with the business for 15 years. But during various state budget crises, the waiting period was reduced to seven years, and then five, and then three. Legislators even tried for one year. Why? Because the state wanted to use that free money.” "That's absolutely correct," said California State Controller John Chiang, who inherited the situation when he came into office. "What we've done here over the last two decades has been dead wrong. We've kept the property and not provided owners with the opportunities -- the best opportunities -- to get their property back." Chiang now faces the daunting task of returning $5.1 billion worth of unclaimed property to people. Some states keep their unclaimed property in a special trust fund and only tap into the interest they earn on it. But California dumps the money into the general fund -- and spends it. "It's supposed to be segregated and protected," Palmer said.” "California has taken all of that $5.1 billion and has used it as a massive loan." “California became so addicted to spending people's money, that, for years, it simply stopped sending notices to the rightful owners.”

ABC News obtained a 1996 internal memo in which the lawyer for the Bureau of Unclaimed Property argued against expanding programs to notify rightful owners. He wrote, "It could well result in additional claims of monies that would otherwise flow into the general fund." Seizing More Than Safe-Deposit Boxes. It's not just safe-deposit boxes. A British man went to retire and discovered the $4 million in U.S. stock he had been counting on had been seized and sold for $200,000 years earlier -- even though he was in touch with the company about other matters. A Sacramento family lost out on railroad land rights their ancestors had owned for generations -- also sold off as unclaimed property. "If I had hung onto it, I would be a millionaire, multimillionaire," said John Whitley. "But that didn't happen because we didn't get to hold it." State Reforms. California's unclaimed property program was so out of control that, last year, the courts issued injunctions barring the state from seizing any more property until it made reforms.” “…all 50 states pay private contractors 10 to 12 percent commissions to locate and seize accounts for them. It's an inherent conflict of interest: the more rightful owners are found, the less money the contractors make.”

California’s Fiscal Health Continues to Deteriorate, Despite Many Deep Cuts - (www.nytimes.com) Just three months after Gov. Arnold Schwarzenegger cut, taxed and line-item-vetoed away a two-year budget gap of $26 billion, California faces billions of dollars in new shortfalls, with the problem likely to deepen in the next fiscal year. At a recent conference here on the condition of California’s fiscal health, the state treasurer, Bill Lockyer, called the budget “a train wreck.” And, he added, “It’s going to get worse.” California finance officials say the state is facing a shortfall of roughly $7 billion for the current fiscal year, which ends on June 30, and several estimates have that gap ballooning to between $10 billion and $20 billion the next fiscal year. Like many other states around the country, California is facing continued revenue shortfalls as personal income and corporate taxes falter. But California lawmakers are also facing the implosion of expected cost savings, as lawsuits and other factors have reduced or eliminated savings that were figured into the budget passed in July. For instance, the budget called for moving at least $1 billion earmarked for transportation uses into the general fund, a move challenged by transit advocates, who have prevailed in court. Further, the state was recently enjoined from making an $80 million cut to social service programs. Then there is the assumed revenue from the sale of part of the State Compensation Insurance Fund, a move that the state insurance commissioner, Steve Poizner, has filed a lawsuit to block. The story is much the same around the country, especially in states hit hard by the foreclosure crisis that had taken particularly desperate — or unrealistic — measures to shore up their budgets. Roughly $165 million of Arizona’s plan to close a $3 billion shortfall is not materializing. An effort to get $50 million in savings from new antifraud measures did not come to fruition because there were no real measures put in place to ferret out the fraud, and the assumption of $100 million received in upfront payments from private prison companies to operate nine of the state’s 10 prisons will almost certainly not come together this fiscal year, lawmakers there say. With other shortfalls, the state is facing a $2 billion deficit in the current year. In Colorado, Gov. Bill Ritter recently ordered state employees to take four furlough days in addition to the four the workers already were taking, as revenues there have continued to fall.

Home equity loan market remains very tight - (www.latimes.com) Not only are fewer credit lines and loans being granted despite improvement in the rest of the home loan market, the terms are a lot less attractive than before. Traditional 30-year mortgages these days are unusually affordable by historical standards, but if you're looking for a home equity line of credit, don't expect any deals. The market for such credit lines, which practically shut down as home prices tumbled, remains tight as a drum despite signs of life in the rest of the home loan market. And offers that let you pay only the prime rate or just above that benchmark are long gone. "The days of lenders falling all over themselves to help you empty the equity out of your home aren't coming back any time soon," said Keith Gumbinger, vice president at loan data tracker HSH Associates. Even for homeowners with plenty of home equity still available, "access to it is harder to come by," Gumbinger said. "You need to be a much higher-quality borrower now. And if you can get it, the terms are going to be a lot less attractive." Before the housing boom, home equity credit lines were a cheap way for homeowners to renovate their property, pay college tuition or buy a car. During the boom, they also were often used to make a down payment on a home or to finance a vacation or other indulgences. But banks are still reeling from huge losses on these credit lines, which -- as a type of second mortgage -- almost always become worthless when "underwater" borrowers slide into foreclosure. And the tide of losses is a long way from ebbing; Bank of America Corp., for example, wrote off $1.97 billion in home equity debt as uncollectable in the third quarter of this year, up $130 million from the second quarter.

Private Equity IPOs Slump as Goldman, Citigroup Can’t Sell AEI - (www.bloomberg.com) Investors suffering the worst returns on initial public offerings in at least 14 years are shunning companies laden with debt, forcing bankers to pull one sale and cut the price of others. The postponement of an $800 million offering by AEI, a former Enron Corp. unit with $2.9 billion of net debt, followed reduced sales by RailAmerica Inc. andSelect Medical Holdings Corp., both owned by private-equity firms. AEI’s IPO unraveled last week after Ashmore Group Plc, the London-based fund manager that controls the company, withdrew when institutional buyers refused to pay the $16-a-share it sought for the deal. “Investors are more focused than ever before on buying healthy balance sheets,” said Timothy Monfort, head of U.S. equity capital markets at Jefferies & Co. in New York. “They don’t want to see a stop-gap measure and they want to know that the equity investment offers a complete solution for the company.” IPOs deteriorated as the Standard & Poor’s 500 Index suffered its first monthly decline since February and the benchmark gauge for U.S. stock-market volatility surged the most in a year. With $4.2 billion of private-equity sales in the pipeline, companies burdened by debt from leveraged buyouts are being forced to lower offering prices, limiting gains that can be passed on to their investors after $3.7 billion was raised through U.S. share sales in the past six months. ‘Bloodletting’: A “bloodletting” for LBOs that will damp the economic recovery may be coming, according to billionaire investor George Soros. “In commercial real estate and leveraged buyouts, the bloodletting is yet to come,” Soros said on Oct. 30 during a lecture organized by the Central European University in Budapest, where he was born. “These factors will continue to weigh on the American economy, and the American consumer will no longer be able to serve as the motor for the world economy.” Stocks are slumping as buyout firms count on IPOs to exit some of the $2.1 trillion in LBOs they made since the start of 2004 and return cash to investors. Distributions to their clients fell by two-thirds to $63 billion in 2008 from the previous year, according to London-based researcher Preqin Ltd. AEI, an operator of power plants and natural-gas pipelines in emerging markets acquired by Ashmore in 2006, would have been valued at $3.9 billion, or 1.3 times net debt, had its shares sold at the midpoint of its original range, according to data compiled by Bloomberg. Underwriters led by New York-based Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co. and Credit Suisse Group AG in Zurich dropped the sale Oct. 29.

Possible Credit Dislocation: Be Warned - (www.market-ticker.denninger.net) I have reason to suspect that the "monetary transmission mechanism" is full of rocks (again), and we are about to have another instance of what could colloquially be called "fun." (Yes, that's sarcasm.) Here's what we know and what I can deduce from it:

· JP Morgan's "cash position" was analyzed by a writer who published on SCRIBD, which showed that actual cash held has deteriorated radically. By more than half in the last year. The deterioration is continuing, not slowing.

· I am hearing repeated anecdotes from multiple areas that foreclosed property held by banks with multiple full-price offers that include a financing requirement are being sold instead to people with actual cashat radical reductions from that price. This implies that these financing contingencies are regarded as not only potentially no good but factually no good, as if the banks know for a fact that the credit pipelinewill (not might), within weeks or months (in the time required to close), disappear. There is no other rational explanation for this behavior.

· Citibank's credit-card terms change implies a willingness to accept and even provoke a complete and intentional destruction of their credit card business as a very high probability outcome, given that nobody in their right mind will accept a 30% interest rate who has an alternative. The obvious implication is that only those who can't transfer balances out will remain and if your credit is that impaired there's a good chance you will default - either intentionally or otherwise. This too implies foreknowledge of a near-complete impending freeze in the credit markets.

· The change in terms on credit accounts is NOT confined to Citibank. I have received a fax from a customer of Infibank with substantially identical terms, in which both the standard and penalty rate was adjusted to 29.99%. This strongly implies that whatever Citibank smells the problem is not confined to them.

· Both of these credit card "adjustment" letters are of course marginal rate changes. That is, they are both based off the PRIME rate. The importance of that is missed by many. Don't be one of them (more on that below.)

· I recently received a back channel communication indicating that The Fed is aware that this has been and still is a solvency problem and has so briefed certain members of Congress. This from a source believed reliable, but which cannot be independently confirmed.

