Tuesday July 14 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Bank Run Teaches Amish About the Risks of Modernity - (online.wsj.com) Some Amish Lived It Up Until Hard Times Hit; Dinners Out and LED-Appointed Carriages. Dan Bontrager is a 54-year-old Amish man with flecks of gray in his long beard. He's also treasurer of the Tri-County Land Trust, an Amish lending cooperative created to support the Amish maxim that community enhances faith in God. This past spring, Mr. Bontrager was startled when a number of men he has known most of his life tied their horses to the hitching post outside his office and came inside to withdraw their money from the Land Trust. "We had a run," Mr. Bontrager says. "I don't know if you know anything about the Amish grapevine, but word travels fast. Somebody assumed it was going to happen, and it started a panic." In Amish country, a bank run is about as familiar as a Hummer or a flat-screen TV. For decades, the more than 200,000 Amish in the U.S. have largely lived apart from the mainstream, emphasizing humility, simplicity and thrift. Known as "the plain people," they travel by horse-drawn buggy, wear homemade clothing and live with very little electricity. But the Amish in northern Indiana edged into the conventional economy, lured by the high wages of the recreational-vehicle and modular-homes industries. And they wound up experiencing the same economic whiplash millions of other Americans did. There has been some fraying of the ties that bind the Amish, many in the community say. "When you have plenty of money, you have a tendency to slowly drift away," says Steve Raber, 37, an Amish owner of a furniture-manufacturing business in Shipshewana, near Topeka. "I think people begin to forget who's really in control." The Amish in northern Indiana date their community to about 1850. About 20,000 of them live on the flat, fertile farmland 120 miles east of Chicago below Michigan's southern border. Like Amish in other parts of the U.S., the Indiana community strayed from their traditional reliance on farming in recent decades as their numbers grew and land prices rose. Many opened family businesses, often in furniture and other wood crafts. By 2007, more than half of Amish men in these parts were working full time in manufacturing, and earning, on average, $30 an hour, says Steven Nolt, a professor at Goshen College in Goshen, Ind., who studies the community. The great increase in discretionary income spawned a "keeping-up-with-the-Joneses mentality," says Mervin Lehman, 39, an Amish father of four who says he was making more than $50-an-hour and working up to 60 hours a week as an RV plant supervisor before he was laid off in November.

Obama Administration Expands and Paves the Way for Future Foreclosures - (www.washingtonpost.com) The Obama administration announced yesterday that it would loosen the eligibility requirements for a program aimed at helping borrowers with no equity in their homes to refinance into cheaper mortgages. Acknowledging that falling housing prices have made it increasingly difficult for borrowers to qualify, officials said the program would now be open to those whose mortgage debt is up to 125 percent of their home value. The program, launched in February, was initially open only to those borrowers who owed no more than 105 percent of their home value. The program targets the growing number of borrowers -- one in five according to recent research -- who owe more than their home is worth, a situation known as "being underwater." These homeowners are considered at a higher risk of foreclosure and have been targeted by the Obama administration under its Making Home Affordable program. Borrowers have traditionally been prevented from refinancing if they had less than 20 percent equity in their home. Under the initial program, that requirement was significantly modified so that for a home worth $200,000, for example, the borrower's mortgage could not exceed $210,000. Now, the mortgage on that house could be as much as $250,000 and still qualify for refinancing. "By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It's a crucial step in our broader efforts to get America's housing market and economy on the path to recovery," Treasury Secretary Timothy F. Geithner said in a statement. The administration initially estimated in February, when the program was first announced, that 4 million to 5 million borrowers would be eligible. More recently, administration officials have said that "tens of thousands" of homeowners have been helped so far. An additional 2 million borrowers could be eligible after the program is revamped, though not all would qualify for or even benefit from refinancing, according to the Federal Housing Finance Agency. The expanded program is expected to have the greatest impact in regions where home prices have fallen the most from their peak, including California, Nevada and Florida, which have the highest rates of foreclosure. "To the extent you are able to lower their mortgage payments and their debt burden, homeowners are less likely to default," said Steve O'Connor, senior vice president of government affairs at the Mortgage Bankers Association, an industry lobby group that pushed for the change. "It's a net positive for efforts to stabilize the markets." The refinancing program is central to President Obama's broader housing plan, which also includes measures to help distressed borrowers stay in their homes by paying lenders to modify their loans. The refinancing effort focuses on borrowers who have not missed any mortgage payments, but are unable to take advantage of historically low mortgage rates because their home values have fallen.

Corrupt SEIU hope to rape (organize and gain dues from) Inland Empire warehouse workers - (www.latimes.com) A labor coalition known as Change to Win is focusing on the vast warehouse and distribution hub in the region, which handles goods from the ports of Los Angeles and Long Beach. The Inland Empire has become a new battleground for unions looking to organize warehouse workers and broaden labor's clout in international trade, a $300-billion industry in the Southland. The fledgling movement is backed by a coalition of unions with more than 6 million members known as Change to Win. That's the national labor group that broke with the AFL-CIO in 2005 and includes the Service Employees International Union, the United Food and Commercial Workers International Union, the United Farm Workers of America and the International Brotherhood of Teamsters, among others. The unions' targets are warehouse and distribution centers in the Inland Empire counties of San Bernardino and Riverside, which together make up one of the nation's biggest logistics networks. The facilities handle much of the container cargo that moves through the ports of Los Angeles and Long Beach, the busiest trade gateway in the United States. "They want to start here because there is such a large concentration of the industry here. It's a great sandbox and it would be a real coup if they do it," said John Husing, an economist who specializes in the Inland Empire goods-movement industry. Nearly 2,900 warehouses of at least 50,000 square feet each dot the Inland Empire. The facilities, which employ nearly 113,000 people, are operated by hundreds of companies, including some of the nation's largest retailers. The unions' strategy is to try to build broad-based community support for better working conditions for warehouse workers, much in the way that labor was able to convince businesses that janitors were being treated unfairly. "It is a huge, monumental task. You cannot do this one warehouse at a time," Tom Woodruff, organizing director of Change to Win, said from his office in Washington. "There needs to be a general union movement. We expect to have a long-term campaign there." Retailers said the best way to raise living standards for workers is through a strong industry and a vibrant U.S. economy. "If we are concerned, we are concerned about efforts in Washington that would change the rules for union organization," said Rob Green, vice president for government and political affairs at the National Retail Federation. Green was referring to federal legislation backed by Change to Win that would make it far easier for workers to join unions. The organizing effort comes at a tough time for the warehouse and distribution industry, which has long been one of the region's most dependable sources of jobs. Warehouses in the Inland Empire added nearly 40,000 positions from 2000 to 2007, Husing said. But international trade has been slammed by the recession, and Husing said warehouse employment has fallen 6.7% from the peak in 2007, with most of those losses coming this year.

A Fake Financial Fix - (www.cato.org) The Obama administration yesterday presented a misguided, ill-informed remake of our financial regulatory system that will make crises more likely and more costly. Our financial system, particularly our mortgage system, is broken — but the Obama plan ignores the real flaws to focus on more convenient targets. Instead of putting an end to bank bailouts, the plan makes bailouts a permanent feature of our regulatory landscape. In fact, it extends the possibility of taxpayer-funded bailouts to any company choosing to become a financial-holding company. This will likely include every large insurer, as well as major consumer-finance companies like GMAC. Of course, the administration tells us that bailouts won't be needed — because the same regulators who missed the signs of the current crisis will get added powers to prevent the next one. We're supposed to believe that, if only the Federal Reserve had the same oversight powers over AIG as it now has over Citibank and Bank of America, that the bailout of AIG would have been avoided. Just think: If only AIG had been managed and regulated as well as Citibank — because Citi is in such great shape now. In the wake of this crisis, it's understandable that the Obama plan increases regulation and oversight of the largest financial institutions — but why do it in ways that reduce the market discipline on those same companies? By assembling a list of institutions deemed "too big to fail," the president is announcing that any of these select corporations will be bailed out if it fails. As a result, these institutions will face lower funding costs than smaller lenders — which will allow them to gain market share. That is, the Obama plan guarantees increased concentration of our financial markets: We'll have fewer banks, but larger ones — insulated from market pressures. In short, the Obama plan puts the entire safety of financial system on hoping that regulators at the Fed get everything right. Meanwhile, the plan barely mentions two institutions at the very heart of the mortgage-market meltdown — Fannie Mae and Freddie Mac. Instead, the administration tells us that it will study the issue and come back with alternatives at a later date. Yet Fannie and Freddie were the single largest source of funding for the subprime market during its height, buying more than 40 percent of all subprime securities at the market peak, while also leading the market in the reduction of credit quality. In all likelihood, their ultimate cost to the taxpayer will be greater than that of the bank bailouts known as TARP. Combined taxpayer losses from Fannie and Freddie could well exceed $300 billion — twice the expected cost of bailing out AIG. Any reform plan that leaves out Fannie and Freddie can't be taken seriously. Even when it gets things right, the plan gets it wrong: It recognizes the failure of the credit-rating agencies, but misses the source of that failure — namely, the fact that those agencies are a government-created monopoly. So it insists on more disclosure — which won't solve the problem. What's needed is an end to the exclusive government privileges that have been granted to the rating agencies — and an end to the practice of having government regulators outsource their jobs to these companies. Then there's the mortgage section of the plan. Naturally, the Obama team doesn't address the largest single problem — the federal government's obsession with extending homeownership to households that can't sustain it. Instead, it calls for increased "consumer protections" in the mortgage industry. Sadly, the administration can't confront the basic fact that the most important mortgage indicator is the borrower's equity: How much of its own money a household puts into the home tells us far more about probable default than whether the loan was adjustable-rate or has a prepayment penalty.

Executive Enrichment Rules Doomed by Naivete - (www.bloomberg.com) The Obama administration’s plans to regulate executive pay for companies on the Federal dole is a decent idea. Last week, the U.S. Treasury Department went further, recommending in areport that Congress intervene in the pay process for every company in the land. “To facilitate greater communication between shareholders and management over executive compensation, public companies should include on their proxies a nonbinding shareholder vote on executive compensation,” the report states. Too bad the proposal won’t do a thing to restrain unbridled corporate compensation gluttony. The problematic word in that passage is “nonbinding.” Lawyers call that a precatory resolution, derived from the Latin precatio, meaning begging, a request or prayer. This so-called say-on-pay policy is being pushed by the high priests and priestesses of the corporate governance movement. Their desire to do good is exceeded only by their naivete. If a board compensation committee has a record of giving top executives the moon, what makes you think they will be cowed by a group of unlettered shareholders, who can only pray for relief? The pay proposal isn’t worthless. But it’s not going to fix a broken system that lavishes unjustified rewards on top executives at hundred of major U.S. companies, no matter how well they perform for their true owners, the shareholders. Ending the abuses will require adopting measures that have real teeth, not merely gums. Here are my favorites, based on 50 years of studying, and for half those years, designing executive pay plans: - Keep excessively paid chief executives off other companies’ compensation committees. Someone like Lloyd Blankfein, CEO of Goldman Sachs Group Inc.who made about $80 million last year, must consider a top executive earning $30 million annually to be a hardship case in need of a little extra motivation to keep plugging away. My own research of CEOs who sit on compensation committees shows that the most highly paid executives award the fattest packages to the CEOs whose pay they regulate. Here’s an even better idea: bar CEOs from serving on comp committees. -- Require true shareholder approval of all pay plans. Don’t limit approval to stock option plans or free share plans. Extend it to cover every plan, whether payable in cash or stock, for the highest-ranking officers in the company. This would be real, binding approval, not one of those namby-pamby predatory ones. -- Fund the CEO’s annual bonus through a shareholder- approved formula. In other words, take away the discretion of the comp committee to rationalize huge year-end payouts, e.g., by pointing to adverse exogenous events over which the executive has no control but failing to note those same exogenous events when they prove helpful to the bottom line.

