Monday December 22 Housing and Economic stories

TOP STORIES:

Does Madoff Have $1 Billion Stashed Overseas? – (www.cnbc.com) There is a rumor among Madoff investors that he has $1 billion stashed in an overseas bank account. Sorkin, Madoff's lawyer, would not comment on this. Fairfield Greenwich, one of the big feeder funds, is planning a lawsuit against Bernard Madoff, the New York money manager accused of running what prosecutors say was a $50 billion Ponzi scheme. In the lawsuit, Fairfield is expected to say it was a victim of fraud and that Bernard L. Madoff Investment Securities didn't do enough due diligence when it marketed Madoff's investment business to clients. Fairfield did its own due diligence, hiring auditors and checking trade confirmations. Madoff had produced the confirmations but Fairfield claims it went to third parties to make sure trades took place and found out they did. That could mean that this scandal is much bigger than previously thought. Part of the defense of the feeder funds will be the extent of the involvement the Securities and Exchange Commission had with Madoff's investment activity that goes beyond what the SEC stated on Friday.

Fannie Mae Renters to Stay Despite Foreclosures - (www.nytimes.com) In a move that provides relief to thousands of renters who face eviction but draws the federal government even deeper into the housing market, the loan giant Fannie Mae said Sunday that it would sign new leases with renters living in foreclosed properties owned by the company. Skip to next paragraphIt is the first nationwide effort to provide widespread relief to renters ensnared by the unfolding mortgage crisis, and it will effectively transform Fannie Mae — a government-controlled mortgage finance company — into a national landlord. It may also increase pressure on private lenders to establish similar programs and on lawmakers to pass renter relief. “There are renters all around the country who have been holding up their end of the bargain and paying their rent faithfully, but the landlord got into trouble, and so the renter is now unfairly facing eviction,” said John Taylor, president of the National Community Reinvestment Coalition, a consumer advocacy group. “It’s really good news that Fannie Mae is doing this. Now the question is whether private sector will follow suit.”

Madoff losses ripple into Boston, shut foundation - (www.reuters.com) The alleged $50 billion fraud by former Nasdaq Chairman Bernard Madoff has rippled deep into Boston's wealthy elite, forcing a charitable foundation to close and triggering losses by prominent philanthropists. The Robert I. Lappin Charitable Foundation, which financed trips for Jewish youth to Israel, said the money that supported its programs was invested with Madoff, a 70-year-old Wall Street trader arrested on Thursday. "The money needed to fund the programs of the Lappin Foundation is gone," the Salem, Massachusetts-based foundation said on its website, adding all staff had been let go. "It is with a heavy heart that I make this announcement," Robert I. Lappin, the foundation's trustee, said in a statement. The Boston Globe reported on Saturday that other clients of Madoff included philanthropists Carl and Ruth Shapiro, big donors to the Museum of Fine Arts, Brandeis University and the Beth Israel Deaconess Medical Center. The Shapiro family foundation lost almost half its money, or about $145 million, to Madoff, the newspaper said. Other clients included Avram and Carol Goldberg, a previous owner of the Stop&Shop supermarket chain, and Stephen Fine, president of privately held Biltrite Corp.

Rules tightened for SBA's Community Express loan - (www.latimes.com) Smart move as we have heard the historical default rates of these loans. The Small Business Administration has tightened the rules on a popular loan program, which will make it tougher for some start-ups and small ventures to get the loans they need. New lending caps and other restrictions come at a particularly dicey time for small businesses because the recession and uncertain financial markets continue to pinch off access to vital capital. The restrictions in the Community Express Pilot Loan program mean two major small-business lenders active in the Los Angeles area each must stop at 100 such loans a month nationwide. This year, before the restrictions, lenders were making as many as 500 a month. The Small Business Administration said it imposed the caps because the pilot loan program it oversees threatened to bump up against a limit authorized by Congress. At Innovative Bank of Oakland, demand for Community Express loans has as much as doubled to 20 applications a day from small firms looking for cash to help them survive the recession.