This data is not conclusive. But - if you are dependent on credit access and these anecdotes are in fact indicative of actual knowledge of an impending lock-up you are at grave financial risk. Note that "margin" type rates that are based on the PRIME rate could hurt you far worse than you believe. With PRIME at historic lows should any such dislocation spike the prime rate your interest rate could go muchhigher with little or no notice or ability to do anything about it. IF this is going to manifest as a dislocation of some sort it will probably occur within the normal closing window for real estate transactions, since the anecdotes related to that have the best-defined "reach", and the discounts being accepted to avoid this risk are massive to the point of denoting near-certainty of this event in the minds of the market participants who are electing to accept these cash-discounted offers. Therefore, if you are dependent on such credit access I would take immediate action to do whatever is necessary to mitigate, to the extent you are able, the consequences of such a dislocation. Consider how you survive returning to what essentially amounts to a cash economic posture in your business and personal life. Note that the indications above are far stronger than what we saw going into last fall before the wheels came off. As a consequence if these actions are those of people with real knowledge (and this is not a guess on their part) I would expect the outcome to be worse than what we saw last fall in terms of economic impact. Those who are short dollars (synthetically or in the actual market) need to beware - if I am reading this correctly you're about to get a really ugly surprise. If you want to speculate on this outcome levered bets on radical dollar appreciation look like one of the best choices out there, followed closely by bearish levered bets on commodities. I would not consider such a speculative play that is not characterized by defined risk, as this analysis is based on nothing more than observation of behavior by market participants that all point toward their foreknowledge of an event that might happen in the reasonably-near future and is not, at present, backed up with actual significant credit-spread widening or other objective criteria.

OTHER STORIES:

US Senate to introduce draft financial bill - (www.ft.com)

Global Crisis Highlights East’s Transition Imbalances - (www.bloomberg.com)

U.K. October House Prices Gain for Third Month, Hometrack Says - (www.bloomberg.com)

Manufacturing in the U.S. Expanded at a Faster Pace in October - (www.bloomberg.com)

Fed’s Mortgage Buying Aids Corporate, Riskier Debt - (www.bloomberg.com)

Pending Sales of Existing Homes in U.S. Rose 6.1% in September - (www.bloomberg.com)

Fed's Path to Higher Interest Rates Begins to Take Shape - (online.wsj.com)

Fed seen on hold as outlook uncertain - (www.reuters.com)

No hints, winks, nods from Fed about rate hikes - (www.marketwatch.com)

Ford Posts $997 Million Profit, Projects Solid Income for 2011 - (www.bloomberg.com)

Retail faces uncertainty as CIT enters bankruptcy - (news.yahoo.com/s/ap)

Pandit ‘Near Death’ Cash Hoard Signals Lower U.S. Bank Profits - (www.bloomberg.com)

Ford Raising $3 Billion, Paying Down Revolving Credit Line - (www.bloomberg.com)

Goldman Looks to Buy Fannie Tax Credits - (online.wsj.com)

U.S. Turns Screws on Bailed-Out GMAC - (online.wsj.com)

Saturday November 21 Housing and Economic stories

2009-11-20T18:25:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Lenders abandon properties - (www.daytondailynews.com) Owner, neighbors, city left to deal with a home that no one has any incentive to improve. As if the mortgage foreclosure crisis wasn’t bad enough, sometime last year a new phenomenon began to emerge: Experts say mortgage lenders and banks began walking away from foreclosed properties, especially in urban areas. The so-called “walkaways” can occur along several different paths, but the effect is the same — after threatening or getting foreclosure, the lender attempts to abandon the usually vacant property, leaving the original owner, the neighbors and the city to live with the damage. Owners often accumulate taxes and zoning enforcement fines on property they believe they no longer own. Neighbors watch their property values decline as the vacant property deteriorates and is often broken into and stripped. Cities then have to bear the cost of boarding up a structure, maintaining the lawn and, eventually, demolishing it. Dayton housing inspector John Carter did a study last year of 302 vacant and abandoned residences in the city and found that about 70 percent were bank walkaways. Of those walkaways, he said, about 20 percent had mortgages but no foreclosure was ever filed. “There are several tragedies to it,” said Richard Stock, director of the University of Dayton’s Business Research Group. “The very first tragedy is, my God, these people could have continued to be in their house all this time, maintaining it. And then there’s the impact on the community.”

Madoff documents reveal incredulous, unfocused SEC - (www.reuters.com) U.S. securities investigators raised repeated concern over how Bernard Madoff could be running an honest business, but never followed through on the many red flags they uncovered. Hundreds of documents released on Friday by U.S. Securities and Exchange Commission's portray an agency at times skeptical or dismissive of evidence that the now imprisoned mastermind of the world's largest Ponzi scheme was up to no good. At other times, it appeared the agency knew that goings-on at Bernard L. Madoff Investment Securities LLC were improper but never followed through on their discoveries or on the allegations of chief whistleblower Harry Markopolos. "I don't think we should worry about Bernie finding out to whom we speak .... we are not telling anybody that we have found anything improper (except for his lies to us, of course)," one SEC investigator wrote in a May 16, 2006 e-mail. In September, SEC Inspector General David Kotz issued his full report on how the agency mishandled warnings and assigned inexperienced lawyers to examine Madoff. He said this led to five botched probes starting in the early 1990s that might have unearthed Madoff's estimated $65 billion Ponzi scheme. Madoff is serving a 150-year prison sentence after pleading guilty to the fraud. He told Kotz that if SEC lawyers had done some basic investigative work, it "would've been easy for them to see" he was a crook. The documents could prove fodder for the lawyers suing the SEC for negligence on behalf of several Madoff victims. This week, the court-appointed trustee liquidating Madoff's firm estimated the crime cost investors at least $21.2 billion, but only $534 million of payments have been authorized. The SEC under current Chairman Mary Schapiro is implementing reforms designed to avoid a repeat, including more oversight by senior lawyers and greater use of subpoenas.

How Goldman secretly bet on U.S. housing crash, and won - (www.mcclatchydc.com) In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies. Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk. Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws. "The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted." John Coffee, a Columbia University law professor who served on an advisory committee to the New York Stock Exchange, said that investment banks have wide latitude to manage their assets, and so the legality of Goldman's maneuvers depends on what its executives knew at the time. "It would look much more damaging," Coffee said, "if it appeared that the firm was dumping these investments because it saw them as toxic waste and virtually worthless." Lloyd Blankfein, Goldman's chairman and chief executive, declined to be interviewed for this article. A Goldman spokesman, Michael DuVally, said that the firm decided in December 2006 to reduce its mortgage risks and did so by selling off subprime-related securities and making myriad insurance-like bets, called credit-default swaps, to "hedge" against a housing downturn.

Wall Street Throws Vast F-you Party At Expense of USA - (www.bloomberg.com) In Washington and on Main Street, politicians and voters are railing against Wall Street’s multi- million-dollar pay packages. In the financial world, most executives expect their bonuses to match or exceed last year’s, with 1 in 10 predicting their best-ever payout. Having shaken off the biggest economic decline since the 1930s, almost three in five traders, analysts and fund managers believe their 2009 bonuses will either increase or won’t change, according to a quarterly poll of Bloomberg customers. Only one in four see a decline. Asians are the most optimistic about pay and Americans and Europeans somewhat less so. “The large banks are knocking the cover off the ball,” said Daniel Alpert, managing director of New York-based investment bank Westwood Capital LLC. The industry is “making money, though with government help.” Worldwide, a majority of market professionals in the survey also turn thumbs down on government attempts to limit compensation, with 51 percent saying restrictions will stifle useful innovation. Only about 38 percent think pay limits will control excessive risk-taking. In the U.S., where President Barack Obama has chided Wall Street for being “motivated only by the appetite for quick kills and bloated bonuses,” 65 percent say the restrictions will damp innovation. The Bloomberg Global Poll of investors and analysts in six continents was conducted Oct. 23-27. It is based on interviews with a random sample of 1,452 Bloomberg subscribers, representing decision makers in markets, finance and economics. The poll has a margin of error of plus or minus 2.6 percentage points. ‘Hit Hard’: “If we were looking for a sense of Wall Street to be, ‘we’re hit hard, I’m going to make less money,’ these results don’t show it,” said J. Ann Selzer, president of Selzer & Co., the Des Moines, Iowa-based public-opinion research firm that conducted the survey. The findings “give some fuel to the people who claim that Wall Street hasn’t really gotten it,” said Mark Borges, a compensation consultant at Compensia Inc. in Corte Madera, California. “There really hasn’t been a dramatic cultural shift in these organizations.”

Small banking empire collapses; 9 fail in 1 day - (www.marketwatch.com) Federal regulators have shut the doors on part of a small banking empire built by through a string of 28 acquisitions over the past two decades. Nine banks, all owned by the same troubled Illinois holding company, were closed Friday by regulators, and the Federal Deposit Insurance Corp. said U.S. Bank of Minneapolis would assume their deposits. The nine banks as of Sept. 30 had combined assets of $19.4 billion and deposits of $15.4 billion, the FDIC said. Combined, US Bank took over 153 branches. The deposit insurance fund will take an estimated $2.5 billion hit, the FDIC said. All nine banks were subsidiaries of FBOP Corp., a holding company based in the Chicago suburb of Oak Park, Ill., according to the FDIC. The closings brought the 2009 total to 115 in 2009 -- the first year since 1992 that more than 100 banks have gone under. By number, banks in Georgia account for one-fifth of all U.S. banks closing this year, with 20 failures, followed by Illinois with 19, California with 13, and Florida with nine. Privately held FBOP, which originated as the parent company of First Bank of Oak Park, wasn't involved in Friday's closures, the FDIC said. FBOP is run by Michael Kelly, who from his base in the Chicago suburbs snapped up banks in San Diego, Los Angeles, Houston, and San Francisco. He started in 1990 with First Bank of Oak Park, which had $125 million in assets. The FBOP subsidiaries that were closed Friday were identified as Bank USA, Phoenix; California National Bank, Los Angeles; San Diego National Bank, San Diego; Pacific National Bank, San Francisco; Park National Bank, Chicago; Community Bank of Lemont, Lemont, Ill.; North Houston Bank, Houston; Madisonville State Bank, Madisonville, Texas; and Citizens National Bank, Teague, Texas.