Crabtree & Evelyn files for Chapter 11 bankruptcy protection - (www.latimes.com) Crabtree & Evelyn Ltd., maker of soaps and other bath and body products, filed for Chapter 11 bankruptcy protection today. The Woodstock, Conn., company, which operates 125 retail stores in the U.S., said day-to-day retail operations in its stores and on its website would continue as usual. It also said it was hoping to reevaluate its real estate portfolio, strengthen its brand strategies and restructure its debt. The filing does not include the company's international affiliates. Crabtree & Evelyn joins a growing list of retailers that have had to seek bankruptcy protection in recent months amid the economic downturn. "The Crabtree & Evelyn brand remains strong," said Stephen Bestwick, acting president of the company. "We are confident that Chapter 11 gives us the opportunity to restructure the company with a business model that will be sustainable for long-term growth." The privately held company reported in a court filing that it had debt totaling $10 million to $50 million and assets in the same range

How to Steal Billions in Plain View - (www.lewrockwell.com) The Federal Reserve is living up to its purpose, which is to enrich bankers at the expense of everyone else. Ben Bernanke, who chairs the Federal Reserve Board, is to be congratulated for his open call for the banks under his tutelage to receive billions more of our tribute. Let us understand the matter clearly. We have exited a significant boom period. During the boom, the bankers made large and very large profits. The managements took home very large pay and bonuses. The stockholders (including officers and managers of the banks) had, for a time, very large wealth in the stocks they held. The bondholders of the banks had, for a time, very secure debts. But the bankers over-reached for business in several ways. They extended a slew of bad loans during the lately departed boom. The stocks and bonds fell in price, reflecting the lower worth of the bank assets, these bad loans. And now that the boom is over, the bankers, led by Mr. Bernanke, want us to eat their losses. Bernanke urges Congress to absorb the bad loans. The details of his three alternative plans are secondary to the fact that they all ask that others pay for the losses that the bankers caused, or else they involve the government in a variety of complicated maneuvers by which the government ends up shoring up these banks and bankers while taking on various risks of owning portfolios of bad loans. The idea is for the bankers to offload their mistakes onto taxpayers. One plan has the government buy the bad loans. Why? Why don’t the bankers reveal what these loans are and sell them in the market? Such sales will reveal that their assets are worth even less than what the market now thinks. The insolvency of the banks will not only be revealed but it will trigger legal ramifications. The banks will have to be re-organized. This will mean breaking them up. It will mean that the holders of the securities of the banks will face large losses, even larger than are now being reflected in the current market prices. A government bailout does the following. It preserves the bank organization. It preserves the current bank management. It transfers taxpayer wealth to the security holders of the bank (bondholders, preferred stockholders, and stockholders). It transfers wealth to counterparties to other contracts that the bankers entered into. Why is any of this necessary? What is so precious about these banks? Haven’t they demonstrated a level of high incompetence? Shouldn’t that spell their doom? Heads I win, tails I win. That is the deal that Bernanke wants for the banks and these associated parties. Tails – they should be losing. No one else should be footing the bills. Citibank or Citigroup is emblematic of the whole tawdry affair. Why in the world should we be saving Citibank? I have been wondering about this for some time before Bernanke’s latest salvo. The government already made a complex deal involving over $300 billion of this company’s loans. What is so special about this bank, other than it has attempted to become a world-girdling enterprise and is failing badly in this endeavor? It even has an office two miles from where I write that usually looks barren. Why should we support the ambitions of a bank like this that is competing with a myriad of other banks in this area alone? The reasons given by Bernanke are absurd ("to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,..."). Promoting overcapacity and singling out inefficient banks for the grace of taxpayer dollars does not promote a lasting recovery and it surely does not strengthen the financial system. Shifting the assets of Citibank, such as they are, to higher-valued uses through re-organization is a sound way to promote recovery and strengthen the economy. But this path would require that a lot of Bernanke’s favorites would bear losses. It would mean a rather different banking system might emerge that influential members of the Fed, who apparently shape its recommendations and bailouts, do not want. What cheek! What effrontery! What brazen thievery! How disgusting!

OTHER STORIES:

Housing, auto fallout lifts metro jobless rates - (finance.yahoo.com)

States brace for shutdowns - (www.latimes.com)

Delinquencies Double on Least-Risky US Mortgages - (www.bloomberg.com)

U.S. consumer confidence slips - (www.globeinvestor.com)

Home prices post 18.1 percent annual drop in April - (finance.yahoo.com)

In search of the exit - (www.ft.com)

Paper Avalanche Buries Plan to Stem Foreclosures - (www.nytimes.com)

Updated: Case-Shiller 100-Year Chart - (www.ritholtz.com)

San Diego house prices sliding at slower pace - (www.signonsandiego.com)

Insured Mortgage Defaults Resume Upward Climb - (www.cnbc.com)

Expensive Houses Languish - (www.time.com)

Gloomy U.S. consumers clip housing recovery hopes - (www.reuters.com)

US Mortgage Applications Fall 19% - (www.bloomberg.com)

California Misses Deadline to Avoid Issuing Need IOUs - (www.bloomberg.com)

3 bad reasons to buy a house - (articles.moneycentral.msn.com)

Another Citigroup Scandal As Usual - (www.seekingalpha.com)

Eyesores next door take shine off dream houses - (www.9news.com)

Hotel Loan Defaults Double as Recession Cuts Travel - (www.bloomberg.com)

Government Stock Market Manipulation - (www.sott.net)

No 'Club Fed' for Madoff - (www.dailyfinance.com)

How to pick an agent - (www.njrereport.com)

Monday July 13 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

States brace for shutdowns - (www.latimes.com) Time is running out for the legislatures in Arizona, California, Indiana, Mississippi and Pennsylvania to solve budget gaps. The last time Indiana missed its deadline for passing a budget and had to shut down the government was during the Civil War. But on Monday, as lawmakers raced to hammer out an agreement over school funding, state agencies began preparing 31,000 workers to be temporarily out of a job. Republican Gov. Mitch Daniels has warned residents that most of the state's services -- including its parks, the Bureau of Motor Vehicles and state-regulated casinos -- would be shuttered unless a budget is passed today. Indiana is one of five states -- along with Arizona, California, Mississippi and Pennsylvania -- bracing for possible shutdowns this week as time runs out for lawmakers to close billion-dollar gaps in their fiscal 2010 budgets. Of the 46 states whose fiscal year ends today, 32 did not have budgets passed and approved by their governors as of Monday afternoon, according to the National Conference of State Legislatures. Although the majority of those are expected to pass eleventh-hour budgets, the fiscal futures of a handful remain uncertain, said Todd Haggerty, an NCSL research analyst. "It's a lot of states that are coming down to the wire," Haggerty said. "It's far more than we've seen in the past, and it's because of the state of the economy." Since 2002, only five states have been forced to shut down their governments. Some of the closures were brief: In 2007, Michigan's doors were closed for four hours before lawmakers passed emergency measures that bought them time to close a $1.75-billion deficit. "What's different now is that the recession has eroded tax revenues across the country," Haggerty said. Collectively, he said, states are wrestling with budget deficits totaling $121 billion. In California, state finance officials will begin issuing IOUs on Thursday if lawmakers and the governor cannot agree on a way to close a $24-billion shortfall. The IOUs would go to local governments, vendors, taxpayers and college students receiving state financial aid. California has issued such IOUs only one other time -- in 1992 -- since the Great Depression. In Arizona, which has never missed its constitutional budget deadline, officials are battling over how to resolve a $3-billion gap. Republican lawmakers and the state's GOP governor, Jan Brewer, fought for months over her proposal for a temporary sales tax hike to preserve some government services. In a compromise unveiled Friday, legislators agreed to ask voters to approve the tax in November. But when a key committee was unable to muster a majority Monday for the compromise bill, lawmakers began drafting resolutions that would let the government function for at least a week.

House Sales Didn't Soar in San Diego: Realtor Data Had "Errors" - (online.wsj.com) The California Association of Realtors expects to make sharp downward revisions in its recent monthly reports of soaring home sales in the San Diego area, Robert Kleinhenz, deputy chief economist of the trade group, said in an interview. Those revisions will mean modest downward revisions in statewide sales, he added. The revisions are likely to be announced in late July, when the Realtor group reports home sales for June. The problem resulted from a glitch in data from a multiple-listing service in San Diego, Mr. Kleinhenz said. He said a change in computer systems used there resulted in incorrect data being sent to the Realtor association over the past year or so. Thomas Lawler, an independent economist in Leesburg, Va., who tracks home sales nationwide, raised questions about the San Diego data in a report last week. Mr. Lawler noted that the numbers reported by the Realtors vastly exceeded those from MDA DataQuick, a research firm in La Jolla, Calif., and other sources. The California Realtors have reported that San Diego sales in April were up about 63% from a year earlier. Mr. Kleinhenz said that is expected to be revised downward to a gain of about 20%. For May, the group reported an 89% increase in sales in San Diego; that will be slashed to about 6.5%, the economist said. As a result, he said, the state-wide sales gain for May -- reported last week as 35% -- also will be revised down, though it probably will remain above 30%, Mr. Kleinhenz said.

Corporate Bonds Show Lehman Doesn’t Matter With 9.2% Return - (www.bloomberg.com) Nowhere is the recovery in financial markets more evident than in corporate bonds, where Lehman Brothers Holdings Inc.’s bankruptcy is becoming a distant memory. U.S. investment-grade company debt returned 9.2 percent in the first half of the year, outperforming Treasuries by 13.7 percentage points, the most on record, according to Merrill Lynch & Co. index data. Corporate bonds also did better than the Standard & Poor’s 500 Index of stocks, marking the first time since 2002 that the fixed-income securities outshined both Treasuries and equities. Yields on investment-grade company securities fell to within 3.31 percentage points of Treasuries yesterday, the least since Sept. 10, according to Merrill’s U.S. Corporate Master Index. Spreads widened to a record 6.56 percentage points on Dec. 5, and the securities lost 6.8 percent in 2008, the worst year on record, as the shock to financial markets from Lehman’s collapse Sept. 15 froze credit markets and sparked a run on Treasuries that caused bill rates to fall below zero. “Spreads on corporate debt were so out of whack coming into the year, implying default rates that indicated more than 20 percent of all speculative-grade companies would go bankrupt,” said Kevin Sherlock, co-head of loan and high-yield capital markets at Deutsche Bank in New York. “The risk appetite is far more aggressive now than it was three months ago. It’s about where we were last summer at pre-Lehman levels.” The biggest returns came in the riskiest securities. High- yield, high-risk bonds gained 29 percent, or 34 percentage points more than Treasuries, Merrill Lynch indexes show. While credit spreads are narrowing, defaults continue to rise. The U.S. speculative-grade default rate jumped to 8.1 percent in May, the highest since October 2002, and may reach 14.3 percent by the first quarter of 2010, according to S&P. “The easy money has been made,” said Richard Lee, a managing director in the fixed-income trading department of closely held broker-dealer Wall Street Access in New York. “You could have bought any corporate credit in January and February and made out like a bandit.” Other measures of credit also show improvement. The difference between what banks and the U.S. government pay to borrow for three months, the TED spread, has shrunk to 41 basis points, the lowest since July 2007 and down from 464 basis points in October. A basis point is 0.01 percentage point. The Libor-OIS spread, an indicator for banks’ willingness to lend, ended yesterday at 0.38 percentage point. That’s approaching the 0.25 percentage point that former Fed Chairman Alan Greenspan has said would indicate that markets were back to “normal.”

Well so much for that grand idea - (www.richudell.com) Good video clip. Sad. Deeply sorrowful. Not sure where to turn to now. I just got the wonderful news from Marlo at Bank of America that if I ask for Deed in Lieu of Foreclosure that they will 1099 me for the difference between appraised value and the incredibly stupid price at which I purchased the home. If I short sale the home same situation takes place. If I continue to pay, then I’m paying more for my cash then anyone else out there. Here she comes off threatening my credit.

Delinquencies Double on Least-Risky Loans, US Says - (www.bloomberg.com) Delinquency rates on the least-risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure. Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said. “I’m very concerned about the rise in delinquent mortgages and foreclosure actions,” Comptroller of the Currency John Dugan said in a statement with the report. President Barack Obama’s plan to create “sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,” Dugan said. Obama’s program, unveiled Feb. 18, aims to help as many as 4 million homeowners by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their houses are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007. “Job losses have mounted and even those with good credit that were able to get a prime mortgage are having a harder time making monthly payments with a loss of income,” said Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania. Serious Delinquencies: Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year, the report said. Mortgages modified to help struggling borrowers stay in their homes fail within nine months more than half the time, the report said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months; 63 percent were in default after a year. As lines of credit deteriorate, home prices are moderating. The S&P/Case-Shiller home-price index for 20 major U.S. metropolitan areas fell 18 percent in April from a year earlier, the smallest decline in six months.

Corn Futures Down Lock Limit, Soybeans and Wheat Drop On Crop Reports - (Mish at globaleconomicanalysis.blogspot.com) As U.S. Farmers Boost Acreage, Corn, Soybeans, Wheat Plummet. Corn plunged by the Chicago Board of Trade’s limit after a government report showed U.S. farmers planted more acreage with the grain than estimated in March. Wheat and soybeans also tumbled on signs of increasing supplies. Corn futures for December delivery dropped by the maximum of 30 cents, or 7.6 percent, to $3.6725 a bushel at 11:02 a.m. on the CBOT. The price headed for the fourth straight quarterly slide. The U.S. corn report showed “an awfully big acreage number and suggests inventories will be more comfortable,” said Tim Emslie, a research manager at Country Hedging Inc. in Inner Grove Heights, Minnesota. The U.S. is the world’s largest exporter of corn, soybeans and wheat. Corn is the nation’s biggest crop, valued at $47.4 billion in 2008, followed by soybeans, hay and wheat, government figures show. Soybean futures for November delivery fell 22 cents, or 2.2 percent, to $9.615 a bushel. Earlier, the price touched $9.435, the lowest since April 1. U.S. farmers will sow a record 77.483 million acres with the oilseed, up 2.3 percent from 75.718 million last year, the USDA said. In March, the agency said farmers intended to plant 76.024 million acres. Wheat futures for July delivery tumbled 18.25 cents, or 3.5 percent, to $5.0975 a bushel. The price earlier touched $4.9575, the lowest since Dec. 12. About 13.77 million acres were seeded with spring wheat, the USDA said. That topped the 13 million projected by analysts surveyed by Bloomberg News last week. Total inventories on June 1 were 667 million bushels, doubling from a year earlier. Cattle and hog futures rallied today as the crop reports signaled lower costs for livestock feed. “This is a great day for the cattle and hog producer and the dairyman,” Basse said. “Corn, soybeans and wheat all made their seasonal highs earlier this month. Given favorable weather for the remainder of the growing season, we should have a breathable cushion of inventories.”

Paying college tuition with credit card gets costlier - (www.usatoday.com) Across the nation, a growing number of universities are making it harder — and costlier — for students to use credit cards. Starting Wednesday, students at the University of Southern Maine who pay tuition using plastic will face a 2.75% processing fee. Other schools that have adopted, or are adopting, similar policies include George Mason University, Northwestern University, Wichita State and the University of Virginia. The movement comes as colleges face budget shortfalls and look to trim costs wherever they can. When students use a credit card, institutions have to pay an average of 2% to process the transaction, according to Nilson Report, a payment systems newsletter. Traditionally, colleges have borne these costs themselves. But they're increasingly rethinking these policies — and passing costs along to students — amid the difficult economy. In 2007, 26% of colleges charged a credit card payment fee, either directly or through a third party, up from 14% in 2003, according to surveys conducted by the National Association of College and University Business Officers. Other industries, such as retailers and airlines, are also grappling with the impact of credit card processing fees. At George Mason University, controller Elizabeth Brock says that 50% of students typically pay their tuition via credit card. Brock believes the 2.75% fee levied on credit card transactions will cause many students to switch to other forms of payment. "A high percentage of our students and parents who used a credit card (did so) because there was no incentive not to," says Brock, who estimates the school will save $1.5 million a year from its new policy. Students can still pay their tuition by credit card — through TouchNet, a third-party provider — she adds, but, "It's not going to be cheap." TouchNet accepts MasterCard, American Express and Discover, but not Visa, President Dan Toughey says, because of Visa rules that prevent it from passing the credit card processing fee on to consumers. Visa spokeswoman Randa Ghnaim says it doesn't allow merchants to charge consumers processing fees because they're "unfair." George Mason senior Steven Smith, 21, agrees. "A lot of students think it's outrageous," says Smith, a member of the student government.