Overtime pay, rest breaks become bargaining chips in state budget crisis - (www.latimes.com) GOP lawmakers and business groups say changes in workplace rules are needed to keep employers in California, generating tax revenue. But Democrats and labor groups refuse to go along. For decades, California employers have griped about state laws governing overtime pay and lunch breaks, contending that they raise costs and darken the business climate. Now, their concerns have become a Republican bargaining chip in tough negotiations between the governor and lawmakers over how to fix a $14.8-billion hole in the state budget for the current fiscal year that threatens to shut down government by spring. Major business groups took their concerns to Gov. Arnold Schwarzenegger, and last month he included them in his plan for addressing the budget crisis. "Workplace reforms," Schwarzenegger said, are "needed to help keep jobs in California." Giving California employers incentives to boost payrolls and not flee to lower-cost states would generate more tax revenue and help balance the state budget, he predicted. But Sacramento Democrats, who control both the Senate and Assembly, flatly reject the proposal, which has been pushed unsuccessfully by the GOP since the early 1990s. "We're not interested in rolling back hard-fought gains for workers in California," said Senate President Pro Tem Darrell Steinberg (D-Sacramento). At issue are two very different views about how to calculate overtime pay and how strictly to enforce rules that require workers to take unpaid lunch and rest breaks.

Credit card reforms ‘to cost banks billions’ - (www.ft.com) The US banking industry could lose billions of dollars in annual interest payments, according to a study that warns of credit card lenders raising prices after a regulatory overhaul. The Federal Reserve board will meet this week to finalise changes to rules governing the $970bn credit card business. Widely hailed by consumer groups as urgently needed reforms to protect borrowers, the changes could lead to the banking industry losing more than $10bn in annual interest payments, says a study by the law firm Morrison & Foerster. This could prompt credit card lenders to raise prices and tighten lending standards, reducing the availability of credit for US consumers. The proposed rules, which are expected to pass with only minor changes when the Fed meets on Thursday, will impose strict disclosure standards on credit card lenders and prohibit common pricing practices that have drawn fire for exposing borrowers to unforeseen costs. Consumer groups and lawmakers have welcomed efforts to shield borrowers from lending practices such as raising interest rates on existing balances and applying payments to lower interest balances first. The proposed rules would also require lenders to give borrowers more time to pay their bills and more notice of changes to interest rates for future borrowing. The result might be that credit cards could become more expensive for all borrowers. By restricting credit card lenders’ ability to re-price loans for risky borrowers, lenders have warned that the new regulations are likely to prompt credit card issuers to raise interest rates, cut credit lines and reduce promotional offers to make up for lost revenue.

Shipping charter rates soar - (www.ft.com) One of the world’s key shipping markets has begun to recover from a slump, with a revival in Chinese demand for iron ore and coal pushing some average charter prices up almost threefold in the past week. The revival in prices, after a disastrous six months for the industry in which charter rates fell nearly 99 per cent for the largest vessels, could encourage shipowners to bring mothballed vessels back into service. One participant said yesterday that some owners were able to charge enough to cover the costs of operating Capesize ships, the largest dry bulk carriers. Average rates for these ships, which move coal and iron ore, have nearly tripled over the past week. However, smaller ships have yet to show the same recovery as Capesize vessels. Average spot rates, or the cost of carrying a single cargo immediately, finished the week at $8,261 a day for Capesizes, according to figures from Pareto Dry Cargo, an Oslo shipbroker. The previous week’s average was $2,763, one of the lowest yet seen. Pareto reported a long-term charter of a Capesize ship at $17,500 a day for a year, more than the daily basic operating costs of such a ship. Long-term charter rates are, unusually, higher than those in the spot market because of expectations that the spot market will recover.

Policymakers to prop up US housing market – (www.ft.com) Move to cut mortgage costs could start soon. An intensified effort to exploit government control of Fannie Mae and Freddie Mac to drive down US mortgage costs and cushion a decline in house prices could start soon. This might begin in the final weeks of the Bush presidency and is likely to continue under Barack Obama’sadministration.