OTHER STORIES:

Why U.S. Doesn't Need More House-Buyer Perks - (www.smartmoney.com)

Extending house-debtor credit: another clunker? - (www.features.csmonitor.com)

Job losses, lack of available credit hurting housing market - (www.pittsburgh.bizjournals..com)

Foreclosures Hit the Unemployed Middle Class - (www.newsweek.com)

Luxury Houses With Slashed Prices - (www.forbes.com)

Walking Away Makes Sense For Many - (www.Mish)

Ireland: House prices 25% down from peak - (www.rte.ie)

Wilbur Ross Sees "Huge" Commercial Real Estate Crash - (www.bloomberg.com)

Is Fed Abandoning Bailout Of Commercial Real Estate? - (www.zerohedge.com)

How Bloomberg Fabricates U.S. Housing Numbers - (www.seekingalpha.com)

FDIC's Bair Wants Broad Authority To Ban All Future Bailouts - (www.dailybail.com)

9 more U.S. banks fail; $2.5 billion hit for FDIC - (www.marketwatch.com)

Investigating the Mortgage Crisis - (www.thenation.com)

Savings Glut, Investment Drought - (www.motherjones.com)

Feral Houses! - (www.sweet-juniper.com)

Friday November 20 Housing and Economic stories

2009-11-19T18:11:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

6 loans in 6 years: How one woman lost her house - (www.seattletimes.nwsource.com) Barbara Simonson, 90, had to sell her million-dollar home after a series of WaMu loans stripped much of its equity. Barbara Simonson lost her Blue Ridge house, designed by her husband, after repeatedly refinancing with WaMu. For more than half a century, Barbara Simonson lived on a bluff overlooking Puget Sound in Seattle's Blue Ridge neighborhood. Her late husband, a noted architect, designed the house. She liked to sit in the living room and watch the boats going by. She had hoped to live there the rest of her life. Simonson, 90, didn't get her wish. She was forced to sell after six Washington Mutual mortgage loans in six years stripped much of the equity from her nearly million-dollar home. She got them all from the same loan officer at WaMu's home-loan center at Northgate, loans that were far too complex for a stroke survivor to understand. In fact, not until going over her loan documents with a reporter did she realize that interest rates were adjustable. "I have to tell you, math was not one of my better subjects in school," she said. For years, Simonson had kept all of her money at Washington Mutual. She trusted the bank. Her monthly Social Security check, now roughly $1,270, was deposited there directly. Things began going wrong for Simonson when she borrowed more than $500,000 against her house to lend to her son. A contractor now in Iraq, he made payments for a while, then stopped. Worried about draining her savings to meet the payments, she visited WaMu's Northgate loan center and talked to a loan officer, Patricia Collins, about getting a loan with a lower interest rate and smaller payments. The loan officer drew up papers for a $551,000 loan in 2001. The loan application listed Simonson's monthly income at $10,300. Simonson says she has no idea where that figure came from. Collins didn't return calls seeking comment about the wildly inflated income. When it came time for Simonson to sign the papers for the adjustable-rate loan, she said, "I was told what to do and I did it." The next year, when her payments went up, she complained to WaMu and refinanced into a larger loan. In October 2003, the bank qualified her for a $680,000 option ARM. If she had been asking for a 30-year fixed-rate loan, Simonson wouldn't have come close to qualifying for it, even using the inflated monthly income figure. With the option ARM, Simonson started out making minimum payments that didn't cover interest or principal, piling up more debt. The bank had "qualified" her for the loan on her ability to pay the minimum amount. In other words, Simonson was put into a loan that she could not repay once the loan reset in five years, when the minimum payment was replaced by payments on full interest and principal. The loan cost more than $11,000 in fees, which were rolled into her mortgage. Her minimum payment was $2,266, nearly twice her retirement check. The loan officer used the bigger new mortgage to pay off Simonson's old mortgage and put the remainder in an account that made automatic monthly payments on the loan.

WSJ Presents Yet More Utter Nonsense from the National Association of Realtors - (www.prospect.org) For readers who didn't get enough information about the housing market from David Lereah, the widely cited former chief economist of the National Association of Realtors (NAR) and author of the Why the Real Estate Boom Will Not Bust and How You Can Profit from It, the WSJ is again presenting unchallenged assertions from the NAR. Today's wisdom from the NAR is that raising the homebuyers tax credit to $15,000 and applying it to all homebuyers (not just first-time buyers) "could be crucial for permanently righting the housing market again." Okay, the problem in the housing market is a huge excess supply of housing that has led to a record inventory of vacant housing units. How will a tax credit that encourages people to flip homes do anything to absorb an excess supply of housing? It is certainly possible that the extension of the credit will slow and possibly temporarily reverse the decline in house prices (that may have happened in the last few months), but this would just delay the inevitable adjustment process. Once the tax credit is removed, prices will resume their fall. The delay in the adjustment will have led some new homebuyers to purchase homes at bubble-inflated prices. It may also prevent some homeowners from realizing how much equity they have lost. As a result, they may put off plans to adjust their consumption and saving patterns to make up for their lost wealth. Given its counterproductive impact on the housing market, it is not clear that a homebuyers tax credit is the best use of $15-$30 billion. It would have been useful if the WSJ had not allowed the NAR view to appear unchallenged.

SF Real estate leader's name on bad-check warrant - (www.sfgate.com) Problems besetting one of San Francisco's largest apartment building owners appear to be hitting home more directly. According to the Clark County, Nev., district attorney's office, there is a warrant out for Walter Lembi, managing director of the financially troubled Lembi Group, for allegedly passing $298,500 worth of bad checks earlier this year at Caesar's Palace in Las Vegas. According to a document from the Clark County district attorney's office, dated July 1, the check fraud division is seeking restitution in the amount of $328,450 (including fees). The document lists Lembi's recorded home address in Burlingame. Bernie Zadrowski, head of the check fraud division, said Wednesday that his office had been in touch with an attorney said to be representing Lembi and that Lembi has until Sunday to comply. "We pitched an offer" of settlement, Zadrowski said, although he would not specify the basis of the offer. Failure to meet the deadline in similar cases usually results in a broader, nationwide arrest warrant being issued, Zadrowski said. A woman who answered Lembi's listed home phone on Wednesday evening said Lembi "doesn't live here anymore," but gave no more details, except to confirm that the name on the document, Walter Richard Lembi, is Lembi's full name. The attorney, listed as Robert Ryan of San Diego, according to Zadrowski, did not return calls. A call to the Lembi Group's attorney was not returned. According to Zadrowski, Lembi wrote two checks to Caesar's Palace for chips he was playing with at the casino, which usually waits 60 days before cashing such checks. Judging by the July 1 date on the notice issued by his office, Zadrowski believes the checks were written around the beginning of May. And if the accused doesn't make good in the specified time? "If he gets picked up, we'll prosecute him," said Zadrowski. Still sinking: Business-wise, things seem not to have gotten any better since we wrote in September that the Lembi Group was "disappearing beneath waves of debt." Once the owner of about 300 apartment buildings in San Francisco and on the Peninsula, its empire - founded by Walter Lembi's father, Frank Lembi - has been humbled by dozens of receiverships and foreclosures. Not to mention waves of lawsuits filed by former tenants suing for nonpayment of security deposits, and a long-standing city suit alleging unfair business practices and tenant harassment. In interviews, Walter Lembi has blamed the credit crunch for his company's woes. "The worst financial market I've seen in the history of my career in real estate," he told San Francisco Apartment Magazine. "But our bankers are working very well with us. They would like to see some kind of pay down."

U.S. Turns Screws on GMAC - (online.wsj.com) Thanks to a series of cheeky television ads that mocked its rivals -- and some of the highest interest rates on deposits in the nation -- Ally Bank was swimming in new money this spring. The upsurge couldn't have come at a better time for its ailing parent company, GMAC Financial Services, which had just been bailed out by the federal government. But federal bank regulators put an end to the comeback party. Viewing the high-rate strategy as a perilous one, the Federal Deposit Insurance Corp. tightened its leash. It ordered Ally to lower its bank-deposit rates and to restrict its lending to low-end car buyers. For GMAC, getting rescued by the federal government has been no picnic. In the 10 months since the consumer-finance company received its first dose of rescue financing, it has wrangled repeatedly with the FDIC over its turnaround plans. Currently the company is locked in debate with the Treasury Department about the adequacy of its capital levels, with the Treasury pushing GMAC to take billions more in federal aid. Inside GMAC, executives have expressed frustration that hard-nosed regulators are hindering its plans for digging itself out of its mess, according to people familiar with the situation. At one point, GMAC executives even applied to switch Ally Bank's charter so it would be overseen mainly by the Federal Reserve rather than the FDIC -- an effort it abandoned on Tuesday. GMAC's complicated relationship with the federal government stems from the government's conflicting priorities as it attempts to get the economy back on track. On the one hand, it needs the private sector to provide consumers with abundant credit. But it can ill afford to have financial firms engage in the kind of risky lending that precipitated the crisis. A spokeswoman for GMAC said the company "continues to work cooperatively with the FDIC, Federal Reserve and U.S. Treasury to restructure our business model." For years, GMAC was owned by General Motors Corp., and its mission was to provide financing to car dealers and buyers. Eighty percent of GM dealers came to rely on GMAC to get cars onto their lots. In recent years, it expanded into other businesses, including real estate, commercial finance and auto insurance.