OTHER STORIES:

House prices post 18.1 percent annual drop in April - (www.finance.yahoo.com)

Case Shiller April Shows Slight Moderation In Rate Of Decline - (www.businessinsider.com)

Next Segment of Housing Market to Crash: $1 Million McMansions - (www.finance.yahoo.com)

Loan Delinquencies Double on Prime Loans - (Mish at globaleconomicanalysis.blogspot.com)

Consumer Confidence in U.S. Slipped in June - (www.bloomberg.com)

No recovery for US property markets until 2017 - (www.reuters.com)

How maths killed Lehman Brothers - (plus.maths.org)

Can a Market Crash Save Us from Hyperinflation? - (www.seekingalpha.com)

20 Million Vacant Houses and Squattertown, USA - (Charles Hugh Smith at www.oftwominds.com)

California Misses Deadline to Avoid the Need for IOUs - (www.bloomberg.com)

Congress Gets Plan for Consumer Protection Agency - (www.nytimes.com)

IMF Board Set to Authorize $150 Billion in Bond Debut - (www.bloomberg.com)

Soros Predicts 'Stop-Go' Economy, Higher Rates - (www.cnbc.com)

Iraq Fails to Award Most Oil Contracts in Bid Round - (www.bloomberg.com)

Euro Hurts Slovakia, Slovenia as Shoppers Seek Hungary Bargains - (www.bloomberg.com)

Russia to recapitalise its banks - (www.ft.com)

China Manufacturing Expands a Fourth Month, PMI Shows - (www.bloomberg.com)

China Limits Use of ‘Virtual’ Currency - (www.nytimes.com)

U.K. CIPS Factory Index Rises to 13-Month High, Markit Says - (www.bloomberg.com)

Small businesses vital to economic recovery go bankrupt - (www.usatoday.com)

Insured Mortgage Defaults Resume Upward Climb - (www.cnbc.com)

Gloomy U.S. consumers clip housing recovery hopes - (www.reuters.com)

Monster online jobs index dips in June - (www.reuters.com)

Insured, but Driven Bankrupt by Health Crises - (www.nytimes.com)

Citi raises rates on millions of credit cards: report - (www.reuters.com)

A Forecast With Hope Built In - (www.nytimes.com)

Sunday July 12 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Attorneys advise clients to stay in their houses without paying - (www.heraldtribune.com) Phil Agnes and other lawyers have two words for homeowners facing foreclosure: Stay put. The flood of foreclosures has clogged the courts, allowing homeowners to stay in their homes while the paperwork goes through the system. Many homeowners are unaware that they can remain at home for months while the foreclosure is in court, attorneys say. And homeowners willing to challenge the foreclosure sometimes can remain in their homes for more than a year, sometimes more than two years, just by filing a few basic legal documents. "It's in everyone's best interest to stay in the home," said Agnes, an attorney who volunteers at Gulf Coast Legal Services Inc. A legal fight lets homeowners save money for post-foreclosure life, when a ruined credit score makes it harder to find a new place to live. And there are more advantages, attorneys say: Making the legal process costly and time-consuming may push the lender to find alternatives to foreclosure like a loan modification or short sale, the attorneys say. Staying in the house does not disrupt family life, and the owner takes care of the home, protecting its value for the bank and the neighborhood's appearance. Agnes said he sent letters to homeowners immediately after foreclosure filings, and about a third of them were returned because the homeowners had already left. The Manatee and Sarasota court records are full of cases in which the banks waited months to move forward, even if the owner did not respond. Agnes said he has two cases where he responded for the homeowners, and the bank has not filed anything in almost a year. "And they're still in the house," he said. Too rushed to fight: The attorneys for lenders hope owners do not bother to fight the foreclosure.If a homeowner simply walks away from the property, attorneys can spend hardly any time in court and retake it in as little as 90 days. Courts across Florida have expedited the process to clear tens of thousands of foreclosures that have been filed since the housing market fell in 2006. Sarasota and Manatee counties had 46,455 filings since January 2006, far outpacing the final judgments in cases. Adding to the clog, the lenders often pay law firms a flat fee for each judgment they obtain, so they focus on the easier cases, foreclosure defense attorneys who work in the system say. When a homeowner files paperwork that takes the case out of the fast track and into the traditional court, lender attorneys sometimes seem to put the case aside. "They don't have time to necessarily fight these cases," Agnes said. "If you just sort of roll over and do nothing, they're not going to help you." And any motion that requires the banks to produce information can delay the case for months. The more difficult the request, the longer the delay. The going time lag for banks to respond when a homeowner asks to see some types of paperwork? Up to six months. "They're very disorganized," said Christy Greene, an attorney at Advocates For Justice in Jacksonville.

Citi raises card rates on millions - (www.ft.com) Citigroup has sharply increased interest rates on up to 15m US credit card accounts just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks. People close to the situation said that Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, had upped rates on between 13m and 15m credit cards it co-brands with retailers such as Sears. Citi’s rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection and a week after the bank was attacked by some politicians for raising employees’ salaries. Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24 per cent – or nearly 3 percentage points – between January and April, according to a Credit Suisse analysis of data from the consultancy Lightspeed Research. After FT.com broke news of the hike, Citi issued a statement saying: ”We have adjusted pricing and card terms for some customers as part of our regular account reviews. This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles. These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit.” Citi’s move came as the economic downturn caused record defaults among US card users and prompted many issuers to raise rates, both to cushion their losses and pre-empt the new restrictions set to come into effect in February. However, Citi’s increases have been larger than those of its main rivals, according to Lightspeed, which tracks about 12,000 US credit card accounts. Carolyn Maloney, Democratic representative for New York, the author of the new rules that will sharply constrain lenders’ ability to raise rates for risky borrowers, criticised Citi’s move. “It’s hard to tell if rate hikes on existing balances being put in place now are the result of prior bad business decisions or getting in under the wire of the new law,” Ms Maloney told the Financial Times.

Madoff Investors Were 'Greedy': Hedge Fund Manager - (www.cnbc.com) People who invested with Bernard Madoff were greedy and happy to accept high returns without probing too much in the way these were achieved, Hugh Hendry, chief investment officer at hedge fund Eclectica, told CNBC Tuesday. "I'm sympathetic for people losing money but I think this pejorative term of being greedy still applies," Hendry told CNBC.com. "There was an implicit greed in not questioning and just accepting unnatural returns." "They didn't show the requisite amount of fear that would have generated the curiosity to investigate," he said, adding that for every one Madoff investor, there were ten who stayed on the sidelines. Regarding the indirect victims of Madoff, those who didn't know that their money was put in the Ponzi scheme, "shame on their advisors," Hendry said. "Did you invest with Madoff?" is the first question investors ask their advisors nowadays, and the market is already "de-selecting" the investment advisors who did from those who didn't, he said. Besides the lack of scrutiny over the numbers, a reliance on respectability is the other facet of the problem, according to Hendry. "The problem that we had, and Bernie typifies it, is he was respectable," Hendry told "Squawk Box Europe". "I can't raise money. People say 'look at that crazy guy'." Sometimes, it is the "crazy guy" who makes clients money when others lose it, he added. Madoff, who confessed to running a Ponzi scheme of more than $50 billion, was sentenced Monday to spend 150 years in prison – a virtual life sentence – after his scheme collapsed amid the financial crisis. "This is a speculative excess and the excess is a lack of scrutiny. And we see a lack of scrutiny across the board in the pricing of assets," Hendry added. "There will be more regulation," Hendry said. "I don't think that's necessarily the answer. The banking sector is the most tightly regulated sector, apart from nuclear, in the world. "

Senate Field Hearing Explores Reverse Mortgage Scams - (www.kansascity.com) Reverse mortgages, increasingly used by seniors to help fund retirement or pay unexpected medical bills, are often accompanied by excessive fees and marketed using overly aggressive tactics, Sen. Claire McCaskill said Monday. The Missouri Democrat hosted a Senate field hearing at a senior center in suburban St. Louis to address concerns about the fast-growing reverse mortgage industry. The mortgages, which are loans available to those age 62 or older that convert home equity into cash, have exploded in popularity in the past decade — the Federal Housing Association endorsed 112,148 reverse mortgages in fiscal year 2008, up from 7,757 in 2001. Mathew Scire, director of the Government Accountability Office’s Financial Markets and Community Investment team, testified that reverse mortgages are complex and costly for the vulnerable population they serve. McCaskill agreed. “You may borrow $100,000 and 10 years later owe $200,000,” she said. The GAO’s review of marketing material for reverse mortgages found examples of potentially misleading claims, Scire said. Some promise “lifetime income,” which Scire said isn’t always guaranteed. A reverse mortgage allows elderly homeowners to convert equity in their homes into cash. It differs from a home equity loan or a second mortgage because the borrowers don’t have to repay the loans as long as they continue to live in and maintain the home. Most reverse mortgages are insured through the Federal Housing Administration’s Home Equity Conversion Mortgage program. In fact, because the loans are federally guaranteed, reverse mortgages are costing taxpayers millions of dollars, McCaskill said. In its fiscal 2010 budget request, the Department of Housing and Urban Development sought $798 million to cover potential losses from declining value of homes using reverse mortgages. Peter Bell, president of the National Reverse Mortgage Lenders Association, told McCaskill his agency has polled state attorneys general offices, bank regulators and the Federal Trade Commission and found very few complaints about reverse mortgages. Bell said strong safeguards are in place to ensure against fraud, including mandatory counseling for anyone considering a loan. “I don’t think you could come up with any business in America in which every potential customer is referred to an independent third-party specialist, a counselor at a HUD-approved agency, to review the transaction under consideration and its implications before a decision is made to proceed,” Bell said. But Scire said GAO investigators posed as potential customers at 15 counseling sessions and found none of the counselors covered all of the topics required by HUD. Scammers also are taking advantage of reverse mortgages, said Anthony Medici, special agent in charge of HUD’s Criminal Investigation Division. In some cases, unauthorized individuals — relatives, even neighbors — keep payments after the homeowner dies or permanently leaves a residence. Another concern involves financial professionals convincing seniors to invest proceeds into some other financial product they may not be able to access for years, perhaps until after their life expectancy.

Realty fervor takes aim at reality - (Bill Fleckenstein at articles.moneycentral.msn.com) The real-estate balloon has deflated, but there's still plenty of hot air surrounding home prices. Let us now appraise industry lobbying efforts to lift valuations. As the aftermath of the real-estate/credit bubble enters its second year, let's begin by devoting our attention to two key cogs in that wheel: the National Association of Realtors and the National Association of Mortgage Brokers. For both organizations, the operative words are: long on bombast, short on shame. Mark-to-fantasy still rules: Reacting last Tuesday to macro data near and dear to his heart, NAR Chief Economist Lawrence Yun made his own plea for what -- in Wall Street terms -- would be called mark-to-model: "Pending home sales indicated much stronger activity, but some contracts are falling through from faulty (my emphasis) valuations that keep buyers from getting a loan." By "faulty," he meant: "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales." (A slight variation is contained within a letter to members from the NAMB: "Appraisal Management Companies are assigning appraisers from a different municipality, county, or even state to appraise the target house. Therefore, unfamiliar with the neighborhood and unable to produce an accurate appraisal.") In other words, we don't want these house prices marked to the last sale. We want them marked to where we think they ought to be marked. Yun continued: "In the past month, stories of appraisal problems have been snowballing from across the country, with many contracts falling through at the last moment. There's the danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected." Honest appraisals: Not in my backyard: That pathetic little threat didn't cut it for Barry Ritholtz (the author of "Bailout Nation," among his other talents), who, in an e-mail to me, summed up the situation: "I did some more digging, and I quickly discovered what this contemptible suggestion was all about: It is part of a broader lobbying effort by the National Association of Mortgage Brokers (NAMB) and the NAR against honest appraisals. For more proof of this lobbying effort, see the letters to mortgage brokers and real estate agents from their trade associations to mobilize against mandating honest appraisals." (Ritholtz has posted both the mortgage brokers letter and the Realtors letter on his Web site.)

The California IOUs are coming... - (themessthatgreenspanmade.blogspot.com) We're back in California for a couple of days and, having caught a few minutes of the local news from Sacramento a short time ago, there appears to be little progress being made in the effort to avoid state issuance of IOUs in the days ahead. The local paper carries news that the last day of the fiscal year should be quite an interesting one in the state capital, with each passing hour the odds increasing that the IOU man cometh. Both houses likely will be in session all day and into the evening, but look for the real action at the negotiating table in the Governor's Office. A key issue is $3.3 billion in budget savings that have to be approved by midnight -- in the current fiscal year -- or will be lost forever. Democrats are pushing the cuts to schools and redevelopment agencies to be approved by midnight, but the GOP and the governor want a full package before signing off. The 1992 version of this melodrama ended badly, with drunken shouting, a fistfight, and a mysteriously stopped clock in the Assembly. Ultimately, the production ran all summer, with IOUs, court fights and rock-bottom performance ratings for politicians of all stripes. Maybe someone will do the state a favor and roll a hand-grenade into the governor's office and a new group of "leaders" can begin the budget process anew. Too harsh? Probably. But, it seems clear that nearly all lawmakers in California are hopelessly out of touch with reality these days, many of them likely viewing the recent economic downturn as being just a temporary setback in what is seen as a birthright of ever-rising real estate prices, the absence of which makes the state, basically, ungovernable. The idea that an Obama bailout might also materialize, despite recent assurances to the contrary, is no doubt making the sense of urgency a bit less than it might otherwise be.

