Monday April 13 Housing and Economic stories

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TOP STORIES:

Banks could bet on toxic assets with taxpayers' money - (www.reuters.com) U.S. banks that received billions of dollars of taxpayer money to bolster their capital could place bets on the same toxic assets that got them into trouble in the first place -- and with government support. It is unclear whether U.S. regulators will prevent banks receiving government aid from participating as buyers in the $1 trillion Public-Private Investment Program (PPIP) designed to unclog credit markets and bank balance sheets. But the program, where the government provides much of the financing and shoulders much of the risk, leaves open the prospect that banks, as well as private investors, could buy the troubled securities and loans. This means recipients under the government's $700 billion bank bailout fund, the Troubled Asset Relief Program, might take part. "Without very strict regulation you're potentially creating big risks by allowing banks to buy toxic assets with house money," said Wayne Shaw, a professor at Southern Methodist University's Cox School of Business. "It's a terrible risk." On Monday, Morgan Stanley Chief Executive John Mack told employees his bank may buy toxic assets and package them for sale to individual investors, according to a person who heard him speak, but was not authorized to comment publicly. Three days earlier, Goldman Sachs Group Inc Chief Executive Lloyd Blankfein said his bank may join the PPIP as an investor. Each of these banks took $10 billion from TARP. The Financial Times said on Friday that Citigroup Inc and JPMorgan Chase & Co, which together took $70 billion of taxpayer money, might also buy toxic assets under the PPIP. Neither returned calls seeking comment. Two other large TARP recipients, Bank of America Corp and Wells Fargo & Co, had no immediate comment on their plans.

Fannie, Freddie worker bonuses total $210M - (finance.yahoo.com) - Mortgage finance giants Fannie Mae and Freddie Mac plan to pay more than $210 million in bonuses through next year to give workers the incentive to stay in their jobs at the government-controlled companies. The retention awards for more than 7,600 employees were disclosed in a letter from the companies' regulator released Friday by Sen. Charles Grassley of Iowa, the senior Republican on the Senate Finance Committee. The companies paid out nearly $51 million last year, are scheduled to make $146 million in payments this year and $13 million in 2010. "It's hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year," Grassley said in a statement. "It's an insult that the bonuses were made with an infusion of cash from taxpayers." Fannie and Freddie declined to comment on Friday. Fannie had disclosed that it plans to pay four top executives at least $1 million each in retention payments that run through February. Freddie has yet to report on which executives are in line for the awards.The two companies, hobbled by skyrocketing loan defaults, were seized by regulators last fall and operate under close federal oversight with new chief executives installed by the government. Since the takeover, Fannie Mae has received $15 billion in federal aid, while Freddie Mac has received nearly $45 billion. The companies' federal regulator, James Lockhart of the Federal Housing Finance

Financial Industry Paid Millions to Obama Aide - (www.cnbc.com) Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed Friday in releasing financial information about top officials. Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama’s policy decisions for the troubled financial industry, including firms from which he recently received payments. Last year, he reported making 40 paid appearances, including a $135,000 speech to the investment firm Goldman Sachs, in addition to his earnings from the hedge fund, a sector the administration is trying to regulate. The White House released hundreds of pages of financial disclosure forms, which are required of all West Wing officials. A White House spokesman, Ben LaBolt, said the compensation was not a conflict for Mr. Summers, adding it was not surprising because he was “widely recognized as one of the country’s most distinguished economists.” Mr. Summers’s role at the White House includes advising Mr. Obama on whether — and how — to tighten regulation of hedge funds, which engage in highly sophisticated financial trading that many analysts have said contributed to the economic collapse. Mr. Summers, a former president of Harvard University, was Treasury secretary in the Clinton administration. He appeared before large Wall Street companies like Citigroup ($45,000), J. P. Morgan ($67,500) and the now defunct Lehman Brothers ($67,500), according to his disclosure report. He reported being paid $10,000 for a speaking date at Yale and $90,000 to address an organization of Mexican banks.

Downturn Pushes More Toward Bankruptcy - (www.nytimes.com) The ailing economy continues to pull more Americans into bankruptcy court, where the number of troubled consumers filing for protection soared in March to its highest level since October 2005, when a new law made it more arduous and expensive to file. And as job losses continue to climb, they may well drag bankruptcy filings along with them. An average of 5,945 bankruptcy petitions were filed each day in March, up 9 percent from February and up 38 percent compared with a year earlier, according to Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company. In all, 130,793 people filed for bankruptcy in March.

NY Times Threatens to Shut Down Boston Globe - (www.cnbc.com) The New York Times has threatened to shut The Boston Globe unless the newspaper's unions agree to $20 million in concessions, the Globe reported on Friday, quoting union leaders. The union officials said executives from Globe and the Times, which owns the Boston newspaper, made the demands on Thursday morning in a meeting with leaders of the newspaper's 13 unions, the Globe reported. "Management told union leaders Thursday that the Globe will lose $85 million in 2009, unless serious cutbacks are made, according to a Globe employee briefed on the discussions," the Globe report said. That compares with an estimated $50 million loss last year, the newspaper quoted the employee as saying.