NY's Upper East Side not immune - (www.pbs.org) Frontline video/news story: As the U.S. unemployment rate hits a 25-year high and the Dow Jones Industrial Average hits a six-year low, award-winning FRONTLINE producer Ofra Bikel chronicles the recession's impact on one unlikely American neighborhood -- New York's Upper East Side. In Close to Home, Bikel sets up her cameras in the hair salon she's patronized for 20 years. It's an intimate space where she has come to know well the surprisingly diverse clientele -- from athletic trainers and housewives to high-end bankers, actors and opera singers. Despite expectations that this neighborhood is a secure bastion of privilege, these days, when clients get in the chair, they offer a window into the country in recession: Some are broke, others don't have a plan, and they're all looking to commiserate. Deborah Boles, the owner and sole hairdresser at Deborah Hair Designs, started the business in 1985. "I wanted a place where people can go and they can feel comfortable," she says. "They know they belong here." But it's all on the line with the current downturn -- clients come less often; some skip coloring or skip the trim -- and as Deborah watches neighboring businesses go under, she wonders how long she can survive. Barbara, Deborah's sister, helps out at the salon, but she has been struggling with her own economic crisis. After buying a home in Florida at the height of the market, she now has a subprime mortgage that she can no longer afford. Unable to pay the exorbitant interest, she has had to take in four tenants, each with their own stories of foreclosure and unemployment.

OTHER STORIES:

Actually, Case-Shiller Shows Housing Crash Has Already Resumed - (www.businessinsider.com)

Are more foreclosures and short sales coming? - (www.mortgage.freedomblogging.com)

Moody's Projects Further House Price Declines - (www.calculatedriskblog.com)

Under Attack, Credit Raters Turn to the First Amendment - (www.huffingtonpost.com)

'Too Big to Fail' Must End For All, FDIC Chief Says - (www.dealbook.blogs.nytimes.com)

Bubble-wrapping the China shop - (www.blogs.reuters.com)

Echoes of another great crash -- and the lessons we refuse to learn - (www.seattletimes.nwsource.com)

A Halloween beyond your nightmares - (www.theautomaticearth.blogspot.com)

The First-Time House-Buyer Tax Credit Scam - (www.online.wsj.com)

The GDP Mirage - (www.businessweek.com)

We Are in the Mother of All Carry Trades: Roubini - (www.cnbc.com)

Two economists see red flags again for stock market - (www.usatoday.com)

New-House Sales in "Surprise" Decline - (www.businessweek.com)

New house sales take "surprise" tumble - (www.msnbc.msn.com)

Fears of a New Chill in House Sales - (www.nytimes.com)

High Foreclosure Rates Spread into New Metro Areas - (www.cnbc.com)

Honolulu foreclosures rising - (www.starbulletin.com)

Courts Beginning to Side in Favor of Foreclosed Owners - (www.rismedia.com)

Real estate market won't reach 2007 levels again, EVER - (www.mysanantonio.com)

How Reno sale handled by bank on corporate welfare - (www.newsreview.com)

Thursday November 19 Housing and Economic stories

2009-11-18T18:38:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Manhattan default could rock California: CAs Two Biggest Pension Funds Could Lose Big in Manhattan Real Estate Deal - (www.insidebayarea.com) A multibillion dollar real estate deal in New York City gone sour could send shock waves through California. The states's two biggest retirement pension funds, the California State Public Employees Retirement System and the California State Teachers Retirement System, stand to lose a combined $600 million invested in one of the boldest real estate ventures in history. At the height of the real estate bubble in 2006, an investment group led by New York City real estate firm Tishman Speyer Properties and BlackRock Realty Advisors paid $5.4 billion for a pair of gigantic Manhattan apartment complexes known as Stuyvesant Town and Peter Cooper Village. The price seemed outrageous to many, but the company believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar. Three years later, to the glee of many New York renters, the tactic has been a bust. Tenants fought back, conversions happened much slower than expected and a state court ruled Thursday that about $200 million in the company's new rent increases were improper. Default looming: Real estate analysts say the ownership group is now just two to three months away from a likely default on the $3 billion mortgage it used, along with a $1.4 billion secondary loan, to buy the property. Foreclosure looms as a strong possibility. Even before the state Court of Appeals ruling on a lawsuit filed by the apartment complex tenants, ratings firms had estimated that the value of the 80-acre property, home to 25,000 people, had fallen to as little as $2 billion — far less than the outstanding loan balance. Given the math involved, "I wouldn't be surprised if they just want to walk on it," said Steve Kiritz, a senior vice president at the credit ratings agency Realpoint LLC. "The whole master plan with this project had been for Tishman to come in and ramp up the number of units that were paying market rent," he said. Regular folks — especially those who have had home financing problems of their own — might laugh at the folly until they realize that some of their own money might be tied up in the deal. Some of the biggest equity investors in the deal are public pension funds that manage retirement system benefits for millions of government employees. Florida's State Board of Administration had put $250 million into the project. It has already written off the entire investment as a loss. CalSTRS has already written off its $100 million stake, while CalPERS is still on the hook for $500 million. Future uncertain: Tishman, by comparison, stands to lose much less. Its share was $112 million, less than 2 percent of the purchase price. A spokesman for the company declined to comment Friday on the project's future. Tishman Speyer's co-chief executive, Rob Speyer, told The New York Times in a recent interview that win or lose on the court case, "the asset is going to require a restructuring." "Once the court case is resolved," he said, "we'll speak to our debt holders as well as our fellow equity investors." Teams of lawyers will likely spend the next few months fighting over who gets control of the complex and which lenders are entitled to get some money back, said Dan Fasulo, a managing director of Real Capital Analytics. How much they recover, and who is wiped out, may come down to how much appraisers decide the building is really worth, based on more realistic rent projections. "I had a number, put together last week, that I thought was fair. I don't think that number is fair anymore," Fasulo said. "No one could give you an honest appraisal right now."

How Goldman secretly bet on the U.S. housing crash - (www.therealnews.com) Goldman didn’t tell buyers of $40 billion in securities it was secretly betting the other way. In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies. Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk. Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws. "The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted." John Coffee, a Columbia University law professor who served on an advisory committee to the New York Stock Exchange, said that investment banks have wide latitude to manage their assets, and so the legality of Goldman's maneuvers depends on what its executives knew at the time. "It would look much more damaging," Coffee said, "if it appeared that the firm was dumping these investments because it saw them as toxic waste and virtually worthless." Lloyd Blankfein, Goldman's chairman and chief executive, declined to be interviewed for this article. A Goldman spokesman, Michael DuVally, said that the firm decided in December 2006 to reduce its mortgage risks and did so by selling off subprime-related securities and making myriad insurance-like bets, called credit-default swaps, to "hedge" against a housing downturn. DuVally told McClatchy that Goldman "had no obligation to disclose how it was managing its risk, nor would investors have expected us to do so ... other market participants had access to the same information we did." For the past year, Goldman has been on the defensive over its Washington connections and the billions in federal bailout funds it received. Scant attention has been paid, however, to how it became the only major Wall Street player to extricate itself from the subprime securities market before the housing bubble burst. Goldman remains, along with Morgan Stanley, one of two venerable Wall Street investment banks still standing. Their grievously wounded peers Bear Stearns and Merrill Lynch fell into the arms of retail banks, while another, Lehman Brothers, folded. To piece together Goldman's role in the subprime meltdown, McClatchy reviewed hundreds of documents, SEC filings, copies of secret investment circulars, lawsuits and interviewed numerous people familiar with the firm's activities. McClatchy's inquiry found that Goldman Sachs:

· Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they'd misled borrowers or exaggerated applicants' incomes to justify making hefty loans.

· Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.

· Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.

· Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

Obama Signs Law Giving Defense Department Authority to Exempt Photos From Freedom of Information Act - (www.commondreams.org) President Signs Law Giving Defense Department Authority to Exempt Photos From Freedom of Information Act. ACLU Renews Call for Secretary Gates Not to Block Release of Torture Photos. President Obama today signed into law a Homeland Security appropriations bill that grants the Department of Defense (DOD) the authority to continue suppressing photos of prisoner abuse. The amendment, which would allow the DOD to exempt photos from the Freedom Of Information Act (FOIA), is aimed at photos ordered released by a federal appeals court as part of an American Civil Liberties Union FOIA lawsuit for photos and other records related to detainee abuse in U.S. custody overseas, although it would apply to other photos in government custody as well. Earlier this month, the ACLU sent a letter to Secretary Robert Gates urging him not to exercise the authority to suppress the photos in their case, stating that the photos "are of critical relevance to an ongoing national debate about accountability." "We are disappointed that the president has signed a law giving the Defense Department the authority to hide evidence of its own misconduct, and we hope the defense secretary will not take advantage of that authority by suppressing photos related to the abuse of prisoners," said Jameel Jaffer, Director of the ACLU National Security Project. "Secretary Gates should be guided by the importance of transparency to the democratic process, the extraordinary importance of these photos to the ongoing debate about the treatment of prisoners and the likelihood that the suppression of these photos would ultimately be far more damaging to national security than their disclosure. The last administration's decision to endorse torture undermined the United States' moral authority and compromised its security. A failure to fully confront the abuses of the last administration will only compound these harms." Another provision contained in the new law allows the transfer of detainees from Guantánamo Bay to the U.S. for prosecution. "This law allows the administration to transfer prisoners to the U.S. for criminal trials in the federal courts, and the administration should now do exactly that," said Jaffer. "The military commissions at Guantánamo are not just unlawful but unnecessary. The federal courts are fully capable of prosecuting terrorism suspects while protecting both national security interests and fundamental due process. It's time to shut down Guantánamo, transfer the military commissions trials to federal courts that uphold the rule of law, and transfer prisoners whom the administration does not intend to charge to countries where they won't be in danger of being tortured. Indefinite detention without charge or trial undermines the most basic values of justice and fairness."

