Monday, July 28, 2014

Tuesday July 29 Housing and Economic stories

Muni Fund Collapses To Record Lows As Puerto Rico Risk Rises - ( Quietly behind the scenes and away from the exuberant stock market trading headlines of the mainstream media, Muni bond markets are in turmoil. Thanks to the 'shenanigans' in Puerto Rico - after lawmakers last month approved a bill allowing some public corporations to restructure debt - PR bonds have collapsed to record lows (and dragged a number of large Muni funds with them). As Bloomberg's Michelle Kaske reports, A Franklin Templeton Investments municipal-bond fund with the industry’s biggest allocation to Puerto Rico has sunk to the lowest in its 29-year history as prices on the struggling commonwealth’s debt set record lows. The price per share of the $300.4 million Franklin Double Tax-Free Income Fund fell to $9.28 yesterday, the lowest since its inception in April 1985. The drop follows Moody’s three-step downgrade of Puerto Rico’s GOs last week to B2, five levels below investment grade.

Espirito Santo Bonds Tumble to Records Amid Missed Note Payments - ( Banco Espirito Santo SA bonds plunged to record lows after a parent company delayed payments on short-term notes, reawakening concern that banks remain vulnerable as the euro region emerges from the sovereign debt crisis. Portugal government bonds also fell, sending the 10-year yield up the most in two months, leading declines among securities from Europe’s most indebted nations. A gauge of Portuguese stocks fell to a seven-month low. The selloff was prompted by Espirito Santo International SA saying it delayed payments on some securities and follows a warning from the bank in May that its parent company faced a “serious financial situation” that could be damaging. Moody’s Investors Service placed Banco Espirito Santo 

'Second CIA spy in Germany': Berlin raids Ministry of Defense - ( German authorities have carried out a raid on the residence of a defense ministry official suspected of passing secrets to the US, just one week after the arrest of a German intelligence officer who worked as a double agent. Officials from the Federal Prosecutor's Office said Wednesday that residential and office premises of the staff of the Federal Ministry of Defense in Berlin were searched on “initial suspicion of activity for an intelligence agency.”  According to the German newspaper Die Welt, a soldier of the Bundeswehr is suspected of committing espionage. The individual was said to have made “intensive contacts” with alleged US intelligence officials and was under the surveillance of the Military Intelligence (MAD) some time ago.  "When sufficient evidence existed, the case was handed over to the federal prosecutor," security sources told the paper. 

US government made at least $100 bn in improper Medicare payments last year - ( The US government estimates that it made about $100 billion in improper payments last year to those not entitled to receive them. The Medicare program only accounted for about half of the amount that was erroneously doled out. Congressional investigators believe the number of inaccurate payments could be even higher. The House Oversight Subcommittee on Government Operations is scheduled to hold a hearing on Wednesday afternoon regarding the improprieties. "Nobody knows exactly how much taxpayer money is wasted through improper payments, but the federal government's own astounding estimate is more than half a trillion dollars over the past five years," said Rep. John Mica, chair of the subcommittee. "The fact is, improper payments are staggeringly high in programs designed to help those most in need — children, seniors and low-income families." The total of inappropriate awards is down from a peak in 2010 of $121 billion.

MBIA in Longest Slump Ever on Puerto Rico Default Concern - ( MBIA Inc. fell for a 13th day, the bond insurer’s longest streak of declines since going public in 1987 amid concerns it faces losses tied to guarantees on Puerto Rico’s debt. MBIA, based in Armonk, New York, tumbled as much as 5.8 percent before ending trading in New York down 3.5 percent at $9.65, the lowest since October. Bermuda-based competitor Assured Guaranty Ltd. (AGO) also extended a decline today, falling 1.7 percent to $22.71, the lowest since February and the 11th drop in 12 days. MBIA, with $4.8 billion of net exposure, and Assured, with $5.3 billion across three units, are sinking on their Puerto Rico guarantees after surviving U.S. mortgage losses that toppled other bond insurers during the financial crisis. After lawmakers in the self-governing U.S. territory last month approved a bill allowing some public corporations to restructure debt, prices on the commonwealth’s bonds have dropped to record lows.