Property Bust Threatens Condo 'Death Spiral' - (www.cnbc.com) Rust pokes through the peeling paint on the railings, pest control has been curtailed and the palm trees are no longer being fertilized at the 1940s-era Miami Modern condominium building in Miami Beach. The condo association has been forced to cut expenses because the owners of 11 of the 28 apartments in the modest two-story building are delinquent, victims of a mammoth U.S. real estate collapse that has hit Florida especially hard.
With so many cash-strapped owners failing to pay their monthly fees for upkeep, the condo board last year had to raise $40,000 with a special levy to fill a giant hole in the $80,000 annual budget, but only managed to collect $19,000 from the owners who are still able to pay their bills. Florida's condominium and homeowners' associations are facing what experts call a trickle-down disaster from the property crisis. Dozens and perhaps hundreds of condo buildings have budget shortfalls as thousands of owners, under water on their mortgages or in foreclosure, stop paying monthly fees. "I call it a death spiral," Miami Beach city commissioner Jerry Libbin said. "It's a catastrophe in the making."

Fannie, Freddie Bonuses 'Insult': GOP's Grassley - (www.cnbc.com) Continuing bonuses paid to employees at Fannie Mae and Freddie Mac are offensive since taxpayers are helping keep the mortgage-finance companies afloat, a leading Senate Republican said Friday. "It's an insult that the bonuses were made with an infusion of cash from taxpayers," Charles Grassley of the Senate Finance Committee said in a statement. "The elite in Washington and New York need to realize that bonuses for poor performance and at taxpayer expense do a lot of damage to public confidence." The Iowa lawmaker has been a strong critic of executive bonuses paid out by finance companies that have lately had to rely on government aid. During a public uproar last month about bonuses paid out at failed insurance giant American International Group Inc., Grassley said executives should "follow the Japanese example" and "resign or go commit suicide." AIG was under fire for paying out $165 million of bonuses despite a series of taxpayer bailouts for the company totaling $180 billion.

FDIC seeks pension funds' interest in toxic-loan purchases - (www.latimes.com) Major pension funds today are getting pitched to participate in the Obama administration's plan to buy banks' toxic mortgage assets. Federal Deposit Insurance Corp. Chairman Sheila Bair was scheduled to brief the funds, including the California Public Employees’ Retirement System, on the program. The California State Teachers Retirement System also was invited. A CalPERS spokeswoman said one of the questions the fund had was whether it could buy loans directly from banks under the program, rather than using a money manager to handle and manage the purchases.After suffering severe losses on so much of their stock market and private-equity assets over the last year, it’s not surprising that pension funds would be looking for opportunities elsewhere. The Obama administration’s loan-purchase program is aimed at enticing big investors by offering to have the Treasury and FDIC shoulder much of the risk. The invitation-only meetings [with Bair] are taking place at the New York office of the FDIC’s financial adviser, Perella Weinberg Partners. "Sheila really wanted to get input as this program is refined," said Peter Weinberg, a partner at the New York-based firm. "She’s listening and seeking advice from market participants." Bair is drumming up support for a $1 trillion plan Treasury Secretary Timothy Geithner unveiled last month to help rid U.S. banks of the loans and securities clogging their balance sheets. The FDIC is in charge of a program that would form investment pools to buy devalued loans from banks. Under the Legacy Loans Program being set up by the FDIC, private investors would buy equity in loan pools, with any contributions matched dollar-for-dollar by the Treasury. The equity then would be supplemented through the sale of debt guaranteed by the FDIC.



OTHER STORIES:

Larry Summers: Wrong Man for the Job - (www.ml-implode.com) - "Let’s review: Summers, along with Robert Rubin, pushed for the repeal of Glass Steagall, and supported the Commodity Futures Mo...
Time to Remove the "L" from "BLS" - (www.ml-implode.com) - "In short, the BLS model is horribly wrong at economic turns. We have been in recession for a year and a half, and the BLS is cl...
The Letter I Sent to Senator Feinstein Today... - (www.ml-implode.com) - What follows is the text of a letter I sent to Senator Feinstein today. The situation is grave and worsening as related to priv...

Treasuries Slide as Traders Focus on Record U.S. Debt Supply - (www.bloomberg.com)
Global Fiscal Crisis Brings Renewed Role for IMF - (www.washingtonpost.com)
Who’s Most Indebted? Banks, Not Consumers - (www.nytimes.com)
U.S. stock rally faces test as earnings kick off - (www.marketwatch.com)
China greets G20 results with caution - (www.ft.com)
Emerging-Market Stocks Rise, Extending Four-Week Rally on G-20 - (www.bloomberg.com)
Japanese Bond Yields Reach Highest This Year as Stocks Rally - (www.bloomberg.com)
European Stocks Rise for Fourth Week, Led by Banks, Carmakers - (www.bloomberg.com)

Summers Earned Millions in D.E. Shaw Salary, Bank Speech Fees - (www.bloomberg.com)
Bernanke, Kohn Pledge Fed to Withdraw Credit When Crisis Ends - (www.bloomberg.com)
U.S. May Keep Losing Jobs After Unemployment Hit 25-Year High - (www.bloomberg.com)
Top Economics Aide Discloses Income - (www.washingtonpost.com)
Recession outlasts even extended jobless benefits - (finance.yahoo.com)
Fed Chief ‘Uncomfortable’ With Bailouts - (www.nytimes.com)

Empty Tables Threaten Some Restaurant Chains - (www.nytimes.com)
Big Bonuses at Fannie and Freddie Draw Fire - (www.nytimes.com)

Banks May Be Only Winners In New Toxic Debt Rules - (www.cnbc.com)
Mark-to-Market Relaxed - (www.cnbc.com)
Banks May Buy Toxic Debt - (www.cnbc.com)
Airlines Reducing Fleets Faster Than Expected - (www.cnbc.com)
Mortgage Refi Volume Nearly Doubles for Fannie Mae - (www.cnbc.com)