State's tax withholding bump-up starts today - Sacramento Business ... - (www.sacbee.com) Some call it California's cash advance. Effective today, the amount of state income taxes withheld from California workers' paychecks will increase 10 percent. That might sound like a tax increase, but state officials insist that's not the case. Tax experts agree, saying this bump up in withholding taxes gives the state some wiggle room in managing California's treasury in a year that saw a titanic political battle to get a handle on the state's budget. The increased withholding comes on top of a 0.25 percent state income tax increase and a reduction in the dependent credit, also enacted as part of the state budget. Essentially, the accelerated withholding program does not generate additional tax revenue. Instead, it front-loads it, bringing cash in more quickly in an effort to keep the state treasury stocked with funds, which is where the "cash advance" tag comes in. State officials have estimated that the move will generate an additional $1.7 billion in the current fiscal year. The bottom line is that a worker's total annual income tax bill won't rise, and the amount owed at April 2010 tax time will be adjusted accordingly. Simply put, if you owe taxes when April 15 comes along, the balance due will be less based on what was withheld from your paycheck in the last two months of the year. If you're due a refund, you can expect a little more. Taxpayers can evade the accelerated withholding schedules simply by increasing the number of allowances on the withholding forms filed with their employers. That won't make much difference for the calendar 2009 tax year, but it will have a bigger impact for 2010 and perhaps beyond. "The changes that are happening are only for about nine weeks for 2009, so the impact for 2009 is minor," said Brenda Voet, spokeswoman for the state Franchise Tax Board. "But we're trying to warn people to go to their personnel and human resources departments for 2010 to make sure they have the proper amount of tax withheld and make any adjustments they need to make. We don't want people to be surprised by anything." For low-income earners, the withholding change has minor effects. FTB said a single person earning $17,000 annually with no dependents and one withholding allowance will see his or her weekly withholding rate go to $2.68 compared with $2.44 prior to the change, a difference of 24 cents. That same person with five or 10 withholding allowances will see no change. Those with higher wages will experience bigger impacts.

CIT Bankruptcy to Leave Small Businesses Stumped - (www.cnbc.com) CIT Group bankruptcy filing could push at least some small businesses it finances to look for a new lender, but finding new credit will be tough. CIT filed for bankruptcy protection on Sunday, and said its creditors have already approved its reorganization plan. The bankruptcy was long expected and followed a struggle to deal with its debt burden amid the credit crunch and recession, and paves the way for it to restructure its liabilities. Under the plan announced on Sunday, CIT expects to reduce total debt by about $10 billion. The company's operating units are not in bankruptcy, and plan to continue lending. But the company's long-term prospects are uncertain and the bankruptcy could leave more than one million small and medium-sized businesses looking for another source of funding, even if CIT's doors are still open, lawyers said. Clients for CIT's factoring business are in a particular bind when it comes to finding alternative financing since CIT is by far the biggest company in the sector, where lenders buy unpaid customer bills from companies. What's more, many of the factoring clients are in the garment industry, where they already face a bleak holiday season and where credit is generally tight. "In the best of times you would have seen a situation where other lenders would certainly have been willing to consider getting into this business," said Mark Jacobs, a partner in law firm Pryor Cashman's bankruptcy group. "In the current environment, given the constraints on credit generally, there's not enough capacity out there," he added. In the first six months of the year, CIT lent just $65 million in Small Business Administration loans, one percent of the total lent in this category over that time period. In 2008, CIT was the top SBA lender in dollar terms, providing 6 percent of all SBA lending, according to the National Small Business Association. At the same time, banks are also broadly cutting back on lending to small and medium-sized businesses. Banks' lending to small companies fell by about 2 percent, or $14.8 billion, for the year through June, according to data from the Federal Deposit Insurance Corp. The NSBA had expressed its concern about a potential CIT bankruptcy and in July wrote to U.S. Treasury Secretary Timothy Geithner to ask the government to consider assisting CIT. It may discuss a similar lobbying effort again, spokeswoman Molly Brogan said in an interview before the bankruptcy filing.

OTHER STORIES:

Here Comes Tarp on Steroids - (www.alternet.org)
Video: Fox "News" Exclusive: US Army Recruitment Commercial as News - (www.dailypaul.com)

CIT files 5th largest U.S. bankruptcy - (money.cnn.com)

Geithner: Deficit reduction has to wait - (money.cnn.com)

10 most expensive colleges - (money.cnn.com)

'My biggest mistake' - (money.cnn.com)

Chrysler offers buyout to 23,000 workers - (money.cnn.com)

"Money Multipliers Have Collapsed Everywhere...Confidence Is Missing. I Don't See Any Way To Stabilise M3 In Such Circumstances" - (www.washingtonblog.com)
Will the Rich Evolve Into Different Species? - (online.wsj.com)
Time To Cut 6% of Workforce by Thanksgiving - (www.nypost.com)

Soros: Bloodletting Still To Come for LBOs & Commercial Real Estate - (www.bloomberg.com)
Roubini: The Mother of all Carry Trades - (www.cnbc.com)
Oil Company Denbury to Buy Encore for $3.2 Billion - (www.cnbc.com)

Brace for a Volatile Trading Week, With Fed, Jobs Report - (www.cnbc.com)

Auto Sales Are on the Rise but Still at 1980s Levels - (www.cnbc.com)

US Ford Workers Reject Proposed Concessions - (www.cnbc.com)

Retailers Expected to Report Sales Rose in October - (www.cnbc.com)

The Most Secretive Financial Center Is...Delaware? - (www.cnbc.com)

Wednesday November 18 Housing and Economic stories

2009-11-17T18:15:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Edmunds.com fires back at White House cash-for-clunkers slam‎ - (www.csmonitor.com) Edmunds.com CEO Jeremy Anwyl is defending his company’s claim that the Cash for Clunkers program was basically a lemon, saying a recent report simply reiterated what’s well known in the car industry: Incentive programs are “eyewateringly expensive.” After taking on Fox News and the US Chamber of Commerce as part of a new media strategy aimed at perceived political opponents, the White House turned its blog on Edmunds’ critical report of the $3 billion Cash for Clunkers program. In a post titled “Busy covering car sales on Mars, Edmunds.com gets it wrong (again) on Cash for Clunkers,” the White House charged the firm with “trying to grab headlines and get on cable TV” while the analysis doesn’t withstand “basic scrutiny.” Founded in 1966, Edmunds.com is the Santa Monica, Calif.-based publisher of the Blue Book series. Basically a consumer company supplying industry analysis to subscribers, Edmunds.com also offers the “True Market Value” tool. So what did Edmunds do to warrant a snarl from the White House? For one thing, its report did grab headlines, including a well-read Monitor report. According to Edmunds, only 125,000 of the 690,000 cars sold during the taxpayer-funded promotion were sales inspired by the program as opposed to those that would have happened anyway. Edmunds then divided that number by the total price tag and voilà: Each car purchased cost the American taxpayer $24,000. Besides the no-nonsense price tag (an Edmunds’ specialty) there’s nothing new about the premise of the report, Anwyl contends. (The White House used dealer reports to highlight the program’s success while Edmunds used comparative historical sales figures to get its numbers.) “We got real math behind this for the first time,” says Mr. Anwyl in a phone interview, before landing a friendly jab referencing this summer’s “Beer Summit” at the White House. “We need to send an invitation to the President to come out, we’ll have a beer and a photo opportunity, and walk him through the data. He might find it eye-opening.” More seriously, Anwyl says: “It’s shocking and somewhat troubling that this is something the White House would pick up. This administration more than any other administration is invested heavily in the auto industry, so you would hope that they would had done a little more homework than their response suggests.” The White House post instead quoted the President’s own Council of Economic Advisers (CEA) pointing out that the program increased GDP by 1.7 percent in the third quarter and will create 70,000 jobs in the second half of 2009. It took issue with Edmunds’ notion that 80 percent of the payback from the program will take place in 2009, leaving little residual effect on the auto industry into 2010. “In other words,” writes Macon Phillips, the White House’s “new media” chief, “all the other cars were being sold on Mars while the rest of the country was caught up in the excitement of the Cash for Clunkers program. The CEA’s analysis is transparent and comprehensive … Edmunds.com, on the other hand, is promoting a bombastic press release without any public access to their underlying analysis. So put on your space suit and compare the two approaches yourself.”

The Old G.M. Is Dead, but Its Shares Live On - (www.nytimes.com) A FUNNY thing happened to its stock when General Motors went bankrupt. The shares did not go directly to zero, even though it appeared clear that the old shares were worthless. The new General Motors, owned by the government and a union health fund, may or may not prosper, but the old shareholders will lose out either way. Market regulators were appalled. “They asked me whether Grandma Jones was being stupid” and buying the stock because she did not understand what was happening, said R. Cromwell Coulson, the chief executive of Pink OTC Markets, the market where dead stocks go to trade. The regulators promptly forced a change in name and ticker symbol, hoping that would clear up the confusion. The old company’s new name is Motors Liquidation Company, with a ticker symbol of MTLQQ. It trades in Mr. Coulson’s market. But it did not work. The shares still trade for about 60 cents each, giving Motors Liquidation a market capitalization of about $370 million. Not bad for a worthless piece of paper. There has been absurd trading in bankrupt shares before, but it appeared to Mr. Coulson that this trading was going on longer than in past deals. Now he says he thinks he knows why. A new rule of the Securities and Exchange Commission, which took effect in July, has made it virtually impossible for anyone to sell Motors Liquidation shares short, and is forcing those who had short positions to close them out. That is good news for shareholders, if not for believers in efficient markets. “I think more Grandma Joneses are getting a chance to sell G.M. at a higher price,” Mr. Coulson said. “The structure of the market is, if you can’t borrow it, you can’t sell it short.” In a short sale, a traders normally sells borrowed shares and then pay them back with shares purchased later, at what they hope will be a lower price. As can be seen from the accompanying graphic, the outstanding short position in Motors Liquidation stock has been steadily falling since the company went bankrupt. Contrast that to another prominent bankruptcy a few years ago, of the old Delta Airlines. It is clear that some people were able to sell the Delta shares short during the bankruptcy, and that there was a flood of short-selling shortly before the shares were formally canceled. Under former rules of long standing, traders were supposed to sell a stock short only if the shares could be borrowed, but there were exceptions, including one for market makers. Under the new rule — adopted because of complaints about so-called naked short-selling, in which there was no borrowing — it is almost impossible to do that legally. Moreover, the number of shares available to borrow declines when a company goes into bankruptcy. Institutional investors, who are usually willing to lend out shares, sell their stake and must recall shares they have lent. Fewer shares are held in margin accounts, another source of shares for lending. If Mr. Coulson is right, then people with short positions are gradually being forced to buy the shares from real shareholders. Other short-sellers cannot get into the game. That process may also be good news for the government. Under tax law, no tax is due on short-sale profits until the shares have been repurchased. So if the position can be kept open indefinitely, there is no tax to be paid, even though the profits can be withdrawn based on the minimal value of the shares. Short-sellers who are forced to cover will also have to pay taxes.