Sunday, July 27, 2014

Monday July 28 Housing and Economic stories

Greece Resists Troika on Third Bailout as Draghi Protests Delays - ( Greece fought off calls to consider a third bailout as European Central Bank President Mario Draghi warned that the pace of economic fixes is slowing, officials said after euro-area finance ministers met yesterday. Greece has ruled out further aid -- which would come with another raft of conditions -- after its current rescue ends, a Greek official told reporters in Brussels. According to the so-called troika of International Monetary Fund, ECB and euro-area authorities, Greece may need one anyway, an EU official said. Further emergency aid will probably be needed as the government still faces a funding shortfall, can’t count on financial-market support and is slipping further behind on its commitments to overhaul the economy, the EU official said. The troika’s concerns were underlined by Draghi’s warning to Greek Finance Minister Gikas Hardouvelis that Greece should not assume its reforms have been completed.

Austrian Banks’ Bad Debt Eroded 65% of Profit Since 2008 - ( Austrian banks must reconsider a business model that forced them to use 44 billion euros ($60 billion), or almost two-thirds of their profit since 2008, to provision for bad debts, the central bank said. Austria’s largest banks, the biggest lenders in eastern Europe, must strengthen capital to catch up with competitors, cut costs and remain wary of the next bubble, Deputy Governor Andreas Ittner told reporters in Vienna today. If they do, the former communist part of Europe still offers more growth than their home market, he said. “It’s not the time to pull out of eastern Europe,” said Ittner, who heads banking supervision at the central bank. “On the contrary, growth rates are still higher there than in western Europe, but it needs to be sustainable growth.” Erste Group Bank AG (EBS)Raiffeisen Bank International AG (RBI) and UniCredit Bank Austria AG expanded in former parts of the Hapsburg empire after the Iron Curtain fell. Rapid credit growth fueled bank earnings and economic growth until 2008 as clients borrowed to buy homes, cars and consumer goods. When economic growth contracted, bad loans and write-downs soared.

Complacency Breeds $2 Trillion of Junk as Sewage Funded - ( These are boom times for complacency. To gauge just how comfortable the world of debt has gotten, consider: -- Bond buyers handed $2 billion last month to Ecuador, whose socialist president forced a default during the financial crisis while calling creditors “true monsters.” -- So many investors piled into a May bond sale by Clear Channel Communications Inc. that the radio broadcaster, with a credit rating that implies default is almost a certainty, more than doubled the offering to $850 million. -- China’s Logan Property Holdings Co. defied predictions of a slowdown in the nation’s real estate market by selling $300 million of bonds in May. The developer has negative cash flow and total debt almost twice its cash and cash equivalents.

Germany Favors Deutsche Telekom to Replace Ousted Verizon - ( Germany favors Deutsche Telekom AG (DTE) to replace Verizon Communications Inc. (VZ)as a network provider after deciding to end the American company’s contract in the wake of reports about spy surveillance by the U.S. “The federal government wants to win back more technological sovereignty and therefore prefers to work with German companies,” Tobias Plate, an interior ministry spokesman, said today at a press conference in Berlin. Germany is using an option in the current Verizon contract to end the arrangement next year, Plate said, declining to confirm whether the government had any evidence that the provider handed information from the network to the U.S. National Security Agency.

Pope Replaces Vatican Bank Managers as Profit Drops 97% - ( Pope Francis plans to replace the board and executives at the Vatican Bank after a year of reorganization at the scandal-plagued institution in which more than 2,000 accounts were blocked and profit dropped 97 percent. “With the support of the Holy Father and the Council of Cardinals, we are creating simpler, more efficient structures for those serving the mission of the Catholic Church,” Cardinal-Prefect George Pell said today in an e-mailed statement. Net income at the bank, known as the Institute for Religious Works, or IOR, plummeted to 2.9 million euros ($3.9 million) from 86.6 million euros in 2012.

