Wednesday November 12 Housing and Economic stories

TOP STORIES:

The Shallowest Generation - (www.seekingalpha.com) The Baby Boom Generation will never be mistaken for the Greatest Generation that survived the Great Depression and defeated evil in a World War that killed 72 million people. I hate to tell you Boomers, but putting a yellow ribbon on the back of your $50,000 SUV is not sacrifice. Our claim to fame is living way beyond our means for the last three decades, to the point where we have virtually bankrupted our capitalist system. Baby Boomers have been occupying the White House for the last sixteen years. The majority of Congress is Baby Boomers. The CEOs and top executives of Wall Street firms are Baby Boomers. The media is dominated by Baby Boom executives and on-air stars. We have no one to blame but ourselves for the current predicament. Blaming Franklin Roosevelt or Lyndon Johnson for our dire situation is a cop out. Baby Boomers had the time, power, and ability to change our course. We have chosen to leave the heavy lifting to future generations in order to live the good life today. When I see “poor” people appearing to live a more luxurious life than myself, I don’t feel jealous. The thought that goes through my head is: Which banks or finance companies were foolish enough to loan these people the money to live this lifestyle? These foolish financial institutions will never get their loans repaid. What does bother me is that the Bush-Paulson-Pelosi Bailout of Stupid Banks will use my taxes to buy these bad loans from the foolish banks. So, who is the fool in this scenario? The “poor” person got to drive a Cadillac Escalade for a period of time, the foolish banks got bailed out, the bank CEOs took home $30 million, and I lived within my means and footed the bill for the reckless actions of others. It appears that the fools are the Americans who lived their lives according to the rules. The anger is building. I don’t think the politicians running this country realize what true anger looks like. They are used to Americans being herded along like passive sheep.

Cash found in Ohio house's walls becomes nightmare - (www.mercurynews.com) The "shallowest" generation proves themselves by bragging about the find and getting your name in the paper and then suing each-other and ending up with little. A contractor who found $182,000 in Depression-era currency hidden in a bathroom wall has ended up with only a few thousand dollars, but he feels some vindication. The windfall discovery amounted to little more than grief for contractor Bob Kitts, who couldn't agree on how to split the money with homeowner Amanda Reece. It didn't help Reece much, either. She testified in a deposition that she was considering bankruptcy and that a bank recently foreclosed on one of her properties. And 21 descendants of Patrick Dunne—the wealthy businessman who stashed the money that was minted in a time of bank collapses and joblessness—will each get a mere fraction of the find. "If these two individuals had sat down and resolved their disputes and divided the money, the heirs would have had no knowledge of it," said attorney Gid Marcinkevicius, who represents the Dunne estate. "Because they were not able to sit down and divide it in a rational way, they both lost." I ripped the corner off of one," Kitts said during a deposition in a lawsuit filed by Dunne's estate. "I saw a 50 and got a little dizzy." He called Reece, a former high school classmate who had hired him for a remodeling project. They counted the cash and posed for photographs, both grinning like lottery jackpot winners. But how to share? She offered 10 percent. He wanted 40 percent. From there things went sour. A month after The Plain Dealer reported on the case in December 2007, Dunne's estate got involved, suing for the right to the money. By then there was little left to claim. Reece testified in a deposition that she spent about $14,000 on a trip to Hawaii and had sold some of the rare late 1920s bills. She said about $60,000 was stolen from a shoe box in her closet but testified that she never reported the theft to police. Kitts said Reece accused him of stealing the money and began leaving him threatening phone messages. Marcinkevicius doesn't believe the money was stolen but said he couldn't prove otherwise. Reece's phone number has been disconnected, and her attorney Robert Lazzaro did not return a call seeking comment. There were no court records showing that Reece had filed for bankruptcy.

Fed Stonewalling on Giving Details About Collateral Accepted for Loans - (www.nakedcapitalism.com) In case you somehow managed to miss it, our friendly pawnbroker of last resort central bank has been taking lots of crap collateral in return for loans under its alphabet soup of facilities. As we are learaning in our housing meltdown, collateral may not prove to be worth as much as it was said to be at the time the loan was made. Inquiring minds are curious as to what, exactly the Fed has taken, particularly as the numbers are becoming stratospheric. Bloomberg has asked nicely for some of this information, and is now being forced to sue under to the Freedom of Information Act, and the Fed intends to fight! This ought to be a scandal, but after the TARP, the electorate is seems resigned to taxpayer money being thrown at floundering financial enterprises with little in the way of checks or prudence. If the Fed indeed was taking conservatively valued collateral as it has always claimed it was, there would be no reason for it to attempt to squash this request. The Fed's argument, as I infer, is the loans were made by the Federal Reserve Bank of New York, which isn't a federal agency and thus not subject to the FOIA. From Bloomberg. Note I was sent the text by reader Marshall; the story is in typical Bloomberg style, including its odd quotation marks, but I cannot find it one the free version of the site, which means it is either only on the professional version as of now (odd) or they yanked the story (troubling, particularly since the case is a matter of public record):