OTHER STORIES:

Britain's Queen May Run Out of Money by 2012 - (www.cnbc.com)

Credit card losses hit record 10.4% - (www.ft.com)

Buffett Down, S&P Up, As First Half Buzzer Sounds - (www.cnbc.com)

Automakers: Will June Sales Show Signs of Stability? - (www.cnbc.com)

Soros Predicts 'Stop-Go' Economy, Higher Rates - (www.cnbc.com)

Will Weak Economy Drag Down Stocks? - (www.cnbc.com)

California Budget Crisis: When Is a Tax Not a Tax? - (www.cnbc.com)

Government Pressing UBS to Identify Secret Accounts - (www.cnbc.com)

Michael Jackson's Net Worth Revealed in Documents - (www.cnbc.com)

Sellers Hallucinate About Future Prices - (www.businessinsider.com)

Waiting for Godot in the Real Estate Market - (www.financialarmageddon.com)

Loan Mod Vs Walking away - (www.housing-kaboom.blogspot.com)

Why We Need Deflation - (www.seekingalpha.com)

BofA wording may cause more foreclosures - (www.bizjournals.com)

Buffett, Soros Resisted Temptation as Housing Lust Raged - (www.bloomberg.com)

Madoff gets 150 years, Picower quietly keeps all the loot - (www.latimes.com)

'Pretty Boy' Paulson and the Goldman Gang Rob America - (www.marketwatch.com)

Paper Avalanche Buries Plan to Stem Foreclosures - (www.nytimes.com)

The Medical Cost Conundrum - (www.newyorker.com)

Insurance Companies' Schemes To Deny Coverage - (www.nytimes.com)

Appraisers attack requirement for honesty - (www.orlandosentinel.com)

How Many Houses for Sale In Pacifica Really? - (www.pacificariptide.com)

Empty Houses for the Homeless? - (www.pbs.org)

Personal bankruptcies surge in Southern California - (www.latimes.com)

Mounting jobless claims force states to borrow - (www.reuters.com)

Fiscal crisis puts Prop. 13 up for discussion - (www.sfgate.com)

Sears to Let Jobless Stop Payments, Still Keep Fridge - (www.bloomberg.com)

Saturday July 11 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

FDIC's Bair Cancels Listing After Cutting House Price - (online.wsj.com) The property slump is hitting home for Sheila Bair, chairman of the Federal Deposit Insurance Corp. -- one of the few regulators who saw trouble in the housing market before the bust. Last week, Ms. Bair removed her 14-room colonial in Amherst, Mass., from the market after cutting its sale price by $100,000 from an initial $795,000 in April, according to the listing sheet. It's across the street from Emily Dickinson's house in the college town. Ms. Bair, and her husband, Scott P. Cooper, paid $355,000 for the house in 2002. In "02 and "03 they received building permits valued at $89,500 to renovate the 1860s house., including new roofing and a counter-current basement pool. In 2006, President George W. Bush appointed Ms. Bair, then a professor at the University of Massachusetts at Amherst's school of management, to the FDIC post, and she was one of the few officials to remain in their positions in the Obama administration. After listing the five-bedroom property in April, the couple cut the price to $745,000 less than three weeks later, then reduced it again before withdrawing the listing. Ms. Bair's real-estate agent, Stephen Feldman, of Prudential Sawicki Real Estate, declined comment. An FDIC spokesman said Ms. Bair decided to remove the listing and wait for the market to improve on the advice of her real-estate agent. The family will continue to lease the house to its tenants. Ms. Bair and her family currently rent a house in Maryland. Houses in downtown Amherst are a tough sell in the current economy, said Linda Rotti, a sales manager at Jones Group Realty, another agent in town. The downtown location, extensive remodeling and size of Ms. Bair's house -- it has 3,630 square feet of living space -- pose difficulties, Ms. Rotti said.

Deficit forces California to issue IOUs - (www.ft.com) State grapples with a $24bn budget deficit. California is preparing to issue IOUs to its creditors this week as it grapples with an unprecedented cash crunch and prepares to begin its new fiscal year deep in the red. Once the US’s richest state, California now has the dubious distinction of having the worst credit rating in the country. It is facing a budget deficit of $24bn (€17bn, £14.5bn) yet Arnold Schwarzenegger, its governor, and the state assembly cannot agree on a budget that would address the shortfall. California’s fiscal year ends on Wednesday but as the state’s cash reserves are empty, IOUs will be issued to a range of creditors, including contractors, such as information technology companies and the food service groups that cater for prisons. “On Wednesday we start a fiscal year with a ­massively unbalanced spending plan and a cash shortfall not seen since the Great Depression,” said John Chiang, the state ­controller. “Unfortunately, the state’s inability to balance its chequebook will now mean short-changing taxpayers, local governments and small businesses.” The state is also likely to issue IOUs to the US government. California currently contributes funding for government-run programmes for elderly and developmentally disabled people but is considering issuing IOUs to cover its contributions because of the lack of cash. Education funding is ­protected under the state’s constitution while payments on the state’s bond debt are also guaranteed under state law. Democrats and Republicans in the state government last week struck an agreement on a range of money-saving measures. However, Mr Schwarzenegger has threatened to veto the plan on the grounds that it was a piecemeal solution to California’s budgetary woes. Mr Schwarzenegger said he would veto any bills that raised taxes without reforming the state’s government. “I will veto any majority vote tax increase bill that punishes taxpayers for Sacramento’s failure to live within its means,” he said. ”The legislature will have a difficult time explaining to Californians why they are running floor drills the day before our budget deadline. We do not have time for any more floor drills or partial solutions. It’s time for the legislature to send me a budget that solves our entire deficit without raising taxes.”

Developer defaults leave potholes behind - (www.charlotteobserver.com) Unfinished streets and other concerns bedevil neighborhoods while developers' bond problems grow in a rough economy. In an unprecedented sign of hard times for builders, Mecklenburg County developers have defaulted recently on 30 bonds that ensure streets and sidewalks are finished. The bonds or letters of credit, totaling more than $2.5 million, cover the costs of new streets, curbs and gutters, sidewalks and stormwater controls if builders or developers can't complete the work. They let developers begin selling lots while ensuring that public infrastructure is built. But the wave of bond defaults in recent months leaves collateral damage: mud running into streams from abandoned building sites; potholed streets; and government staff completing developers' work. Calling bonds, as the practice is known, is a last resort for city and county enforcers, one they have rarely faced in the past. That's changed as building starts have plummeted – through May, the county's single-family residential permits were down 57 percent from last year – and credit tightens for developers and buyers. Since August, Charlotte officials have cashed eight developer bonds – three more than in the previous 15 years, according to David Weekly, the city's land development manager. City officials blame the economic downturn. The largest of the forfeited city bonds, two totaling $461,000, were posted by the developers of the Rapids at Belmeade, a community in northwest Charlotte. The developers filed for bankruptcy protection last September.

Jeffrey Picower benefitted from Madoff scam more than Madoff - (www.msnbc.msn.com) It is rare these days to see Bernard Madoff's name in print unaccompanied by the word "Ponzi." Yet recent allegations raise the possibility of one key difference between Madoff's crimes and those of legendary con artist Charles Ponzi. While Ponzi's scam was under way, Ponzi himself was its biggest beneficiary. It now appears that the biggest winner in Madoff's scheme may not have been Madoff at all, but a secretive businessman named Jeffry Picower. Between December 1995 and December 2008, Picower and his family withdrew from their various Madoff accounts $5.1 billion more than they invested with the self-confessed swindler, according to a lawsuit filed by the trustee who is trying to recover money for those Madoff defrauded. In contrast, shortly after he confessed, Madoff declared his household net worth to be between $823 million and $826 million, according to court documents. While the Madoffs clearly lived opulently, no evidence has emerged that their combined assets and expenditures approached the amount the Picower family is alleged to have withdrawn from the scheme. In an era when billions of dollars are being tossed about in financial collapses and government bailouts, remarkably little attention has been paid to Jeffry Picower's extraordinary success with Bernie Madoff. If Picower has penetrated the popular consciousness at all, it is as a Madoff victim. The victim narrative is buoyed by testimonials from the nonprofits who received funding from his charitable foundation — which quickly closed on the heels of the swindler's confession. For this reason, ProPublica decided to take a closer look at both Jeffry Picower and the complaint filed against him by Madoff trustee Irving Picard.

Tishman Speyer May Lose Silicon Valley Land After Default - (www.bloomberg.com) Tishman Speyer Properties LP may lose a plot of land in California’s Silicon Valley to Bank of America Corp. after defaulting on an $86.2-million loan used to buy the site, people familiar with the matter said. Tishman Speyer, the New York-based owner of Manhattan’s Rockefeller Center, is in negotiations with the bank about the 41 acres (16.6 hectares) in North San Jose, according to the people, who declined to be identified because the discussions are private. Land values are dropping faster than commercial buildings in the recession because vacant properties don’t generate income, making it even harder to refinance in a climate where lending is scarce. That has hit developers such as Tishman Speyer that scheduled projects to start just as the credit markets turned and economic growth slowed. Tishman Speyer paid $108 million for the land at the market’s peak in March 2007. “No one wants to own something that doesn’t produce any income and in some cases has a cost to it because you have to pay taxes and insurance,” said Tom Craig, a commercial real estate broker in Seattle. “Land is the most elastic part of commercial real estate. When times are bad, it’s not worth anything. When times are good it’s worth a lot.” John R. Miller, Tishman Speyer’s West Coast regional head, didn’t immediately return a call for comment, and an outside spokesman declined to comment. Shirley Norton, a spokeswoman for Bank of America, declined to comment.

GM Cuts Ties with Toyota in US Joint-Venture General Motors cut operational ties on Monday to a northern California auto plant it had operated in a joint-venture with Toyota Motor since 1983. The move deepens uncertainty over the future of a plant that employs over 4,000 workers and was once seen as a ground- breaking experiment in bringing production efficiencies pioneered in Japan to a U.S. workforce. GM, which has been operating in a U.S. government-sponsored bankruptcy since the start of the month, said it was unable to reach an agreement with Toyota on a new production plan for the Fremont, California plant. "After extensive analysis, GM and Toyota could not reach an agreement on a future product plan that made sense for all parties," GM said in a written statement. GM and Toyota have been 50-50 partners in the joint-venture plant commonly known by its acronym NUMMI for the New United Motor Manufacturing. The Pontiac Vibe -- the only GM vehicle built at the plant -- will go out of production in August under a previously announced plan by GM. Toyota uses the plant to build the Corolla sedan and the Tacoma compact pickup truck. Toyota, which surpassed GM as the world's top automaker in 2008, said it had hoped the joint-venture would continue and said it would consider whether to continue operating the plant on its own. "While we respect this decision by GM, the economic and business environment surrounding Toyota is also extremely severe, and so this decision by GM makes the situation even more difficult for Toyota," Toyota said in a statement. "We will consider alternatives by taking into account various factors, including the current distressed market conditions, our overall North American manufacturing capacity, and the viability of the facility as a stand-alone operation without GM production," the Japanese automaker said. GM is dropping its Pontiac brand as part of an effort to shed dealers, slow-selling nameplates and debt in a bankruptcy that will effectively nationalize the automaker with a $50 billion investment from the Obama administration.

Production of the Vibe accounted for less than a quarter of NUMMI output from the start of the year to mid-June, according to data from trade publication Automotive News. 'The Door Is Open': Toyota built 48,872 Corollas and 10,838 Tacomas at the plant during the first six months of the year, according to the Automotive News data. That represented about 15 percent of Toyota's overall North American output. A GM spokeswoman said the automaker was open to future partnerships with Toyota, but declined to comment on what those might include. The Vibe is based on the Toyota Matrix. "I can tell you that the door is open to future opportunities with Toyota," said GM spokeswoman Elaine Redd.

Chicken Farmers Have Hearts Plucked Out - (Mish at globaleconomicanalysis.blogspot.com) Last December, Pilgrim's Pride Went Bankrupt. The repercussions on chicken farmers are still being felt. Please consider At Chicken Plant, a Recession Battle. DOUGLAS, Ga. -- This small town was devastated in February when its largest employer, Pilgrim's Pride Corp., said it would close a chicken-processing plant as part of the company's bankruptcy filing. Since then, city and county officials have been working to find a buyer who could save the plant's nearly 1,000 jobs and $300,000 in annual county tax revenues. But there's a problem: Pilgrim's Pride isn't eager to sell. Pilgrim's has so far rejected a $32 million bid for the plant from Amick Farms LLC of Batesburg, S.C., company and city officials say. Another chicken company took a look and decided Pilgrim's asking price was too high, say people familiar with the matter. City officials say the company kept a prospective bidder from touring the plant, making it a challenge to market. Pilgrim's says it hasn't been offered a fair price for the plant and is cautious about letting rivals see its manufacturing processes. In an email to the city of Douglas, Pilgrim's President and Chief Executive Don Jackson said, "With declining demand for chicken in this terrible economy we need to remove chicken from the market. This would not be accomplished with a sale." While he said he recognized the "devastating impact" a closing would have on Douglas, "the actions do strengthen the company and help protect the jobs" of the company's 40,000 U.S. employees and farmers. Many businesses in the U.S. are struggling with excess capacity. From autos to airlines to houses, "there's a landscape of industries and sectors that are recognizing that they're going to need to scale down," says Nancy L. Rose, an economist at the Massachusetts Institute of Technology Department of Economics in Cambridge. With no plant to process the birds they raise, local chicken farmers have no income to pay off debts. Months ago, the hundreds of cavernous, metal-and-wood chicken houses in the county were worth at least $200,000 each when filled with chickens, farmers say. Now, except for flies and old feathers, the structures sit empty and are virtually worthless. Mr. Jackson, Pilgrim's CEO, appears to have struggled over the decision to shut the plant. In a March 11 email to Ms. Lewis, the Economic Development Authority official, he said: "I do not mean to 'pluck the heart' out of Douglas or any other community. All of my 58 years have been spent in agriculture. Thirty of it in the chicken business. I grew up on a farm and my father spent his entire life farming. Not some 'rich' farmer but one just like your neighbors in Coffee County. He would be sick over this situation." Mr. Jackson declined to be interviewed. Pilgrim's began dismantling chicken operations in the area, slaughtering hens and selling off eggs. The steps were necessary because "you can't close a plant and have tens of thousands of live chickens there with no place to go," Pilgrim's bankruptcy attorney, Stephen A. Youngman, said in court transcripts. Douglas residents still hope the plant will reopen. One recent afternoon, after a corporate jet landed at the local airport, rumors flew that a buyer might have arrived. It turned out the plane was carrying executives from Little Debbie, a maker of cookies and cakes, doing business in the region.