Late Harvest Sows Problems for Farmers - (online.wsj.com) Most years, Larry Thorndyke has his corn fully harvested by Halloween. This year, almost all of his 1,400 acres of corn are still in the field, exposing his farm to crop disease, bad weather and a potential financial nightmare. "It's getting scarier. The longer we go, the more mold keeps growing and the more ears fall off," said the 50-year-old farmer, taking a break from steering his combine over dark, wet dirt Thursday, his first full day of harvesting corn this season. "Every day you wait, you lose more money." The combination of a late planting season and an unusually cool, wet fall is causing one of the latest harvests in recent memory. On Monday, the U.S. Department of Agriculture said just 20% of the corn crop had been harvested in the major corn-producing states, compared with 58% on average by this point in 2004 through 2008. Farmers also had brought in just 44% of the soybean crop, versus 88% on average over the past five seasons. The slowdown complicates life for farmers and threatens to take a bite out of their earnings in a year when net farm income already was expected to be 38% below last year's near-record high. "Most of the farmers' income is still out there in the field," said Loyd Brown, president of Hertz Farm Management, a Nevada, Iowa, company that manages more than 1,800 farms with some 430,000 acres across the Midwest. "They're anxious to get it harvested and anxious to know where they stand for the year." Rain is good for growing crops, of course, as long as it stops in time for crops to dry out enough to be stored without rotting. The longer crops wait in the fields, the greater the risks of mold and other damage. A dry spell never took hold this year, keeping many farmers out of their fields, especially in eastern Iowa and Illinois. Crop losses from mold are starting to hit hard, particularly in the warm Mississippi Delta region. Alabama Agriculture Commissioner Ron Sparks warned Friday of a potential crisis for the state's farmers if they don't get dry weather soon. Because corn hasn't had a chance to dry out in the field, many farmers are being forced to pay extra to have grain elevators dry their crops.

Home-Loan Banks' Loss - (online.wsj.com) The Federal Home Loan Banks, still struggling with soured investments in mortgage securities, had a combined third-quarter net loss of $165 million. The loss reflected write-downs totaling $1.04 billion in the value of private-label mortgage-backed securities. Such securities aren't backed by any U.S. government entity. Some of the home loan banks invested heavily in such securities during the housing boom, partly to increase their interest income. In recent quarters, these banks have repeatedly had to write down the value of those securities as mortgage defaults and foreclosures surge. The 12 regional home loan banks are separately owned and operated as cooperatives and report individual results, but they also produce combined results quarterly for the convenience of debt investors. The banks are jointly liable for debt issued by any of them. The write-downs have eroded capital at some of them, forced the reduction or elimination of dividends and raised concerns that some of the banks eventually could need capital infusions or bailouts. In the year-earlier quarter, the 12 banks had combined net income of $506 million. Five of the 12 banks -- those in Boston, Chicago, Pittsburgh, San Francisco and Seattle -- had losses in the latest quarter, and the others, which generally invested less in private-label securities, were in the black.

Angry Americans feel they are still in slump - (www.ft.com) If Barack Obama had been told last November that the economy would have moved out of recession by July – as Thursday’s gross domestic product numbers indicated – he might have broken out the champagne. However, the White House was more funereal than celebratory in keeping with the opinion of most voters. For most Americans, the return to growth is a pure abstraction. Next week’s jobless numbers, which is likely to see another 200,000 joining the unemployed, will be the more accurate reflection of the public’s mood, which alternates between angry and sullen. Jobs growth always lags behind economic growth and forecasters project unemployment will climb from its current 9.8 per cent to 10.3 per cent by early 2010. Since jobs and wages dominate most people’s perception of the health of the economy, Mr Obama faces the awkward prospect that most Americans will still feel like they are in recession in the build-up to next year’s mid-term elections. To that extent his difficulties are predictable. Remember George Bush senior, who was defeated by Bill Clinton in 1992 in the “economy, stupid” election even though the US had returned to growth several months before. However, neither Mr Bush senior, nor any recent US president, has simultaneously had to grapple with a jobless, or job-loss, recovery and an electorate seething with resentment against Washington’s generous treatment of the perceived authors of the recession – Wall Street. Previous downturns were induced by sharp interest rate rises to quell the consequences of overheating. In most people’s view, this recession was caused by the speculative greed of bankers – an entirely different kind of downturn that fits the plot of a morality play. Unlike most morality plays, however, this one appears to be rewarding the baddies. While the job numbers continue to deteriorate, Wall Street is enjoying good times again and preparing another season of huge bonuses. Goldman Sachs, alone, is on track to pay out $21bn (€14bn, £12.7bn) in bonuses by the end of the year. Since it repaid the direct bailout money it received from Washington – as opposed to the implicit subsidies from which it continues to benefit – it was not subjected to the pay restraints announced last week by Ken Feinberg, Mr Obama’s “pay czar”.

OTHER STORIES:

Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash - (www.bloomberg.com)

VIX Surges Most in Year as Stocks Drop on Consumer, CIT Concern - (www.bloomberg.com)

Lurking doubts launch a sell-off - (www.washingtonpost.com)

China’s Recovery Strengthens, Adding Room for Stimulus Cuts - (www.bloomberg.com)

China Warns of World Slump If Stimulus Withdrawn - (www.bloomberg.com)

Mexico Bonds Drop Most in 9 Months on Rating Concern - (www.bloomberg.com)

Brazil Sept. Budget Deficit Widens to Nine-Month High - (www.bloomberg.com)

Waning stimulus hits consumer spending - (www.ft.com)

Geithner: economic recovery won't come quick - (news.yahoo.com/s/ap)

Fed Summons CEOs of 28 Top U.S. Banks to Meet With Supervisors - (www.bloomberg.com)

Goodbye to all that stimulus? - (www.reuters.com)

Forecast of muted US revival in 2010 - (www.ft.com)

CIT Group Files for Chapter 11 Bankruptcy Protection - (www.bloomberg.com)

Can Citigroup Carry Its Own Weight? - (www.nytimes.com)

Nine U.S. banks seized in largest one-day haul - (www.reuters.com)

CIT's Swoon Hits Taxpayers - (online.wsj.com)

U.S. Bancorp Acquires Nine Failed Banks, Accelerating Growth - (www.bloomberg.com)

We must not be too late with starting the Big Exit - (www.ft.com)

Tuesday November 17 Housing and Economic stories

2009-11-16T18:13:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Ron Paul On Bailouts, Wall Street Fraud And Washington Capture – (www.dailybail.com) Good Ron Paul video: Some exerpts: “Well, they take care of their own. There’s a great deal of influence in Washington from Wall Street. And I think most people have known about it but they’re really coming to the understanding [of] how it really works. If things are going well when the bubble is being formed and the Fed makes easy credit [then] a lot of people make a lot of money. But that’s doomed to fail. The bubble bursts and rightfully the thing to do then is to put people in jail if they committed fraud and the people who are bankrupt, let them go bankrupt. Well, we didn’t do that. Very little fraud was prosecuted and the people who were supposed to go bankrupt got bailed out. Some went bankrupt. If they didn’t have enough influence like Lehman Brothers, they went bankrupt, but somebody like Goldman Sachs, they’re in a much better position so they really got the bailout and they’re making tons of money. So it’s the system that is so bad.” On regulating (from 3:48): “Well the regulation has to be on the cause of the problem. The cause of the problem is easy credit, so the regulation has to be on the Federal Reserve. Then if things get out of whack, there are still regulations, it’s not like there wouldn’t be any regulation, but the regulations come in a different manner, they come through bankruptcy. We didn’t permit the bankruptcies. We did the bailing out. We perpetuated the problem by inflating the currency and bailing out the people that were benefiting, so fraud is a very significant problem that government should be involved in, you should deal with that, but the government is committing the fraud when they create this money and deal with their special interests. It’s a fraudulent monetary system. They run a counterfeiting operation, so yes, the regulations have to be there, but we can’t allow the central bank to create the bubble and say that it is unstable and we can prevent the problems by regulations. I think it’s all twisted around. The regulations have to come first….”