Thursday, July 24, 2014

Friday July 25 Housing and Economic stories

World Cup overpass project collapses in Brazil - ( An overpass collapsed in the Brazilian World Cup host city of Belo Horizonte on Thursday, killing at least one person and injuring 10 more, an emergency official said. Television images showed part of a passenger bus crushed under the overpass and news website G1 said another two trucks and a vehicle were also smashed. The accident site is around 3 km (2 miles) from the Mineirao stadium, where a World Cup semi-final match will be held next Tuesday. The stadium has already hosted five games.

2004 Athens Olympic Venues Abandoned [Photos] - ( What has happened to the Olympic venues from the 2004 Athens Olympics is the nightmare scenario for Sochi.
Unlike the 1984 Sarajevo Olympic venues, which were destroyed during the Bosnian War, there was no catastrophic event that led to the abandonment of the Athens arenas. Greece simply has no use for world-class, expensive-to-maintain venues for niche sports like softball, beach volleyball, or even swimming. They became useless immediately after the Olympics left town. As a result, a decade after Greece spent ~$15 billion to stage the games, some of these once-gleaming venues are crumbling.

Puerto Rico electric authority in deal with lenders - ( Puerto Rico Electric Power Authority, or PREPA, on Monday said the lenders providing it revolving lines of credit have agreed not to exercise their rights to seek certain remedies following a series of ratings downgrades and other recent events that have raised concern about PREPA's financial condition. Under the agreement with the creditors, PREPA is permitted to delay certain payments currently due until July 31. PREPA said it will use that period to continue talks with creditors andevaluate alternatives to improve its financial condition. During that period, all payments owed to employees and suppliers will continue as normal. Prices on PREPA's 5.25 percent bonds due July 2040 weakened to less than 37 cents on the dollar from Thursday's closing price of 40 cents on the dollar.

Gowex Files for Bankruptcy Protection After Chairman Quits - ( Jenaro García Steps Down After Acknowledging Falsifying Accounts. Spanish technology firm Gowex said on Sunday it had filed for bankruptcy protection after the company's chairman acknowledged falsifying accounts and resigned. The collapse of Gowex, which until last week was widely touted as one of Spain's entrepreneurial success stories, followed a scathing report by an investment firm on July 1 that alleged that 90% of the company's revenue was nonexistent. In a statement filed with Spain's Alternative Stock Market on Sunday, Gowex said that Chairman and Chief Executive Jenaro García met with some directors on Saturday and acknowledged that accounting statements for at least the past four years didn't reflect a "faithful image" of the company's performance. The statement said the board revoked Mr. García's management authority and then accepted his resignation. The statement said the company started bankruptcy proceedings, "under the expectation that the company can't meet its current liabilities."

Corinthian's Collapse Shows How U.S. Can Force For-Profit Colleges Out of Business - ( For four years, the U.S. Education Department has threatened to rein in for-profit colleges and their soaring student debt. Now it has found a way. The department has taken its toughest regulatory action ever against a for-profit college: putting Corinthian Colleges Inc., with more than 70,000 students, on the path to going out of business. At least two other large players ITT Educational Services Inc. and Education Management Corp., are also at some risk of stricter enforcement, analysts said. “It’s a big deal, and people who want to isolate it and say that it only applies to Corinthian are kidding themselves,” said Trace Urdan, an analyst with Wells Fargo Securities Inc. in San Francisco who follows the education industry. “Everyone has to be more careful with their cash and take their interactions with the department more seriously.”

Wednesday, July 23, 2014

Thursday July 24 Housing and Economic stories

Student loan forgiveness may be coming - ( The new entitled class - Government workers.  For many members of the class of 2014 who borrowed money to attend college, the clock is ticking on what is likely to be their biggest expense after graduation. They'll have to start paying back their federal student loans in November or December—as the six-month grace period that lenders give new grads comes to an end. But depending on their income—or lack of income, if they're still looking for work—some borrowers may be eligible for much lower payments than they'd anticipated. And eventually they could have their federal loans forgiven altogether. "If total student debt exceeds one's annual income, then you will likely qualify for some sort of payment plan and receive a financial benefit from participation" in an income-driven repayment plan, said Mark Kantrowitz, senior vice president and publisher of, a website that provides information, advice and tools for helping families plan and pay for college.