Iraqi journalist throws shoes at Bush - (www.ft.com) During a farewell visit to Baghdad on Sunday, President George W. Bush defended a war that has taken far more time, money and lives than anticipated, saying the conflict “has not been easy” but was necessary for US security, Iraqi stability and “world peace”. But in a sign of lingering anger against the US military presence, an Iraqi journalist shouted: “This is a goodbye kiss from the Iraqi people, dog,” and hurled his shoes at the US president during a news conference with prime minister Nouri al-Maliki.





OTHER STORIES:

Business confidence plummets - (www.marketwatch.com) Tankan survey of corporate sentiment sinks at fastest rate since 1974 OPEC oil embargo. View of coming months even gloomier.
British automakers may get bailout, too - (www.marketwatch.com) Deutsche Bank bets on customer growth - (www.marketwatch.com)Siemens reported settling U.S. case - (www.marketwatch.com)U.K. home asking prices down 2.3% - (www.marketwatch.com)

Japan's Nomura says it has a $306 million exposure to Wall Street investor's Ponzi scheme - (www.latimes.com) Nomura Holdings said Monday it has 27.5 billion yen ($306 million) in exposure to a recently uncovered Ponzi scheme set up by a Wall Street money manager. Japan's largest securities company is the latest victim to come forward to say it had been duped by Bernard Madoff. The once well-respected investor who served as chairman of the Nasdaq Stock Market was arrested Thursday in what prosecutors say was a $50 billion plan to defraud investors. Nomura said in a statement any losses from the exposure were likely to be limited compared to its capital base
The 17th Floor, Where Wealth Went to Vanish - (www.nytimes.com) Bernard L. Madoff is the only person so far to be arrested in the fraud case at his investment firm in Manhattan. Investigators are trying to piece together what Bernard L. Madoff did with the billions entrusted to his investment firm.
Fleeing Investors Put a Strain on Funds - (www.nytimes.com) Many investors are fleeing hedge funds and using the cash to cover losses on their other investments, leaving money managers struggling to cope with the rush.
A Palm Beach Enclave, Stunned by an Inside Job - (www.nytimes.com) At the exclusive Palm Beach Country Club, trust extended to a fellow member turns to angst after the collapse of Bernard L. Madoff’s suspected $50 billion Ponzi scheme.

MediaNews Sees Bad Timing on Newspapers, Not Bad Bets - (www.nytimes.com) Dean Singleton gambled his company on California — where the crash in housing has hit newspapers especially hard — just as the bottom was about to fall out for newspapers.
After Its Big Cuts, Detroit Makes Lots of Small Ones - (www.nytimes.com) As sales continue to plummet, the Big Three automakers are scrutinizing every budget line for potential savings to save cash.
Goldman Is Expected to Report an End to a Profitable Run - (www.nytimes.com) One of Wall Street’s top firms is expected to post a loss this week, and some wonder if it can ever recapture its former glory.
Japan’s Manufacturing Numbers Drop Sharply - (www.nytimes.com) A key measure of business sentiment released on Monday foreshadowed more bad news ahead for the Japanese economy.

Room for opportunity in commercial real estate slump - (www.latimes.com) Rising vacancies spur lower rents for tenants and discounted prices for investors who can get financing.
L.A., Long Beach ports push projects despite rocky economy - (www.latimes.com) The expansion would cut pollution, create jobs and prepare the complex for a shipping rebound, officials say. >>

Madoff Victims’ ‘Tragedy’ Said to Have Escaped Scrutiny by SEC - (www.bloomberg.com)
Citadel joins rush to lock up funds - (www.ft.com)
List of potential victims grows in NY fraud case - (finance.yahoo.com)
Japan’s Tankan Confidence Plunges Most in 34 Years - (www.bloomberg.com)
Geneva banks lost more than $4 billon to Madoff: report - (www.reuters.com)
BoJ chief says Japan economy to contract - (www.ft.com)
Trichet warns on fiscal indiscipline - (www.ft.com)
China to increase supply of money to boost economy - (finance.yahoo.com)
Report: Saudi's Prince Alwaleed lost $4B this year – (finance.yahoo.com)