OTHER STORIES:

For Sale, Still: Grand Houses In Gracious Neighborhoods - (www.washingtonpost.com)

Mortgage defaults in America: Can pay, won't pay - (www.economist.com)

Uh-Oh, Here We Go Again? - (www.fool.com)

New TV show gives houseowners the cold truth - (www.sfgate.com)

Temporary Bailouts Tend To Become Permanent - (www.blogs.reuters.com)

Embrace Deflation - It's The Cure, Not The Problem - (Mish at globaleconomicanalysis.blogspot.com)

Unemployment Soaring - (www.theautomaticearth.blogspot.com)

California Income Gaps Continue To Widen - (PDF – www.cbp.org)

Recovery When? How About If? - (www.americanthinker.com)

Bringing Transparency to the Federal Reserve - (www.cato.org)

No Recovery Until 'Well into 2010’: Ross - (www.cnbc.com)

Paulson to Testify on BofA/Merrill Lynch in July - (www.cnbc.com)

Billions to Banks - The AIG Insurance Bailout - (www.gimmiethescoop.com)

Canadian housing market still on very shaky ground - (www.macleans.ca)

There Is No Market In Health Care - (www.patrick.net)

Reviving Do-It-Yourself Building - (www.newgeography.com)

Credit Card Hell - (www.mint.com)

I should buy your house for next to nothing - (www.dilbert.com)

Treasury Set to Unveil PPIP; Ross, GE Capital Participate - (www.cnbc.com) The U.S. Treasury is plans to roll out its long-awaited Public-Private Investment Program plan. CNBC has confirmed that two firms will be Wilbur Ross's Distressed Real Estate/debt fund and a joint venture between GE Capital and private investor Angelo Gordon & Co.

Japan Job Woes Deepen But Consumption Points Up - (www.cnbc.com)

Madoff Sentence Cheered, Seen as 'Strong' Message - (www.cnbc.com)

Investors War for Madoff Funds - (www.cnbc.com)

Madoff Victims Speak Out - (www.cnbc.com)

Chinalco Seen Taking Up Rio Issue, Rights in Demand - (www.cnbc.com)

Will Commodities Stay Hot All Summer? - (www.cnbc.com)

Slideshow: A Rogues Gallery of Financial Crime - (www.cnbc.com)

Dollar Falls for Fourth Day Against Euro as Risk Appetite Rises - (www.bloomberg.com)

U.S. stock futures lean higher as quarter ends - (www.marketwatch.com)

Markets out of step on timing of US rate rise - (www.ft.com)

Deficit forces California to issue IOUs - (www.ft.com)

VIX Below Lehman Bankruptcy Level Leaves ‘Wall of Worry’ Intact

Ruling Adds Teeth to State Oversight of Banks - (www.washingtonpost.com)

Bernard Madoff Gets 150 Years in Jail for Epic Fraud - (www.bloomberg.com)

New Plan Ties Reduced College Loan Payments to Income - (www.nytimes.com)

AP Source: 10 others to be charged in Madoff probe - (finance.yahoo.com)

Ponzi victims' anger now shifts from Madoff to SEC, SIPC - (www.usatoday.com)

U.K. First-Quarter GDP Drops 2.4%, Most Since 1958 - (www.bloomberg.com)

Japan’s Jobless Rate Rises to Five-Year High of 5.2% - (www.bloomberg.com)

As Iraq Stabilizes, China Eyes Its Oil Fields - (www.nytimes.com)

Bundesbank ‘Colossus’ Loses Ability to Dictate ECB Lending Rate - (www.bloomberg.com)

Company Bonds in Europe Post Record First-Half Return - (www.bloomberg.com)

Young Japanese Raise Their Voices Over Economy - (www.nytimes.com)

Uncertainty Clouds Recovery of U.S. Investment in GM - (www.washingtonpost.com)

AIG Discloses New Risk on Derivatives Sold to European Banks - (www.bloomberg.com)

Sears to Let Jobless Stop Payments, Still Keep Fridge - (www.bloomberg.com)

Ford boosts production 16% as June car sales show strength - (www.usatoday.com)

Despite Citi Losses, a Prince Stays Positive - (www.nytimes.com)

Friday July 10 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Ryanair to bar passengers from checking luggage - (www.latimes.com) urope's largest low-cost airline plans to offer an unlimited allowance for carry-on bags that comply with government size limits starting next spring. Ryanair plans to allow only hand luggage. Ryanair Holdings, Europe's largest low-cost airline, will bar passengers from traveling with anything other than hand luggage as it seeks to cut costs. Ryanair plans to offer an unlimited allowance for carry-on bags that comply with government size limits while abolishing checked luggage, starting next spring, Chief Executive Michael O'Leary said. "This isn't the end of civilization as we know it, it only sounds revolutionary," he said. Passengers will carry belongings onto the plane; when overhead bins are full items will go in the cargo hold. Ryanair already is scrapping airport check-in desks starting Oct. 1, compelling people to register for flights via the Dublin company's website.

No 2nd stimulus planned - (www.sfgate.com) A senior White House adviser said Sunday the economic stimulus has not yet "broken the back of the recession" but set aside calls for a second massive spending bill. Republicans, meanwhile, called spending under way a failure. White House adviser David Axelrod urged patience for President Barack Obama's $787 billion economic stimulus package in the face of sliding poll numbers. Former Massachusetts Gov. Mitt Romney, a past and potentially future presidential candidate, said the spending was ill-designed and served only to expand the size of government. Republicans have seized on the public's growing unease over government debt and spending to challenge the popular president. Sensing their own vulnerabilities, Obama's top advisers have ramped up their defense of spending that is incomplete and going slower than many had hoped. "You know, we take the long view on this. Look, when the president signed the stimulus package — the economic recovery package — he said it's going to take a while for this to work," Axelrod said. "And we're going to go through some rough times, and unemployment is going to go up, and ... we have to work our way through this." Some economists and business leaders have called for a second spending bill designed to help guide the economy through a downturn that has left millions without jobs. Axelrod said it's too early to know if more spending would be needed or if the administration would seek more money from Congress. "Most of the stimulus money — the economic recovery money — is yet to be spent. Let's see what impact that has," Axelrod said. "I'm not going to make any judgment as to whether we need more. We have confidence that the things we're doing are going to help, but we've said repeatedly, it's going to take time, and it will take time. It took years to get into the mess we're in. It's not going to take months to get out of it." Republicans, though, aren't waiting. "I don't think the stimulus that was passed is going to be much help," Romney said. "The stimulus that was passed was, unfortunately, focused more on government and creating employment inside government than it was creating jobs in the private sector."

The Eyeshade Smelled Trouble - (www.nytimes.com) WHEN it comes to corporate America, critics and skeptics are about as welcome as skunks at a pool party. And when companies try to silence dissenters, shareholders are often imperiled. This truism is on full display in the mess at Matrixx Initiatives, a Scottsdale, Ariz., maker of over-the-counter health care products. Best-known for its homeopathic Zicam Cold Remedy offerings, Matrixx hit a rough patch on June 16, when theFood and Drug Administration advised consumers to stop using two of its popular remedies. The F.D.A. said that it had received more than 130 reports of anosmia — or loss of smell — from users of the products and that more than 800 such reports had been delivered to Matrixx. The agency told Matrixx that Zicam Cold Remedy Nasal Gel and the same treatment in swab form could no longer be marketed without government approval. Matrixx maintains that the products, which contain zinc, are safe. But it immediately withdrew them from the market. Bill Hemelt, Matrixx’s president, said company officials would meet with the F.D.A. to try to persuade it to reverse its decision. Matrixx shares have fallen 71 percent since the F.D.A. announcement. No surprise, given that Zicam cold remedies generated 71 percent of Matrixx’s $112 million in revenue last year. Its Cold Remedy Swabs are the company’s best-selling product, corporate filings show. Last Tuesday, Matrixx’s problems grew when it said the Securities and Exchange Commission had begun an informal inquiry into the company related to the F.D.A. action. This dire turn of events may have shocked some Matrixx shareholders, but it was foreshadowed back in 2002, when reports of smell loss among some Zicam users began surfacing in anonymous Internet posts. Matrixx filed a defamation suit against the posters. Then, as part of the case, it subpoenaed Tim Mulligan, an independent research analyst who had published a critical report on the company in his accounting-oriented newsletter, The Eyeshade Report. A former assistant United States attorney in Los Angeles who was licensed as a certified public accountant, Mr. Mulligan had set up his company, Forensic Advisors, in Rockville, Md., in 2001. Over the years, he had questioned the practices of several companies that were subsequently investigated by the S.E.C. Matrixx never named Mr. Mulligan as a defendant in its defamation case, but the years of legal work and costs that he incurred defending himself against the company’s subpoena finally drove him to shutter his research operation in late 2005. “It’s a shame that in our legal system you can pretty well keep somebody tied up in court without even naming them as a defendant,” Mr. Mulligan said. THE battle between Matrixx and Mr. Mulligan began in 2003, when he published a report focusing on what he called aggressive accounting practices at the company. Citing regulatory filings and other public documents, Mr. Mulligan’s 24-page report that August also warned that Matrixx might not be able to supply the F.D.A. with adequate support for its claims that Zicam reduces the severity of cold symptoms. The report also noted criticisms in medical journals of the studies that Matrixx cited to support its claims. He published the report without knowledge of the defamation case, he said. A month after Mr. Mulligan’s report, three doctors at a meeting of the American Rhinologic Society presented cases of smell loss after the use of zinc-laced nasal sprays. Consumers began to file lawsuits against Matrixx, which the company fought. Then, in November 2003, Mr. Mulligan received a subpoena from Matrixx. It asked him to produce documents used to prepare his report. Even though he thought that Maryland’s press-shield law meant that he did not have to submit, Mr. Mulligan said he handed over 383 pages of documents to Matrixx. Then he wrote three more reports on the company detailing the rising reports of smell loss among some Zicam users and the litigation risk they posed to the company. Five months after his last report, Matrixx sent Mr. Mulligan a letter saying that he had been served with a second subpoena seeking his deposition and asking for his sources and clients, among other items. “If you do not appear, a warrant may be issued for your arrest,” the letter said, according to court documents.

Rules May Limit Cash for Clunkers Program - (www.nytimes.com) In Europe, hundreds of thousands of car owners have taken advantage of government subsidies to get rid of their old vehicles and trade up to new ones. Car sales in Germany are up about 40 percent from a year ago. But a similar so-called cash-for-clunkers program that starts in July in the United States is not expected to have nearly the same impact. While the program, which President Obamasigned into law this week, gives consumers a credit that is in line with the payments in Europe — up to $4,500 — what qualifies as a “clunker” in the United States is far more limited. Further, the American program has $1 billion in financing, enough for about 250,000 consumers to use it, and ends Nov. 1, or sooner if the money runs out. Germany, on the other hand, originally expected to spend 1.5 billion euros to get 600,000 old cars off the road. But the program proved so popular, the government this spring raised the budget to 5 billion euros for two million cars and extended the deadline to the end of 2009. Still, if the alternative is to simply wait for the market to recover on its own, dealers and carmakers in the United States say they will take what they can get. “It’s better than nothing, that’s for sure,” said George Pipas, the Ford Motor Company’s chief sales analyst. “Anything to get consumers off the couch and give them a reason to go to the dealership.” The program, formally known as the Car Allowance Rebate System, is aimed at reducing fuel consumption by removing older, gas-guzzling vehicles from the nation’s roads. The cars and trucks turned in will be scrapped and their owners given a credit of either $3,500 or $4,500 toward a new vehicle. The amount of the credit depends on the fuel-efficiency rating of the new vehicle. The official Web site for the program is cars.gov. In Europe, where nearly a dozen European countries have clunker programs, the details vary. But generally, the programs require only that the vehicle being turned in is old. In Germany, eligible cars have to be at least nine years old, and the subsidy covers the purchase of any new car, regardless of its size or fuel efficiency. The American program, by contrast, is far more complicated. To qualify, consumers must turn in a vehicle that is no more than 25 years old and has a combined city and highway fuel economy rating of no more than 18 miles per gallon, as calculated by the Environmental Protection Agency. The E.P.A. lists vehicles’ ratings at the Web site FuelEconomy.gov. The old vehicle must be drivable, and it must have been insured by and registered to the same person for at least the last year, preventing shoppers from buying an old car and flipping it to get a discount on a new vehicle. The credit cannot be applied toward a used vehicle or toward new vehicles that cost more than $45,000. To get the full $4,500 credit, consumers must buy either a new truck or sport utility vehicle that is rated at least five miles per gallon higher than the scrapped vehicle or a passenger car that is rated at least 10 miles per gallon higher than the scrapped vehicle. Because the old vehicle will be destroyed, the credit is given instead of the regular trade-in value — not in addition to it — though some dealers might compensate customers for the vehicle’s scrap value. The rules mean that the owner of a 2003 Chevrolet Trailblazer, which qualifies because it gets about 16 miles per gallon, would get nearly $2,000 less under the program than by making a normal trade-in. Conversely, a 1992 Honda Civic, which is worth only a few hundred dollars, does not qualify because its gas mileage is too high. “It has to be worth not very much and it also has to get very poor E.P.A. fuel economy,” said Jack R. Nerad, the executive editorial director and market analyst for Kelley Blue Book. “It’s a fairly narrow profile. You’re talking about people who are probably economically challenged to begin with and they have to be able to qualify for a new car purchase in the midst of a deep recession. Those are some difficult parameters.” But Mr. Nerad said the program could have a broader impact just by encouraging consumers to look at new vehicles, something many have not done because of uncertainty about their jobs and finances during the recession.