Regulators shut banks in Texas, California - (biz.yahoo.com/ap) Regulators shut Franklin Bank in Texas, Security Pacific Bank in Calif.; 19 failures this year. Regulators shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19. The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17. The co-founder and chairman of parent Franklin Bank Corp., Lewis Ranieri, is credited with inventing mortgage-backed securities two decades ago, but apparently was unable to save his own company from getting ensnared in the home-loan bust. The bank's failure is a bitter irony because it is the mortgage securitization business of which Ranieri is known as a pioneer -- the repackaging of home loans as bonds that are sold to investors -- that was at the heart of the mortgage and credit crises. Last spring, the audit committee of the company's board found in an investigation certain weaknesses in accounting, disclosure and other issues relating to residential real estate loans.

Trump Files Suit Against Lenders - (online.wsj.com) Donald Trump filed suit against the lenders on his unfinished Chicago skyscraper, plunging the project into legal turmoil and highlighting the credit crunch's pervasive effects on real estate. Tall Trouble: Donald Trump's Chicago skyscraper project, the Trump International Hotel & Tower, during construction in July. Mr. Trump is suing to extend a $640 million senior construction loan on the 92-story Trump International Hotel & Tower from a group of lenders led by Deutsche Bank AG and including a unit of Merrill Lynch & Co., Union Labor Life Insurance Co., iStar Financial Inc., a publicly traded real-estate investment trust, and Highland Funds, a unit of Highland Capital Management LP. The tower, which contains 339 hotel rooms and 486 condominiums, will be the second-tallest building in the U.S. behind Chicago's Sears Tower and is expected to be completed in mid-2009. The hotel, on the lower floors, opened earlier this year. But sales of both the hotel rooms and the condominiums have come in below original estimates and the project's current projected revenue remains short by nearly $100 million needed to pay off the senior lenders. The lawsuit, filed in New York State supreme court in Queens, is a further indication of the dysfunction in the real-estate lending markets as borrowers and lenders struggle to resolve troubled projects. People familiar with the matter say the lender group, which is made up of more than a dozen institutions, was unable to agree on the extension.

Ranieri Becomes Victim of Crisis as Franklin Seized - (www.bloomberg.com) Lewis Ranieri, who helped create the mortgage-securities market in the 1980s while at Salomon Brothers Inc., became a victim of its collapse after his Houston-based bank was seized. Franklin Bank Corp., formed by Ranieri in 2002, was taken over by the Federal Deposit Insurance Corp., and its deposits handed over to Prosperity Bank, the FDIC said in an e-mailed statement yesterday. The failed bank's 46 offices will open as branches of Prosperity, the FDIC said. Ranieri, 61, a former Salomon Brothers vice chairman, formed Franklin in 2002 and over the next four years expanded the bank's lending operations. While Franklin avoided the subprime mortgage market, his firm was burned by loans to builders in California, Arizona, Florida and Michigan, where foreclosures are among the highest in the U.S. In November 2006 and again a year later, he predicted the market would get worse.

Nobel Laureate's Fund Halts Withdrawals - (www.washingtonpost.com) Platinum Grove Asset Management, the hedge-fund firm co-founded by Nobel laureate Myron Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29 percent in the first half of October. The decline left Platinum Grove Contingent Master Fund with a 38 percent loss this year through Oct. 15, according to investors. Funds that use a similar approach of exploiting differences in the value of related securities fell 14 percent last month and 30 percent this year, according to data compiled by Chicago-based Hedge Fund Research. "The suspension is necessary given current market conditions," Platinum Grove said in an e-mailed statement Friday. "Platinum Grove will use this period to consult with its investors and counterparties, determine their future intentions and manage the assets of the fund accordingly." Scholes, 67, winner of the 1997 Nobel Prize in economics, was a founding partner in Long-Term Capital Management, the hedge fund that lost $4 billion a decade ago after a debt default by Russia. He started Platinum Grove in 1999 with four others who had worked at Long-Term Capital.