Calif. firm, execs charged in bond bid-rigging - (news.yahoo.com/s/ap) A politically connected financial firm and two of its executives were indicted Thursday for what prosecutors say was a bid-rigging scheme in the municipal bond business. The charges in the nine-count indictment filed Thursday in Manhattan federal court against CDR Financial Products Inc. are the first resulting from the Justice Department's probe of the mammoth municipal bondsindustry. CDR, based in Beverly Hills, Calif., has also come under scrutiny for its ties to New Mexico Gov. Bill Richardson. The indictment alleges that two CDR executives and one former executive from the firm engaged in bid-rigging conspiracies in which CDR was hired by public entities that issue municipal bonds to act as their broker and conduct a supposedly competitive bidding process. "This case is fundamentally about collusion, the illegal rigging of a purportedly competitive bidding process," said Joseph Demarest, head of the FBI's New York office. The result of the scam, Demarest said, was less money for the states, cities and counties that hired CDR. CDR is also known as Rubin/Chambers, Dunhill Insurance Services Inc. Prosecutors say CDR's company's owner and president, David Rubin, vice president Evan Zarefksy and formerchief financial officer Zevi Wolmark took part in two wire fraud schemes. The three are also charged with obstructing the IRS. Because such bonds are tax-exempt, the competitive bidding process is regulated by the IRS. Prosecutors said the company secretly manipulated the bidding process to enrich themselves and the bidding companies at the expense of the municipalities, the IRS or both. Under the scheme, CDR would arrange in advance which company would win a particular bid for bond business and arrange kickbacks to CDR in the form of inflated fees, authorities said. In one 2006 state bond deal, one of the bidders agreed to pay CDR a $475,000 kickback, according to the indictment. The municipal bond business is huge: In 2007 and 2008, about $800 billion worth of municipal bonds were issued across the country. If convicted of the most serious charge against them, the three men face a maximum prison sentence of 20 years. Rubin's lawyer Donald Etra said the charges "have no basis." "The bottom line is that David Rubin has done nothing wrong," Etra said. "He's a brilliant businessman and a prominent philanthropist." Lawyers for the other two men could not immediately be located. The company could face a maximum fine of $100 million for the bid-rigging charge. Federal prosecutors in New Mexico had also investigated CDR for its links to Richardson, the Democratic governor. The investigation forced Richardson to bow out of a possible Cabinet position in the Obama White House. Rubin and his firm contributed $110,000 to Richardson political committees from 2003 to 2005. The largest of those contributions, $75,000, was made less than a week before CDR was selected in June 2004 by the New Mexico Finance Authority to handle the reinvestment of idle bond proceeds. CDR was hired as a financial adviser on state transportation bond deals, which generated almost $1.5 million in fees for CDR in 2004-2005.

Fed: Mortgages Overwhelmingly Government-Owned Now - (www.bloomberg.com) The U.S. housing market faces a “difficult” return to normal because government-sponsored enterprises own or guarantee most mortgage lending while alternative sources have disappeared, said an economist with the Federal Reserve Bank of San Francisco. “Fannie Mae, Freddie Mac, and Ginnie Mae now own or guarantee an overwhelming share of originations,” bank senior economist John Krainer wrote in a paper released today. “At the same time, non-agency mortgage securitization and loans retained in lender portfolios have largely dried up.” The paper underscores the challenge that economists at the San Francisco Fed, one of 12 regional Fed banks, believe that the economy faces as it begins to emerge from the worst recession in seven decades. Bank researcher Glenn Rudebusch concluded in another paper this month that the economy is not likely to return to full employment soon even though the recession is “almost certainly” over. The U.S. government seized control of Fannie Mae and Freddie Mac in September 2008, after a surge in mortgage defaults threatened to topple the companies. The Treasury Department has committed as much as $400 billion to keep the two enterprises afloat while President Barack Obama’s policy makers figure out how to restructure their operations. “With the vast majority of current mortgage lending now intermediated in some form by the GSEs, it will be difficult for the housing market to return to normal,” Krainer wrote.

New York Feds Secret Choice to Pay for Swaps Hits Taxpayers - (www.bloomberg.com) In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb. Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter. Among AIG’s bank counterparties were New York-based Goldman Sachs Group Inc. and Merrill Lynch & Co., Paris-based Societe Generale SA andFrankfurt-based Deutsche Bank AG. By Sept. 16, 2008, AIG, once the world’s largest insurer, was running out of cash, and the U.S. government stepped in with a rescue plan. The Federal Reserve Bank of New York, the regional Fed office with special responsibility for Wall Street, opened an $85 billion credit line for New York-based AIG. That bought it 77.9 percent of AIG and effective control of the insurer. The government’s commitment to AIG through credit facilities and investments would eventually add up to $182.3 billion. Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations. Subprime Mortgages: CDOs are bundles of debt including subprime mortgages and corporate loans sold to investors by banks. Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public. The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III. Habayeb, who left AIG in May, did not return phone calls and an e-mail. Goldman Sachs: The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG. He declined to comment for this article. In his resignation letter, Friedman said his continued role as chairman had been mischaracterized as improper. Goldman Sachs spokesman Michael DuVally declined to comment. AIG paid Societe General $16.5 billion, Deutsche Bank $8.5 billion and Merrill Lynch $6.2 billion. New York Fed: The New York Fed, one of the 12 regional Reserve Banks that are part of the Federal Reserve System, is unique in that it implements monetary policy through the buying and selling of Treasury securities in the secondary market. It also supervises financial institutions in the New York region. The New York Fed board, which normally consists of nine directors, in November 2008 included Jamie Dimon, chief executive officer of JPMorgan Chase & Co., and Friedman. The directors have no direct role in bank supervision. They’re responsible for advising on regional economic conditions and electing the bank president. Janet Tavakoli, founder of Chicago-based Tavakoli Structured Finance Inc., a financial consulting firm, says the government squandered billions in the AIG deal. “There’s no way they should have paid at par,” she says. “AIG was basically bankrupt.”

OTHER STORIES:

Corporate Censorship Of Internet Proposed In "Internet Freedom Act" - (www.dvorak.org)

Why does Gov't want housing to be expensive? - (www.washingtonpost.com)

Housing bottom? Analysts wary - (www.heraldtribune.com)

Goldman Sees False Bottom, Merrill Sees Treat - (www.bloomberg.com)

U.S. House Prices Could Fall Another 10% - (www.seekingalpha.com)

Housing Prices May Fall Further - (www.forbes.com)

US house prices ready for a freefall - (theautomaticearth.blogspot.com)

Foreclosures Abound; Banks Pretend Otherwise - (www.glendalenewspress.com)

Judge sends couple to prison in $79-million mortgage fraud - (www.tampabay.com)

Consumer Confidence Declines in U.S. - (www.nytimes.com)

U.S. stock market's climb tied to dollar's fall - (www.marketwatch.com)

U.S. Equities Will Drop Painfully, Grantham Says - (www.bloomberg.com)

Pellegrini Says Shorting U.S Debt Attractive Bet - (www.bloomberg.com)

Soros Launches Effort to Battle Free-Market Zeal - (www.newsweek.com)

9 Signs of America in Decline - (www.usnews.com)

Twelve Reasons For A Job Loss Recovery - (www.Mish)

Underemployed compound CA's jobless troubles - (www.sfgate.com)

Owner not happy with loan re-modification, tortured loan officers - (www.rocktrueblood.blogspot.com)

Monday November 16 Housing and Economic stories

2009-11-15T18:16:00.000-08:00

KeNosHousingPortal.blogspot.com

TOP STORIES:

Boeing picks Charleston for new 787 line - (seattletimes.nwsource.com) Boeing's board has voted unanimously to build a second 787 final assembly plant in Charleston. "We're taking prudent steps to protect the interests of our customers as we introduce the 787-9 and ramp up overall production to 10 twin-aisle 787 jets per month," said Jim Albaugh, president and CEO of Boeing Commercial Airplanes, in a prepared statement. South Carolina offered the company $170 million in upfront grants for startup costs, plus multiple tax breaks that would be worth tens of millions of dollars more. The legislation assumes the company will invest $750 million and create 3,800 new jobs in South Carolina within seven years — if it doesn't create that many jobs, it doesn't get any of the money. Boeing's decision could vastly increase the footprint it established in Charleston through primary partners on the 787 program. At Boeing Charleston, the plant where Boeing bought out co-owner Vought this summer for $1 billion, about 900 workers fabricate the 787's single-piece rear-fuselage barrels out of composite plastic. At the adjacent Global plant, owned 50-50 by Boeing and Alenia, 1,600 workers assemble the Dreamliner's central fuselage. Albaugh said that "while we welcome the development of this expanded capability at Boeing Charleston, the Puget Sound region is the headquarters of Boeing Commercial Airplanes. Everett will continue to design and produce airplanes, including the 787, and there is tremendous opportunity for our current and future products here. We remain committed to Puget Sound." Boeing said that until the second 787 assembly line is operational in North Charleston, the company plans "transitional surge capability" in Everett to ensure the successful introduction of the 787-9, the first derivative model of the 787. "When the second line in Charleston is up and operating, the surge capability in Everett will be phased out," Boeing said without giving specifics. Boeing's decision to add a 787 line in South Carolina will make it that much harder for Washington to pull itself out of its jobs slump. High-paying jobs such as those at Boeing support other jobs throughout the local economy — a Boeing worker buys a new fridge, the fridge salesman buys a sandwich for lunch, the sandwich-maker renews her gym membership, and so on. The more people work in well-paying jobs, the more jobs are created further down the economic food chain. Local economist Dick Conway, who has studied Boeing's impact on the regional economy for decades, estimates that each Boeing job generates spending that supports 1.7 other local jobs — one of the highest "multipliers" of any private-sector employer. That means every job that Boeing creates in South Carolina represents nearly three jobs that won't be created in Washington.

Boeing rejects Murray offer on further talks - (seattletimes.nwsource.com) A statement from Boeing this morning appears to reject an offer by Sen. Patty Murray to revive the talks between Boeing and the Machinists union in a last-ditch effort to save the second 787 line for Everett. "No decision has been made" between Charleston, S.C., and Everett, said Boeing spokesman Tim Healy. "But we have the information we need to make the decision. We were very clear with the union about when we needed their best and final offer." Healy said he could not offer any clarification beyond that statement. But the clear implication is that Murray's attempt earlier this morning to revive the talks has come too late. Earlier this morning, Murray's spokeswoman Alex Glass described what sounded like a Hail Mary pass. "The Senator has placed calls to the Machinists and Boeing, asking them to sit down in her office," Glass said. "The machinists have agreed. We are waiting to hear back from the company." Murray was involved in facilitating talks between the two sides over the past weekend. There was no indication that the new effort would succeed. A person close to the talks late Tuesday said they were effectively dead and that Boeing was likely to choose Charleston, S.C. for the second line. "We're giving it everything we've got," Glass said. "The Senator feels there is still room for negotiation. For the good of our workforce and the company, she wants to make sure that they talk again."