Five Banks Are Seized, Raising U.S. Failures This Year to 45 - (www.bloomberg.com) Five U.S. banks with total assets of about $1.04 billion were seized by regulators, pushing this year’s tally of failures to 45 as a recession drives up unemployment and home foreclosures. Community Bank of West Georgia, in Villa Rica, Georgia; Neighborhood Community Bank of Newnan, Georgia; Horizon Bank of Pine City, Minnesota; MetroPacific Bank of Irvine, California; and Mirae Bank of Los Angeles were closed yesterday by state regulators, according to statements from the Federal Deposit Insurance Corp. The FDIC was named receiver of the four banks. Wilshire Bancorp’s Wilshire State Bank will take over all of Mirae’s $362 million in deposits, and will purchase $449 million of assets, the FDIC said in a statement. Sunwest Bank of Tustin, California, acquired most of MetroPacific’s $73 million in deposits and $80 million in assets, the FDIC said. Stearns Bank of St. Cloud, Minnesota, bought Horizon Bank’s $69.4 million of deposits. Stearns will purchase $84.4 million of Horizon’s assets, the FDIC said. The FDIC didn’t find a buyer for Community Bank of West Georgia, and said it will mail checks to reimburse insured depositors. The bank has deposits of $182.5 million. Charter Financial Corp.’s CharterBank will assume Neighborhood Community Bank’s $191.3 million of deposits and purchased some assets in a loss-share agreement with the FDIC, according to the agency. “The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector,” the FDIC said. “The agreement also is expected to minimize disruptions for loan customers.” Regulators have seized the most U.S. banks this year since 1993. The U.S. economy has shed about 6 million jobs since the recession began in December 2007. Foreclosure filings surpassed 300,000 for the third straight month in May, according to RealtyTrac Inc.

Sheraton Keauhou Bay Resort and Spa is in foreclosure after owner defaults – (finance.yahoo.com) The Sheraton see Bay Resort and Spa on the Big Island is going into foreclosure after the resort's owner defaulted on its mortgage, another sign Hawaii's beleaguered tourism industry is suffering during the global recession. Kenneth Marcus, a commissioner appointed by Circuit Court Judge Ronald Ibarra, confirmed Thursday that the hotel is due to be auctioned July 31. Owners Koa Hotel LLC have defaulted on nearly $60 million remaining on their mortgage, interest and fines. Marcus said the hotel is due to stay open -- for the time being at least. "As far as the operations of the hotel, nothing is likely to change, for all outward appearances," Marcus said. "In terms of the short term, it should be business as usual." He couldn't say for sure what would happen to the hotel after the sale, but said it it's unlikely someone would buy the hotel and close it. Koa Hotel is owned by the New York private equity firm Brickman Associates. The property's major creditor is Lehman Brothers Holdings Inc., which filed for bankruptcy last year. The resort's business declined amid a broader drop in visitors to Hawaii since last spring. So far this year, 15 percent fewer tourists have visited the Big Island compared to the first part of 2008. A buyer would get a 521-room resort and spa on about 20 acres of land owned by Kamehameha Schools. The resort has three restaurants and bars, retail space, a fantasy pool, a spa, a wedding chapel, a fitness center, a business center and two tennis courts. Notice of the foreclosure sale, which Marcus said would be advertised starting Sunday, said no minimum price has been set for the auction. Interested bidders must register with Marcus at least five days before the auction. Potential bidders must sign a confidentiality agreement before being permitted to review some financial documents. Marcus will take the winning bid to Ibarra's court, where further bids are allowed. Ibarra will approve the winning bid. According to county property tax records, Koa Hotel doesn't owe any back taxes. Kekoa Paulsen, spokesman for Kamehameha Schools, said the leaseholders were not in default on lease payments. Koa Hotel purchased the former Kona Surf Hotel in 2001. In 2005, the owners took out an $82 million mortgage from Lehman Brothers. The hotel sits on an oceanfront lot, but doesn't have a beach. This has long been a problem for hotel owners, said licensed Realtor and Honolulu-based hotel broker consultant Ronald Gilligan, who was involved in earlier purchases of the property. "It was geographically inconvenient for long stays," Gilligan said. This hotel foreclosure sale most likely won't be Hawaii's last during the economic downturn, Gilligan said.

Bloated State Police Pension Plans – Something Has To Give - ("Mish" at globaleconomicanalysis.blogspot.com) The police union in Michigan is doing what public service unions in general usually do, 1) whine for more taxes 2) Complain they need more workers to maintain safety 3) Elect layoffs over reduced pay 4) Ignore the long term issues that need addressing. Please consider Michigan State Police layoffs take effect Sunday. LANSING, Mich. (AP) - About 100 Michigan State Police troopers will be laid off Sunday after a last-ditch effort to avoid the job loss failed. Members of the Michigan State Police Troopers Association voted against a furlough plan that would have temporarily cut their pay to avoid layoffs of low seniority workers. The furlough plan would have required troopers to take 37 hours of unpaid leave over a six-week period. That would have saved jobs now, but there was no guarantee low-seniority officers would have kept their jobs in the next budget year. Mike Moorman, the troopers' union president, said the vote reflects dissatisfaction with how the state has handled public safety funding in recent years. Michigan has lost more than 2,000 law enforcement officers statewide this decade, including more than 400 from the state police. Positions have been eliminated as government tax revenues decline during a lengthy recession. "The membership's rejection of furlough time is not a reflection on our unwillingness to stop the loss of 100 troopers," Moorman said in a statement. "Our members are fed up with the lack of public safety priorities in Michigan, which have been discussed for years, yet never acted upon." Col. Peter Munoz, director of the Michigan State Police, said in a statement he is "deeply disappointed" a solution could not be found to avoid the layoffs. The state spent more than $8 million in the past few years training the troopers it now plans to lay off to save less than $2 million in the current budget year. Some state lawmakers continue to question why Gov. Jennifer Granholm's administration plans to move the police department into a new $40 million headquarters building in downtown Lansing early next year. The move could have long-term financial implications for the state police -- including significantly higher annual lease payments of $3.7 million per year -- but it does not affect the department's budget for the current fiscal year. Peter Munoz, director of the Michigan State Police, whines he is "deeply disappointed a solution could not be found to avoid the layoffs". Munoz is wrong. There was a perfectly good solution to avoid the layoffs. If the union wanted to protect the most workers, the vote would have been for pay cuts. Instead, the union elected to do what unions typically do, protect the few instead of sharing the pain. Of course there is plenty of blame to be spread around. Why is the legislature and/or Governor authorizing a new $40 million police headquarters in Lansing with lease payments $3.7 million per year higher? After the layoffs, the Michigan State Police will have 958 troopers at posts across the state. Reduce the pension plans and benefits to reasonable levels and perhaps Michigan can afford 1200 officers. Then again, why isn't 900 or even 850 officers enough? Michigan has lost 400 state police in a decade. Is anyone suffering for it? How? Voters are fed up with paying ever increasing taxes to keep unneeded public servants in high paying jobs with ridiculous pension benefits. State Police Pension Double-Dipping: Inquiring minds are digging further into the Michigan State Police layoff situation. Please consider Why another budget "crisis?" State Police Pension Double-Dipping (among other reasons).

Troopers start getting a portion of their pension while still working and simultaneously collecting their regular salary. The amount of pension they can collect is 30 percent the first year, 50 percent the second, and then increases 10 percent each year until eventually they are getting full pension and full pay before they have retired. The money is not paid out to them immediately but is deposited into an interest-bearing retirement account they get when they really retire. That's nuts, of course. No sane private sector employer would give away such a benefit. We offer one because legislators abandoned their fiduciary duty to be responsible stewards and gave away a huge pile of loot to a powerful public employee union. The rationale under which that caper was foisted on taxpayers was that Michigan State Police are eligible to retire and collect their pensions after just 25 years of service with no minimum age. As a result it's not uncommon to have age 40-something men and women in the prime of life eligible to call it a career and head for the beaches, spending the last 35-40 years of their lives lounging at taxpayer expense. Needless to say this causes potential staffing problems at the MSP. Rather than fix the problem in a rational and fiscally prudent way - establish a minimum age of say 55 or 65 before an individual can start collecting a pension - the political class gave away some boodle in the form of a goofy DROP program as an incentive to keep troopers working. Pretty sweet deal, huh? Sweet for the troopers, but not for the taxpayers. And just one more example of why you should never believe a politician who says, "Our budget has been cut to the bone." Mike Moorman, the troopers' union president, whines "Our members are fed up with the lack of public safety priorities in Michigan". Moorman is not bright enough to figure out what everyone else in the world knows: The US is in recession and Michigan is at the top of the list. There simply is no more tax money to pay for boated unions or their pension plans.

175 California Hotels In Default; Sheraton Keahou Bay Resort in Hawaii Defaults; More Defaults Coming - ("Mish" at globaleconomicanalysis.blogspot.com) Hotel owners are facing the same problems as homeowners, being upside down on their properties with no good escape. Please consider Hotel foreclosures jump in California. In California, 175 hotels are in default -- the first stage in the foreclosure process -- according to a report from Atlas Hospitality Group, an Irvine-based brokerage firm. Another 31 have been foreclosed, nearly one third of them in the Inland region. Of those in default or foreclosure, about 75 percent obtained new loans between 2005 and 2007 for construction financing, re-financing or to buy the hotel, according to the firm. Atlas Hospitality estimates that 2,500 hotels -- about 25 percent of the state's entire hotel population -- refinanced or obtained new loans in that time meaning more defaults and foreclosures could be on the horizon. The industry has been rattled by foreclosures before, especially in the mid-1990s, but the impact today is more widespread, hitting both low-end and high-end properties in every region, Reay said. Those who bought hotels between 2006 and 2006 are likely sitting on properties worth at least 50 percent less than what they paid, he said. [Mish: obviously there is a typo in the date range] Reay's firm is marketing The Block at Big Bear, a 50-room hotel that catered to snowboarders. The hotel's owner walked away earlier this year and closed the hotel, which is in default. The hotel was appraised for more than $4 million in 2006. Today, Reay's firm, working with a court-ordered receiver, is asking $2.04 million for the property. Hoteliers will likely have to survive at least two more years of low revenues, diminishing profit margins and fewer rooms booked by travelers unwilling to spend. Atlanta-based PKF Hospitality Research has forecast that the revenue hoteliers earn per room will reach its lowest point of the recession in the third quarter of this year.

OTHER STORIES:

Jackson Estate Has Piles of Assets but Loads of Debt - (www.nytimes.com)

Median pay for top execs of Northwest companies goes down for first time in several years - (seattletimes.nwsource.com)

Questions about Iran dominate G8 discussions - (www.ft.com)

China repeats criticism of dollar dominance - (www.ft.com)

Overview: Central banks point up risks ahead - (www.ft.com)

Major provisions of House climate and energy bill - (finance.yahoo.com)

China's required PC filter Green Dam a big risk for companies - (seattletimes.nwsource.com)

Treasury, GM Close to Reaching Deal on Legal Claims - (www.washingtonpost.com)

Oil hovers above $69 as traders eye US economy - (finance.yahoo.com)

U.S. Stock-Index Futures Advance, Signal Rebound for S&P 500 - (www.bloomberg.com)

BIS Sees Risk Central Banks Will Raise Interest Rates Too Late - (www.bloomberg.com)

Madoff sentencing nears, but victims' pain goes on - (www.washingtonpost.com)

China Bank Lending Funneled Into Stocks, News Says - (www.bloomberg.com)

Swiss Banks Shun Americans as U.S. Compels Disclosure - (www.bloomberg.com)

British Financials Plan to Cut 13,000 Jobs, CBI Says - (www.bloomberg.com)

In search of the exit - (www.ft.com)

A Plan to Stem Foreclosures, Buried in a Paper Avalanche - (www.nytimes.com)

Rising national debt raises prospects of eventual inflation - (www.usatoday.com)

IEA Cuts Five-Year Global Oil Demand Outlook on Economic Slump - (www.bloomberg.com)

US TV prepares for $2bn ad shortfall - (www.ft.com)

Record fundraising buoys banks’ earnings - (www.ft.com)

How a Loophole Benefits GE in Bank Rescue - (www.washingtonpost.com)

The Fed must reassure markets on inflation - (www.ft.com)

Thursday July 9 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

More reasons not to believe the NAR - (themessthatgreenspanmade.blogspot.com) In addition to dubious assertions the other day about property assessors coming in too low with their valuations, thus thwarting a rebound in home prices, the National Association ofRealtors (NAR) also reported a stunning decline in the percentage of distressed sales, a development that prompts the update of the chart below, first presented back in February. What this chart does is back out the percentage of sales classified as "distressed" in the NAR's monthly report on existing home sales, which results in a trend that looks very similar to that of new home sales, what has confounded homebuilders over the last couple years. That is, up until last month, when distressed sales plunged! And, after some rudimentary math, non-distressed home sales must have surged, as shown above. Did non-distressed sales really surge last month? That's essentially what the realtors' trade group said on Tuesday because overall sales were about flat in May, but the percentage of distressed sales tumbled from 45 percent in April to just 33 percent in May, down from over 50 percent in March. Moreover, the current level of distressed sales is now below the level that was seen when this statistic was first reported last fall. Does that really make sense given the waves of foreclosed properties that continue to hit the market or is the decline a little bit of "stretching the truth" for a statistic that surely does not have the reporting rigor of, say, the total number of homes sold? A smaller number of "distressed" sales might make the real estate market as a whole seem a little bit less distressed itself and might even serve to stir some of the "animal spirits" of homebuyers who might otherwise be a bit put off with such a high number of bank-owned properties being sold.