Parents pull kids from day care as money tightens - (biz.yahoo.com/ap) Child care proves too costly for parents suffering economic slide, upending work-life balance. The nation's economic troubles play out one family at a time at the New Horizons Learning Center in this struggling city two hours northwest of Chicago. Some parents have been laid off and must pull their children out of the day care center until they can find a job. Others' employment hours have been cut, so they reduce their kids' attendance to a few days a week. Financial strains prompt one mother to pay with a postdated check. Another chooses to work in the middle of the night -- after putting her kids to bed -- because of the extra dollar per hour that shift brings. And the stress shows on the faces of the children who can't understand why their friends, without explanation, stop coming. "They act out more, cry a lot more," said Diane Kesterton, director of New Horizons, where a 38-child enrollment has been halved to 19 in just three months. "They don't know what's happening, they're confused." Parents nationwide are telling day care providers they must scale back or abandon their services. Instead, they keep kids at home with grandparents or upend their work-life balance because gas and food prices have become prohibitive and average child care costs outpace rent and mortgage payments -- even for those drawing salaries. "I was paying more in day care than I was making in work," Meredith Hartigan, a Rockford single mother of two, said in explaining her decision to pull her 4-year-old daughter out of day care in August and switch to working nights and weekends.

Hedge fund Citadel shuttering Bermuda reinsurer - (www.reuters.com) Citadel Investment Group, one of the world's biggest hedge funds, is shuttering a Bermuda reinsurer it formed in 2004, according to a source familiar with the matter. Citadel, which manages roughly $18 billion, thought it had a winning business plan with CIG Re because it was fully collateralized, giving the insured certainty their claims would be paid if catastrophe struck. It is unwinding the reinsurer, according to this person, because the company's cost of capital is too high. The reinsurer, which does not have a financial strength rating, has also had a hard time competing with rivals who do.

U.S. Buying More Loans to Students - (www.nytimes.com) The government announced plans Friday to expand purchases of the student loans it backs in an effort to head off a potential shortfall next year. While student loans are typically considered among the most secure assets — especially ones that carry government guarantees — the fear that has spiked financing costs for mortgage and auto loans has spread into student loans as well. While students are still able to obtain federally backed loans, the credit crisis has hurt the lenders that provide them. Dozens have stopped offering the loans, blaming market conditions. The initiative by the Education Department is intended to make it easier for these loan companies to obtain financing. In the 2009-10 academic year, the agency will purchase loans, as it has this year. The agency will also pledge to be the buyer of last resort for loans purchased by a private intermediary in an effort to foster investment in the student loan industry.

O.C. builder buys its own debt at 77% discount - (www.ocregister.com) Builder William Lyon Homes from Newport Beach, in its most recent quarterly report, reveals ….It recently purchased $71.9 million of its debts at a cost of $16.7 million. That’s a steep 77% discount. Lyon will have to book a $54 million gain on the deal. CEO William Lyon says: “The Company was presented with an opportunity in late October 2008 to purchase some of its outstanding Senior Notes at a significant discount to face value. The Company will continue to be selective in any future purchases while maintaining a prudent level of liquidity and debt.”





OTHER STORIES:

Pension funds think twice about hedge funds - (www.reportonbusiness.com)
China Announces $586 Billion Stimulus Plan to Boost Economy - (www.bloomberg.com)
Saudi Aramco Says Oil Price Falls May Curb Investment - (www.bloomberg.com)
ECB Cuts .50% BOE 1.5%; Trichet Eyes More Cuts - (Mish at globaleconomicanalysis.blogspot.com)
Small-Business Owners Lobby to Cut Credit Card Fees - (www.nytimes.com)
Taiwan Cuts Interest Rates for 4th Time in Two Months - (www.bloomberg.com)
Brazil demands sweeping global financial overhaul - (ap.google.com)
Obama Is Seen Inheriting Worst U.S. Recession Since Reagan Era - (www.bloomberg.com)

Jobless ranks hit 10 million, most in 25 years - (biz.yahoo.com/ap)
U.S. Jobless Rate Hits 14-Year High - (www.nytimes.com)
Do Loan Modifications Work? - (www.minyanville.com)
Credit Swap Disclosure Obscures True Financial Risk - (www.bloomberg.com)
GM's Time Is Very Short for Bailout - (www.bloomberg.com)
Detroit Could Be In For Severe Struggles - (www.nuwireinvestor.com)
Las Vegas Casino Plunges on Default, Bankruptcy Risk - (www.bloomberg.com)

AIG in Talks to Rework Terms of Federal Bailout - (www.washingtonpost.com)
How the Thundering Herd Faltered and Fell - (www.nytimes.com)
The Five Most Wanted Rip-off Artists from Wall Street and Washington - (www.alternet.org)
Foreclosure Crisis Now An Epidemic On Long Island - (www.wcbstv.com)
US Broke Now, And More Broke Every Day - (www.247wallst.com)

Average English house loses 15 percent in one year - (www.dailymail.co.uk)
Can Obama Stop the Bush Administration's Final Economic Heist? - (www.alternet.org)
The Unedited "Forbidden" SNL Economic Bailout Skit - (www.guestofaguest.com)