State offers no goodies for new Boeing 787 line - (seattletimes.nwsource.com) Washington state will not offer new financial incentives to induce Boeing to put a second assembly line for its 787 Dreamliner beside the first one in Everett rather than in Charleston, S.C. And state officials said they are deliberately staying out of the one contentious issue that could change the competitive picture here: Boeing's push for a no-strike agreement with the Machinists union. Gov. Chris Gregoire released a 32-page document Monday that outlined the business case for building a second 787 line here. It includes no new concessions specific to Boeing or the aerospace industry, but instead summarizes the state's existing advantages as a center of aerospace manufacturing. Boeing needs a second assembly line to get the production rate up to 10 jets a month by the end of 2013. Last Friday, Gregoire presented the document to the new CEO of Boeing Commercial Airplanes, Jim Albaugh. He is expected to send a recommendation to the Boeing board in Chicago possibly as soon as the end of October, with a firm decision on the assembly site by the end of the year, state officials said. Rogers Weed, director of the state Department of Commerce and chairman of the Governor's Aerospace Council, said Monday some 700 to 900 jobs are immediately at stake. "That's a lot of jobs, especially in this kind of economy," Weed said in an interview. He acknowledged that manufacturing costs are higher here, but said the quality of work is higher than in Charleston, the risks to the already much-delayed 787 program are lower, and the broad infrastructure support for the aerospace industry is unmatched elsewhere. Boeing will be able to build the Dreamliner more flexibly and more quickly if it works with the aerospace work force in Washington that already has valuable experience operating the first assembly line, Weed said. The governor's document says Boeing will benefit from "the transfer of learning curve efficiencies" if the new line is alongside the existing one in Everett. That judgment was echoed by International Association of Machinists (IAM) district President Tom Wroblewski. "Nobody has shown me how having two separate assembly lines on opposite ends of the continent would be more efficient than having two of them next to each other in Everett," he said in a statement Monday. Under previous Gov. Gary Locke, Washington secured the first 787 production line for Everett after an intense site-selection competition in 2003. To win that competition, the state offered tax breaks and other incentives worth around $3 billion over 20 years. South Carolina is expected to offer Boeing financial enticements. State Republicans responded critically to the lack of specific incentives in Gregoire's business-case presentation. "I am disappointed to learn that the state has not seen fit to offer additional financial incentives," said U.S. Rep. Dave Reichert, R-Auburn, in a statement. "The 787 being built in South Carolina would be a blow. ... We must think creatively and strategically."

US Airways cutting 1,000 jobs, reducing flying - (finance.yahoo.com) Struggling US Airways said Wednesday it will cut some 1,000 jobs next year, shift nearly all of its flying to its three hubs and Washington, and suspend several international routes. The retrenching is aimed at putting its airplanes where the money is -- its hubs at Philadelphia, Phoenix, and Charlotte, North Carolina, as well as Washington. US Airways said flying from its hubs has been profitable. Once the changes are made early next year, 99 percent of its flying will be to or from those cities, up from 93 percent now. It's also keeping its US Airways Shuttle between Boston, New York, and Washington, although some of the Boston flying is shifting to its smaller Embraer 190 jets. US Airways has said its domestic flying will drop slightly next year, while international flying will rise a little. The carrier is scaling back international flying from Philadelphia. It will suspend flights between there and London Gatwick; Birmingham, England; Milan, Italy; Shannon, Ireland; and Stockholm. It will also formally give up its government permission to fly between Philadelphia and Beijing, which it never used. Us Airways said its first flights across the Pacific will now be on its planned route to Tokyo, beginning in 2012 "or when market conditions become favorable." The company said revenue on trans-Atlantic routes has fallen $273 million this year through September. The Tempe, Arizona-based airline said the job cuts will happen in the first half 2010 and will include 600 passenger and ramp service workers, 200 pilots, and about 150 flight attendants. The airline will close crew bases in Las Vegas and at LaGuardia airport in New York on Jan. 31, and in Boston on May 2.

Crisis reveals worry about retirement funds - (www.bloomberg.com) American savers watched in horror this year and last as the balances on their retirement accounts evaporated with the meltdown in the financial markets. Fast forward to now and the markets have stabilised, taking these accounts back toward break even or better. But the experience has left many investors cold on so-called 401(k) plans and launched a debate in the money management industry and on Capitol Hill on whether the $2,458bn system is inadequate. "The economic collapse has fuelled Americans' concerns about whether they will have enough savings to last them throughout retirement," George Miller, a Democratic congressman from California, said earlier this year. "[They] are justified in losing confidence with our financial system and their ability to save for retirement." Through 401(k) plans, workers in the US can save a portion of their salaries while deferring income taxes until they withdraw the money in retirement. Employers often match the employee contribution at some level and the money typically is invested in mutual funds. The plans gained in popularity over the past two decades as companies phased out traditional pensions and concern grew that Social Security, the government programme, would fall short. Among the benefits compared to traditional pensions are that workers can take 401(k)s with them when they change jobs and the account is ringfenced against the failure of the employer, but it does not guarantee a payout in retirement. At the end of 2007, the amount of money in 401(k)s topped $3,000bn, according to the Investment Company Institute, about double the $1,541bn in 1998. When financial markets around the world dropped sharply in 2008, 401(k) plans, too, were hit. The average workplace savings account at Fidelity Investments, the largest provider of 401(k)s, dropped 27 per cent in 2008 to $50,200 from $69,200 at the end of 2007. Calls to Fidelity's hotline spiked to more than 100,000 a day in the period after Lehman Brothers collapsed, when credit froze and the Dow Jones Industrial Average fell below 9,000 for the first time in five years. By March 30, that balance was $47,500. "The drop was so steep that people were wondering if we would ever come back," said Michael Doshier, vice-president of Fidelity's workplace investing group. "The surprise has been how steep the return back was."

Apollo Shares Plunge as SEC Starts Accounting Inquiry - (www.bloomberg.com) Apollo Group Inc., the biggest publicly traded U.S. educator, plunged the most in more than 19 months in New York trading after the company said its accounting is being investigated by the U.S. government. The Securities and Exchange Commission’s Enforcement Division has begun an informal probe of Apollo’s “revenue recognition,” the Phoenix-based company said yesterday in a statement. The company also expects to pay about $80.5 million in settlement and legal costs for a lawsuit related to its recruitment practices, according to the statement. Apollo was forced to restate earnings in 2007 because stock-option grants to executives between 1994 and September 2006 were incorrectly dated. Chief Financial Officer Kenda Gonzales and Chief Accounting Officer Dan Bachus resigned in November 2006 following the company’s investigation. Apollo didn’t say when the alleged misstatement of revenue occurred. “Management has provided little information that would enable investors to assess what the issue can be,” said Ariel Sokol, a Wedbush Securities Inc. analyst in New York who recommends selling the shares, in an e-mail yesterday. “The issue investors need to ask is whether this is company-specific or industry wide.” Apollo fell $12.91, or 18 percent, to $60.06 at 4:29 p.m. in New York Stock Exchange composite trading. It was the biggest drop since March 28, 2008 when the company’s earnings missed analyst estimates. Before today, Apollo had fallen 4.8 percent in 2009, compared with an 18 percent gain in the Standard & Poor’s 500 Index. University of Phoenix: Bridgepoint Education Inc., a for-profit provider of college classes that said last month that it was undergoing a federal audit of financial aid, fell $1.42, or 8.7 percent, to $14.87. Grand Canyon Education Inc., also a for-profit educator, fell $1.42, or 7.7 percent, to $17.14. RBC Capital Markets analyst Robert Wetenhall cut his rating on Apollo Group to “underperform” from “sector perform.” Morgan Stanley analyst Suzanne Stein cut her rating on the company from to “equal weight” from “overweight.” Apollo runs the University of Phoenix, the nation’s largest private university with 443,000 students, most of whom take classes via the Internet. Federal student aid accounted for about 86 percent of company revenue in fiscal 2009, Apollo said yesterday in a filing. That’s up from 82 percent in fiscal 2008 and 48 percent in fiscal 2001, according to company filings.

OTHER STORIES:

Gold to Rise to $2,000 Amid ‘Massive’ Inflation, Superfund Says - (www.bloomberg.com)

Bill Seeks to Shift Rescue Costs to Big Banks - (www.nytimes.com)

Picard says $21.2bn lost in Madoff scheme - (www.ft.com)

Bond Weakling California Shows States’ Failure to Disclose Debt - (www.bloomberg.com)

Norway Lifts Rate to 1.5%; First in Europe to Reverse Easing - (www.bloomberg.com)

Cold Water for Asia Property Market - (www.nytimes.com)

Irish Bar Values Plunge 40% as Pub Culture Mirrors Economy Bust - (www.bloomberg.com)

New-Home Sales in U.S. Unexpectedly Fall as End of Credit Nears - (www.bloomberg.com)

U.S. Goods Orders Rise for Fourth Time in Six Months - (www.bloomberg.com)

US mortgage applications slump third straight week - (www.reuters.com)

Fed Unlikely to Shift Thinking on Interest Rates - (www.reuters.com)

Fears of a New Chill in Home Sales - (www.nytimes.com)

Economy is kick-started, but can it motor ahead? - (www.washingtonpost.com)

Draft law would extend Fed powers - (www.ft.com)

GMAC May Receive Third Bailout Package From U.S. Government - (www.bloomberg.com)

Housing slump hits California timber industry like a buzz saw - (www.latimes.com)

A Drop in the Wrong Bucket - (www.nytimes.com)