The NAR's Appalling Fight Against Honest Appraisals - (www.businessinsider.com) Yesterday we mentioned how the National Association of Realtors, and its chief economist Larry Yun, was complaining about "low-ball" appraisals, saying they were hurting the housing market. Basically, they're upset about a new law that requires an objective, third-party appraiser and the use of distressed sale prices (AKA market prices) in determining the value of a home. Well, Barry Ritholtz has done more digging into this, and suggests that based on the NAR's activity, you might almost conclude that the NAR is "pro fraud" He found this letter from the NAR, detailing its effort to thwart the legislation:

TO: State Association Executive Officers
State Association Presidents
FROM: NAR Government Affairs
DATE: 19 June 2009
RE: Fly-In Head’s Up

Please note this notice is going to all state executive officers and state presidents. We will be sending Fly-In details on Monday June 22, 2009 to the states who have Members of Congress and/or United States Senators on the House Financial Services Committee or Senate Banking Committee. (list of states at end of memo) There is growing concern in the real estate industry over the implementation of the Home Valuation Code of Conduct (HVCC) and its effect on the use of appraisal management companies (AMCs) by lenders. NAR is taking the following actions: (Target dates in bold)

1. NAR is scheduling meetings with the Director of Federal Housing Finance Agency, Jim Lockhart to raise concerns about implementation of the HVCC and problems with AMCs and ask for an immediate 18 month moratorium. Director Lockhart is the conservator over Fannie and Freddie who entered the consent order with the NY Attorney General. ( June 22, 23, 24, or 25th)

2. Government Affairs will conduct a fly in the week of June 22. Two members from each Association (State AE/State President or FPC as appropriate) to meet with members/staff of the House and Senate Banking/Financial Services Committee. The ask will be to cosponsor the bill (item 3) and to support an 18 month moratorium.

3. Our legislative team will work on getting a bill introduced in Congress asking for a 18 month moratorium. (week of June 22)

4. We will ask the Chair and Ranking Members of the House and Senate Banking [ Reps Frank and Bachus/ Senators Dodd and Shelby] Committees to write Director Lockhart asking him to grant a 18 month moratorium (week of June 22)

5. We will try and get an 18 month moratorium attached to an immediate pending appropriation bill or other similar fast track bill. (June)

6. Staff will talk to the American Bankers Association who heretofore is fine with the AMC system to see if we can negotiate support.(June 19)

NAR will engage a coalition of Appraisal Institute, MBA, Home Builders and other appropriate trade groups.

7. NAR Research is conducting a survey so we have concrete data information to bring to the regulators and the NY Attorney General’s office . The survey will also be run through the State Association. EHS will be released next week and the appraisal issue will be mentioned front and center in NAR’s release. Survey release June 22

8. NAR is scheduling a meeting with NYS Attorney General Andrew Cuomo and representatives of NYSAR. (June 29. 30)

9. NAR will conduct a Call For Action if we do not get a moratorium in the next week to 10 days

Real Estate Associations Want Appraisers To Inflate House Prices - (www.huffingtonpost.com) The housing is still struggling because appraisers are being too tough assessing the value of homes. That's the self-serving argument being made by realtors who are complaining that lower appraisal values of homes are delaying deals, ruining sales and prolonging the housing crisis. Their solution? Delay reforming the appraisal industry for another 18 months, then we can worry about the real value of a home. Until then, they argue, what's wrong with a few inflated prices? Well, as Barry Ritholz puts it: Appraisal fraud was an enormous contributor to the unsustainable run up in prices during the boom period. Many (but not all) mortgage brokers and realtors referred buyers to appraisers that ALWAYS hit the number of the home purchase price. New York Attorney General Andrew Cuomo, in an attempt to prevent this kind of appraisal fraud, instituted the Home Valuation Code of Conduct, which took effect May 1. According to the Wall Street Journal: The code covers any mortgage that can be guaranteed by Fannie or Freddie, which means the majority of all home loans. It bars loan officers, mortgage brokers or real-estate agents from any role in selecting appraisers. The idea is that people who are hungry for commissions shouldn't be in a position to lean on the appraiser. Now, NAR and other real estate lobbying groups, who are trying to maintain stay in business despite the total destruction of their market, are mobilizing a major effort to reach out to Congress and housing officials. As NAR economist Lawrence Yun said earlier this week, "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales." Instead, Yun and his bunch want appraisers who won't be too tough. As Yun puts it, "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected." With so much going on in Washington, it may be an uphill battle drumming up support for delaying reforming the real estate market in the wake of one of the worst housing crisis in modern history. Hey, but that's just us.

Bloomberg Buys the Discredited Realtor Lobby's Spin - (www.cjr.org) You’d think that by now the media would be done with the National Association of Realtors, a discredited organization that caused the press so much embarrassment during the housing bubble. But here’s Bloomberg writing a story that could be an NAR press release, warning that “There may be another culprit scuttling a U.S. housing recovery: low home appraisals.” To which Yves Smith of Naked Capitalism provides a welcome dose of “yeah, right.” As Smith points out: The fact that this story appears to have come from industry-cheerleading NAR’s lips to Bloomberg screens is a red flag. Just because the NAR says something doesn’t mean it’s a story—or such a story at least ought to be accompanied by a heaping helping of skepticism given the source. The sliver of “to be sure” Bloomberg dutifully slides into the story doesn’t come until too far down, as Smith points out: When home values come in below the sales price, that’s not the appraiser’s fault, it’s a reflection of the market, the Appraisal Institute, a Chicago-based professional group that represents more than 25,000 appraisers, said in a statement yesterday. “We take offense with the notion that an appraisal is only good if it happens to come in at the sales price,” the group said. “That mentality helped cause the mortgage meltdown to begin with.” Smith notes that “the story immediately undercuts that and returns to the “low appraisals” mantra.” And indeed it does. But I have a more pressing consideration here. Hey, Yves: Leave some media criticism for me! This is too good. But seriously, it’s an excellent piece of media criticism. The whole Bloomberg story is obviously part of a lobbying pushback by the NAR against new restrictions on appraisals intended to curb the corruption that goosed the housing bubble. Barry Ritholtz points to a passage from his new book Bailout Nation that succinctly describes said corruption: Historically, there was no incentive to inflate appraisals. But with the rise of the mortgage brokers—many working closely with real estate agents—the business of steering appraisals to the most generous rose rapidly. By inflating appraisals, many appraisers found they could attract more referral business; some even managed to always hit the target prices given by real estate agents, which contributed significantly to the huge run-up in home prices. In 2005, more than 8,000 appraisers—roughly 10 percent of the industry—petitioned the federal government to take action against such abuses. But both Congress and the White House did nothing, allowing this rampant fraud to continue unabated. Ritholtz adds: So the very people who were enormous contributors to the credit bubble (mortgage brokers), and their colleagues who helped feed the housing boom and bust via friendly (i.e., corrupt) appraisals (RE Brokers, appraisers), are now mobilizing to make sure that honest appraisal reform is thwarted.

Living without credit cards - (msnbc.msn.com) Lisa Brough was forced into a debt-free life by medical disaster. Her husband has Huntington’s disease, a degenerative brain disorder, and has been unable to work since 1999. The couple, who have three children, saw their finances suffer as a result. They ended up with $50,000 worth of credit card debt as Brough worked two jobs and still struggled to pay the bills and the high property taxes on their home in Westchester County, N.Y. “I said to myself, ‘I can’t do this anymore,’ ” she recalled. “He was going downhill, and I had to figure out a way to get out of this. I couldn’t count on tomorrow because I didn’t know what tomorrow would bring.” In 2005, she took drastic measures. She decided to sell her $350,000 home, pay off all the family’s debt, and move to lower-cost Cary, N.C., where she was able to buy a house for $164,000 house in cash. Since then it’s been cash and debit cards only for Brough, 50, who has no debt of any kind. How does she do it? She buys secondhand furniture and electronics, gets her husband’s medicines from Canada at cut rates, has a $10,000 emergency fund and thinks long and hard before she opens up her wallet. “When you use cash you think about what your needs are because you’re paying a big chunk of money at once,” she said. This concept is probably a foreign one to many Americans who are addicted to buying almost everything on credit. But believe it or not, it is possible to survive and thrive without depending on credit cards. In fact, Brough is part of a small but growing debt-free movement, some joining because of personal or economic hardships, and others just looking to simplify their lives. It’s all about economic empowerment. “Times are tough and people want to take control of their finances,” says Denis Cauvier, a financial psychologist and co-author of “The ABCs of Making Money.” “When people look at what’s happening, all the ups and down of the stock market, housing prices, people getting laid off, they get a sense they are out of control,” Cauvier says.

Personal bankruptcies surge in Southern California - (www.latimes.com) The region had the nation's biggest percentage jump in 2008, and the number this year through April is up 75% despite a 2005 rule overhaul aimed at curbing filings by those who would benefit unfairly. Going legally broke has made a big comeback -- especially in the Los Angeles area -- despite a mid-decade revision to the U.S. Bankruptcy Code intended to curb filings. The number of Southern Californians seeking bankruptcy protection nearly doubled in 2008 from 2007 in the U.S. Bankruptcy Court's seven-county California Central District, by far the biggest increase in the nation. Bankruptcy is still booming. Personal filings from January through April, the most recent month available, rose 75% in the Central District compared with the year-earlier period. Bankruptcy experts attribute the growth mainly to the mortgage meltdown, which hit the region's adventuresome borrowers particularly hard. Add soaring credit card debt and medical expenses, and people who never thought they'd see a bankruptcy courtroom are lining up with petitions in hand. "California has been one of the biggest climbers in the filing rate in the last few years," said Robert Lawless, a law professor at the University of Illinois and contributor to the Consumer Bankruptcy Project, which examined how the 2005 bankruptcy overhaul affected filers. "I attribute a lot of that to the foreclosure problem." The scene plays out weekdays in the downtown Los Angeles bankruptcy filing office. In 2006 and 2007, with bankruptcy filings in the doldrums, official statistics indicate this room was less than bustling. But on a recent morning, nearly 20 people were waiting in the hallway before the doors opened, many looking for a way out of their mortgage troubles. Kim Smock raced in to ask a clerk: "Do you think I can make an 11:30 sale?" It was 10:45 a.m. and Smock had only 45 minutes to stop the foreclosure sale of his home. In short order, Gerri Colwark arrived for a similar reason -- the bank was ready to sell her father's foreclosed home that morning. A bankruptcy filing stops a foreclosure sale, at least temporarily, even if the paperwork is stamped only a minute before the sale is to take place. "I rushed over here," she said, a bit out of breath. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was designed to keep people who had the ability to pay debts from enjoying the benefits of bankruptcy. At the heart of the changes is a complex "means test" to analyze a person's ability to pay debts before being allowed to seek Chapter 7 bankruptcy protection, which along with Chapter 13 are the types most often used by individuals.

OTHER STORIES:

New house sales in May down 33% from last year - (money.cnn.com)

4 of America's nastiest housing busts - (articles.moneycentral.msn.com)

Graph of Equity in Household Real Estate - (www.ritholtz.com)

Value of commercial real estate back to 2004 levels - (www.sfgate.com)

The Tyranny of Mark-to-Market Rules for Houses - (www.reason.com)

Banksters Polishing Their Sleazy Image - (www.bloomberg.com)

Goldman Sachs Manipulating Markets Since Depression - (zerohedge.blogspot.com)

Instead of Real Financial Reform, Obama capitulates to Wall Street - (www.globalresearch.ca)

World Real Estate Markets In The First Quarter - (www.nuwireinvestor.com)

The 13 Most Distressed Cities Of The Super-Rich - (www.forbes.com)

With housing still tumbling, what's best way to gauge prices? - (www.latimes.com)

The path to recovery is getting narrower - (www.marketwatch.com)

Housing, unemployment woes leave movers shaken - (www.sfgate.com)

Pensioners kidnap and torture their financial adviser - (www.dailymail.co.uk)

US To Trade Gold Reserves For Cash Through Cash4Gold.com - (www.theonion.com)

Jackson Estate Has Piles of Assets but Loads of Debt - (www.nytimes.com)

Median pay for top execs of Northwest companies goes down for first time in several years - (seattletimes.nwsource.com)

Questions about Iran dominate G8 discussions - (www.ft.com)

China repeats criticism of dollar dominance - (www.ft.com)

Overview: Central banks point up risks ahead - (www.ft.com)

Major provisions of House climate and energy bill - (finance.yahoo.com)

Five Banks Are Seized, Raising U.S. Failures This Year to 45 - (www.bloomberg.com)

China's required PC filter Green Dam a big risk for companies - (seattletimes.nwsource.com)

Treasury, GM Close to Reaching Deal on Legal Claims - (www.washingtonpost.com)

Rules May Limit Cash for Clunkers Program - (www.nytimes.com)

The Eyeshade Smelled Trouble - (www.nytimes.com)

Wednesday July 8 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Cramer: Bernanke Charges Bad for Stocks - (ww4w.cnbc.com) As usual, Cramer thinks it is ok for the Fed and other financial execs to break the law, and uses the “fragile financial system” as his argument for not getting to the bottom of illegal financial activities. Cramer continued his defense of Federal Reserve Chairman Ben Bernanke, which started Wednesday afternoon during Stop Trading!, and railed against the congressman who questioned his integrity. The charges are “preposterous,” he said, and the economy is in too tenuous a position for this political theater. Rep. Darrell Issa, R-Calif., of the House Oversight and Government Reform Committee claims that Bernanke not only forced a shotgun wedding of Bank of America and Merrill Lynch but also that he “deliberately hid concerns and pertinent details” of the merger, Issa said in statement. But Cramer called this all but impossible and described the Fed chief as “completely and utterly incapable of doing what Issa described.” “Ben Bernanke’s the single most honest and independent man I’ve come across in 30 years on Wall Street,” Cramer said. Certainly, no one has been a bigger critic of Ben Bernanke than Cramer has. Does the phrase “They know nothing!” ring a bell? Whether it was the delay in cutting interest rates back in August 2007 or the need to buy mortgage bonds, the Mad Money host was never short on criticisms of the central bank. But Bernanke eventually came around, cutting rates and buying those mortgage-backed bonds in hopes of propping up the economy. He’s done such a good job that Cramer wants him reinstated when the chairman’s term is up in January. But that’s possibility is in danger as a result of Issa’s charges. Unless the congressman retracts his statement, “the man who rescued this market is going to be tarnished.” “And we need this guy,” Cramer said.