Italy delays repayment of commercial debts - (  Italy will settle the debt arrears it owes to private sector suppliers by the end of this year, Economy Minister Pier Carlo Padoan said in a newspaper interview on Sunday, pushing back previous commitments. The Italian state owes some 75 billion euros ($102 billion)to private suppliers, according to the most recent data from the Bank of Italy. The unpaid bills have starved companies of cash and triggered layoffs, factory closures and bankruptcies. "We will ensure that the arrears are paid off by the end of the year," Padoan told Corriere della Sera daily. Prime Minister Matteo Renzi promised in March to pay back all the debt arrears by July. Within a week he put back the target date to September. The government is finding it hard to tackle the problem because of public financeconstraints, inefficiency, uncertainty over exactly how much is owed and a reluctance on the part of some public bodies to acknowledge their debts.

Argentina gets set for debt talks by calling U.S. judge biased - ( Argentina on Friday accused a U.S. judge of being biased in favor of hedge funds that have sued the South American country for full repayment of defaulted bonds, cementing the tough stance it has taken ahead of debt talks set for New York next week. A series of rulings by U.S. District Court Judge Thomas Griesa leave Argentina just three weeks to clinch a deal with the funds before falling into another default, which would heap financial stress on its already shrinking economy. The government of President Christina Fernandez denounces the funds as vultures bent on crippling Argentina, Latin America's third largest economy, for the sake of profit. "A lot of officials in the United States say its judicial branch is independent," Argentine cabinet chief Jorge Capitanich said. "But it is not independent of the vulture funds because its decisions show clear partiality." The legal fight stems from Argentina's 2002 default on about $100 billion in bonds. The financial crisis thrust millions of middle-class Argentines into poverty. The economy snapped back from 2003 to 2008 before being weighed down by high inflation and heavy-handed trade and currency controls.

France hits out at dollar hegemony in global deals Financial Times - ( France's political and business establishment has hit out against the hegemony of the dollar in international transactions after U.S. authorities fined BNP Paribas $9 billion for helping countries avoid sanctions. Michel Sapin, the French finance minister, called for a "rebalancing" of the currencies used for global payments, saying the BNP Paribas case should "make us realize the necessity of using a variety of currencies". He said, in an interview with the Financial Times on the sidelines of a weekend economics conference: "We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don't think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade." Christophe de Margerie, the chief executive of Total, France's biggest company by market capitalization, said he saw no reason for oil purchases to be made in dollars, even if the benchmark price in dollars was likely to remain.

Bond Anxiety Grows in $1.6 Trillion Repo Market as Failures Soar - ( In the relative calm that is the market for U.S. Treasuries, a sense of unease over a vital cog in the financial system’s plumbing is beginning to rise. The Federal Reserve’s bond purchases combined with demand from banks to meet tightened regulatory requirements is making it harder for traders to easily borrow and lend certain desired securities in the $1.6 trillion-a-day market for repurchase agreements. That’s causing such trades to go uncompleted at some of the highest rates since the financial crisis. Disruptions in so-called repos, which Wall Street’s biggest banks rely on for their day-to-day financing needs, are another unintended consequence of extraordinary central-bank policies that pulled the economy out of the worst financial crisis since the Great Depression. They also belie the stability projected by bond yields at about record lows. “You have a little bit of a perfect storm here,” said Stanley Sun, a New York-based interest-rate strategist at Nomura Holdings Inc., one of the 22 primary dealers that bid at Treasury auctions, in a telephone interview June 30. A smoothly functioning repo market is vital to the health of markets. The fall of Bear Stearns Cos., which was taken over by JPMorgan Chase & Co. in 2008 after an emergency bailout orchestrated by the Fed, and collapse of Lehman Brothers Holdings Inc., whose bankruptcy in September of that year plunged markets into a crisis, was hastened after they lost access to such financing.