Dodd's Irish Luck: The Senator Sure Knows How to Pick an Investment - (online.wsj.com) Irish property prices have plummeted since 2002. But a "cottage" in County Galway owned by Connecticut Senator Chris Dodd has tripled in value during the same period, according to a financial disclosure form filed by the Senator this month. There are two possible explanations for this remarkable turn of fortune. Maybe Mr. Dodd is luckier than a leprechaun. Or could it be that he paid well below the market price when he bought out a co-owner in 2002 and had undervalued the property accordingly? If it's the latter, then Mr. Dodd received a "gift," in IRS parlance, and should have declared it on his financial disclosure form that year. He did not. Oh, and by the way, the seller at that low, low price has been the business partner of a man for whom Mr. Dodd lobbied to receive a Presidential pardon. It's also been nearly a year since a former loan officer at Countrywide Financial charged that the mortgage lender had classified Mr. Dodd as a "very important person" (a.k.a., a "friend of Angelo" Mozilo, Countrywide's then-CEO). As such, Robert Feinberg said, Mr. Dodd received -- and knew he'd received -- preferential rates and fees on two mortgages he and his wife refinanced in 2003. As a power on the Senate Banking Committee, he also knew this was a conflict of interest. This was the era when Countrywide originated and then sold to Fannie Mae high volumes of subprime loans. The SEC charged Mr. Mozilo with fraud and insider trading earlier this month, and the Los Angeles Times reported in May that there is an FBI investigation which "includes a probe of [Countrywide's] role in an influence-peddling scandal involving" Mr. Dodd. The Senate Ethics Committee won't comment on its own investigation of almost a year. Mr. Dodd denies receiving any special treatment, and nearly a year ago he promised to release the Countrywide mortgage documents and clear up the matter. We are still waiting, though he did attempt to placate the Connecticut press with a peek-a-boo release of a few select documents and a review by his own lawyers in February. Now the Irish cottage on 10 scenic acres is bringing more trouble. At the start of the Irish real estate boom in 1994, Mr. Dodd bought the property with William Kessinger for $160,000. Mr. Kessinger has been a business partner of Edward Downe, who is a longtime friend of Mr. Dodd's. In 1986 Messrs. Dodd and Downe owned a condominium together in Washington. In 1993 Mr. Downe pleaded guilty to insider trading and securities fraud and in 2001, as Bill Clinton was preparing to leave the White House, Mr. Dodd successfully lobbied to get his friend a pardon. The following year, 2002, Mr. Dodd bought out Mr. Kessinger's two-thirds share in the house and became the full owner. Mr. Dodd reported to the Irish government that he paid Mr. Kessinger $122,351, and Mr. Dodd says that a bank appraisal that same year valued the property at $190,000. From 2002 to 2007 Mr. Dodd reported its worth at between $100,001 and $250,000 on his annual Senate financial disclosure form. But Hartford Courant columnist Kevin Rennie began digging this year into the mismatch between what Mr. Dodd paid to Mr. Downe's business partner to become a full owner and what the property in Ireland was likely worth in 2002 amid the Irish land boom. Last week, when Mr. Dodd filed his annual financial disclosure form, it included a new appraisal from the same appraiser putting the current value of the house at $658,000.

Barney Frank, Fannie Mae, Freddie Mac planting seeds of future foreclosures again, what’s new - (www.reuters.com) Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said. In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac is due to implement similar policies next month, the paper said. In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper. The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added. In an interview with the paper, Weiner said the rules have "had a real chill on the ability to get these condos sold," at a time when prices of condos have fallen enough to attract potential buyers. In addition to the 70 percent sales threshold, Fannie Mae will also not purchase mortgages in buildings where 15 percent of owners are delinquent on condo association dues or where one owner has more than 10 percent of units, as the firm sees these as signals that a building could run into financial trouble, the paper added. Both Fannie and Freddie are preparing a response to the lawmakers, according to the paper.

Citi Unit Halts Mortgage Applications on Missing Data - (www.bloomberg.com) Citigroup Inc.suspended loan applications at a unit that produced half of its $115 billion in mortgages last year after a review found that some property appraisals and income-verification documents were missing. The correspondent division, which buys loans from banks and independent mortgage firms, stopped accepting new loans at 5 p.m. yesterday and will restart July 6, Citigroup said in a June 22 letter to clients. The New York-based company said it will use the time to change procedures and fix the omissions. “There remain key areas that fall short of our quality- control process,” according to the letter, signed by Brad Brunts, a managing director at the bank’s CitiMortgage division. “We ask you to review your processes and join us in this effort to collectively address these areas of concern.” Citigroup has been overhauling its mortgage business since January, when Chief Executive Officer Vikram Pandit shifted it into a “non-core” group called Citi Holdings along with other businesses tagged for sale, wind-down or restructuring. The bank lost a record $28 billion in 2008, much of it tied to mortgage- bond writedowns and costs to cover soured home loans amid the global credit crunch. The bank accepted $45 billion of bailout funds from the U.S. Treasury and has increased employees’ pay to keep them from leaving. Citigroup will raise base salaries by as much as 50 percent to help compensate for a reduction in annual bonuses, a person familiar with the plan said yesterday. Home Sales: The bank climbed 1.7 percent to $3.06 as of 10:32 a.m. in New York Stock Exchange composite trading today; the shares have tumbled more than 90 percent since the end of 2006. New-home purchases dropped 0.6 percent in May and the median sales price declined 3.4 percent, the Commerce Department said today. The new procedures in the correspondent unit follow a series of steps Citigroup’s mortgage business took over the past two years to address lapses in documentation or underwriting standards. The business is run by Sanjiv Das, who reports to Citi Holdings CEO Mike Corbat. In October, Citigroup cut off all but 1,000 of the 9,500 mortgage brokers in its network for selling the bank loans of poor quality, or in insufficient volume to be profitable. The company also stopped making second-lien mortgages through third parties. Regulators blamed practices at independent lenders last year for driving mortgage default rates to record highs.

Millionaires' club shrank at record rate in 2008, Merrill says - (www.latimes.com) The ranks of the world's millionaires shrank at the fastest rate in 2008, with North America suffering the biggest wealth loss worldwide, according to a survey by Capgemini and Merrill Lynch & Co. The global slump in property and equity markets last year cut the number of millionaires by 15 percent to 8.6 million, wiping out two years of increases, the firms said in their 13th annual World Wealth Report published today. The value of the world's millionaires' assets slid 20 percent to $32.8 trillion, after a 9.4 percent increase the previous year, the survey said. The credit crisis sent stock indexes to their worst annual losses since the Great Depression and slashed the value of real- estate holdings, hedge-fund and private-equity investments in 2008. The benchmark Standard & Poor's 500 Index dropped 38 percent, its steepest annual decline since 1937. "No country was left untouched by the financial crisis and there was nowhere to hide as an investor," Daniel Sontag, president of Merrill Lynch's global wealth management unit, said in New York today. The financial wealth of Asia-Pacific millionaires will surpass those of North Americans by 2013, driven by economic growth in China and U.S. consumer spending, Merrill and Capgemini said. The value of millionaires' assets globally will resume rising by 2013 and climb to $48.5 trillion, the report said. "Signs of stabilization are emerging, resulting in a shift in high net-worth activity as well as priorities," Sontag said. Millionaire investors will move away from capital preservation and increase equity allocation in 2010, according to Sontag.

Wall Street Begins Campaign to Thwart ‘Populist Overreaction’ - (www.bloomberg.com) Wall Street’s largest trade group has started a campaign to counter the “populist” backlash against bankers, enlisting two former aides to Treasury Secretary Henry Paulson to spearhead the effort. In memos of confidential meetings with top financial executives, the SecuritiesIndustry and Financial Markets Association

said it began this month the “execution phase” of the operation, which pledges to “embrace change” and accountability. The plan targets policy makers and the media in New York, London, Washington and Brussels and calls for a “city-by-city, grass roots” approach. The securities industry “must be perceived as part of the solution, which will allow it to better defend against populist overreaction,” the documents, prepared for a June 17 meeting of SIFMA’s board, said. The board meeting minutes and staff-written papers, obtained by Bloomberg News, outline the program crafted by polling, lobbying and public relations companies paid at least $85,000 a month. The memos provide a glimpse, in often candid language, into how Wall Street is grappling with its pariah status. “It is imperative that in this historic period of reform, the industry be recognized as playing a positive role in seeking change and providing solutions to the problems we face,” one of the documents said. “There is currently widespread skepticism about the industry’s commitment to this needed change.” Lobbying Congress: The internal papers call for using regional securities firms, many of which have escaped notoriety in the financial crisis, to push the industry’s message with their local members of Congress. The plan notes that brokers across the country can also be used. “The foot power of the private client group has proven to be effective in blunting populist messages in the past,” said board member Paul Purcell, chief executive officer of Milwaukee investment firm Robert W. Baird & Co., according to the minutes of one meeting.

Ireland’s Banks Face EU35 Billion of Losses, IMF Says - (www.bloomberg.com) Ireland’s banksface losses of as much as 35 billion euros ($49 billion) through next year as the economy shrinks at an “unprecedented” pace, the International Monetary Fund said. Gross domestic product will shrink a cumulative 13.5 percent in the three years through 2010 as the bursting of a decade-long property boom ripples through the economy, the Washington-based lender said in a report late yesterday. The losses envisaged are bigger than those forecast by the biggest Irish securities firms. Bank of Ireland Plc and Allied Irish Banks Plc have the biggest share of bad debts and will probably account for more than half of loans due to go into a proposed bad bank, known as the National Asset Management Agency. Finance Minister Brian Lenihan has said the agency will purchase as much as 90 billion euros in souring property loans. “The assessment of the bad debt outlook is at the top end of estimates for cumulative losses,” Kevin McConnell, head of research at Bloxham Stockbrokers in Dublin, said in a note today. “Much will depend on the working of NAMA, the haircut applied to the bad assets and the level of international recovery seen over the next 18 months.” ‘Economic Distress’: The IMF also forecast that Ireland’s budget deficit may widen to 12 percent of GDP this year, four times the European Union limit and above the government’s 10.75 percent projection. The state will only bring the deficit back to the EU limit in 2014, a year behind target, it said. “The stress exceeds that being faced currently by any other advanced economy and matches episodes of the most severe economic distress in post-World War II history,” the IMF said.

OTHER STORIES:

Credit crunch takes toll on super-rich - (www.ft.com)

Oil Rises Above $69 After Attacks on Shell Pipeline in Nigeria - (www.bloomberg.com)

For Hedge Funds, Biggest Fear Is More Regulation - (www.washingtonpost.com)

Iran crackdown intensifies - (www.ft.com)

Bernanke's 'Cover Up' Must Be Explained: Rep. Issa - (www.cnbc.com)

Rogers Not Shorting — or Buying — Anything - (www.cnbc.com)

Financial Overhaul Risks Deepening Recession: Bove - (www.cnbc.com)

Euro-zone industrial orders down 35.5 pct in April - (finance.yahoo.com)

Russia Facing Long Recession, World Bank Says - (www.nytimes.com)

Somali Pirate Attacks Boost Shipping Insurance Rates 20-Fold - (www.bloomberg.com)

China’s Repo Rate Falls as Central Bank Injects Cash - (www.bloomberg.com)

G.O.P. to Paint Bernanke as Ally of Big Government - (www.nytimes.com)

Indicted Billionaire Stanford Taken to Courthouse - (www.cnbc.com)

Lennar Second-Quarter Loss Wider than Estimates - (www.cnbc.com)

Republicans to Paint Bernanke as Ally of Big Government - (www.cnbc.com)

Fed Keeps Purchases Unchanged, Says Recession Easing - (www.bloomberg.com)

Lawmaker accuses Fed of "cover-up" in BofA deal - (www.retuers.com)

Fed Board Maintains the Status Quo - (www.nypost.com)

Fed Douses Purchases Talk, Urges Investors to ‘Relax’ - (www.bloomberg.com)

AIG to Cut Debt to Federal Reserve of New York by $25 Billion - (www.bloomberg.com)

US banking group attacks new agency plan - (www.ft.com)

Hertz CEO: We're Buying Cars...Lots of Cars - (www.cnbc.com)

Former London Banker Disappears with Guns: Police - (www.cnbc.com)