Monday June 1 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Hooray For California, Propositions 1A-1E Go Down In Flames - (Mish at http://globaleconomicanalysis.blogspot.com) In April I hoped California, Please Send A Message! Today it happened. California voters soundly defeated Propositions 1A-1E in spite of teachers' unions and other misguided souls wasting millions of dollars in a last minute ad campaign to get Californians to tax themselves to death for the benefit of unions and other undeserving parties. California Ballot Propositions: Seven statewide ballot propositions were on a special May 19, 2009 election ballot in California. 1A-1E went down in flames according to the May 19, 2009, Proposition Results Map. 1F, a proposition to restrict legislative pay raises when there is a budget deficit overwhelmingly passed….. With this success (yes the failure to pass these propositions was a huge success) the budget deficit is $21 billion and counting. Had the measures passed, the deficit would have been $15 billion. At the time it was proposed, the propositions were supposed to close the deficit. The reality is California is losing $2 billion a month with no end in sight. Schwarzenegger is going to have no choice but declare another fiscal emergency. Let's see if the legislature can make some better choices this time, starting with reducing their own pay.

Automotive Pension Disaster; $42 Billion in Pension Promises Completely Unfunded - (Mish at http://globaleconomicanalysis.blogspot.com) Pensions are a critical unresolved issue in the upcoming GM bankruptcy. Either GM's unfunded pension obligations get dumped on taxpayers, GM pensioners see their benefits cut, or some combination thereof. Moreover, even though GM has yet to declare bankruptcy, note the Pension Benefit Guaranty’s Deficit Triples to $33.5 Billion. Pension Benefit Guaranty Corp.’s deficit tripled to $33.5 billion in the past six months as more companies canceled retirement plans amid the U.S. recession, according to the head of the government-owned corporation. The PBGC, set up to protect the employee pensions of bankrupt companies, will tell Congress that its financial condition may worsen amid the likelihood for more pension plan failures. In the first half of the fiscal year that began in October, the PBGC took on almost four times the number of participants as it did in all of 2008. The potential for General Motors Corp. and Chrysler LLC to end their plans has left the PBGC facing the prospect of adding 900,000 current and future beneficiaries. The PBGC, which pays retirement income to almost 44 million Americans, estimates that $77 billion of the automotive industry’s pensions are underfunded, with about $42 billion of that not funded at all. The PBGC’s board approved in February 2008 a new investment strategy to shift more money from safer Treasury securities to stocks, real-estate and private-equity with the potential for greater returns. The change was pushed by former Director Charles E.F. Millard, who is now under congressional investigation for his ties to Wall Street. “Millard’s actions were questionable and should be investigated further, but our main concern is that they are symptomatic of a much bigger problem,” Senator Herb Kohl, a Wisconsin Democrat and chairman of the Special Committee on Aging, said in a statement. “PBGC oversight structure is obviously inadequate if one person’s authority goes unchecked. At a time when we need PBGC more than ever, we have got to take concrete steps to strengthen the agency.”

Fed looks to supply for pointer on rates - (www.ft.com) The Federal Reserve is turning its attention to the impact of the economic crisis on the productive capacity of the US economy – an issue central to any assessment of when it might start tightening monetary policy again. Most officials think the crisis will have some impact on supply because of structural changes that make it difficult to reallocate workers to different sectors of the economy and restricted financing for new business projects. But the mainstream Fed view is that this impact will not be very large, possibly reducing trend growth from about 2.5 per cent to 2 per cent or fractionally higher for a few years. This relatively modest mark-down of the economy’s future supply potential suggests the Fed thinks that excess capacity will continue to put downward pressure on prices for an extended period even if a gradual recovery takes hold. This means the central bank may not be in any hurry to raise interest rates next year unless growth is stronger than it expects or inflation expectations independently move higher. However, the debate inside the Fed is still at an early stage and there is a range of views among policymakers about the supply-side impact of the crisis, which may be hinted at in forecasts released on Wednesday.

U.S. Considers Stripping SEC of Powers in Regulatory Overhaul - (www.bloomberg.com) Scary, as the agency that was asleep at the wheel for so long and has caused the most damage (the Fed) is in position to get more power. The Obama administration may call for stripping the Securities and Exchange Commission of some of its powers under a regulatory reorganization that could be unveiled as soon as next week, people familiar with the matter said. The proposal, still being drafted, is likely to give the Federal Reserve more authority to supervise financial firms deemed too big to fail. The Fed may inherit some SEC functions, with others going to other agencies, the people said. On the table: giving oversight of mutual funds to a bank regulator or a new agency to police consumer-finance products, two people said. The 75-year-old SEC, chartered to oversee Wall Street and safeguard investors, has seen its reputation tarnished as some lawmakers blamed it for missing the incipient financial crisis and failing to detect Bernard Madoff’s $65 billion Ponzi scheme. Any move to rein in the agency is likely to provoke a battle in Congress, which would need to approve the changes, and draw the ire of union pension funds and other advocates for shareholders. “It would be a terrible mistake,” said Stanley Sporkin, a former federal judge and enforcement chief at the SEC. “Whatever the SEC has done or didn’t do, it is still the premier investor protection agency around.” Schapiro Determination: SEC Chairman Mary Schapiro’s agency has been mostly absent from negotiations within the administration on the regulatory overhaul, and she has expressed frustration about not being consulted, according to people who have spoken with her. She has pledged to fight any attempt to diminish the SEC, they said. Treasury Secretary Timothy Geithner was set to discuss proposals to change financial regulations at a dinner last night with National Economic Council Director Lawrence Summers, former Fed Chairman Paul Volcker, ex-SEC Chairman Arthur Levitt and Elizabeth Warren, the Harvard University law professor who heads the congressional watchdog group for the $700 billion Troubled Asset Relief Program.

California Rejects Schwarzenegger’s Budget Measures - (www.bloomberg.com) California voters rejected a package of budget-balancing measures that Governor Arnold Schwarzenegger said were needed to keep a $15 billion deficit from widening to $21 billion. A proposal to limit lawmaker pay passed. “I respect the will of the people who are frustrated with the dysfunction in our budget system,” Schwarzenegger said in a statement from Washington conceding defeat. “In order to prevent a fiscal disaster, Democrats and Republicans must collaborate and work together to address this shortfall.” Five of the propositions were failing with 64 percent of the votes counted, according to California’s elections office. The losing proposals would have capped spending and extended temporary tax increases, directed future surplus money to schools, authorized bonds backed by lottery profits and diverted already dedicated revenue to the budget. Lawmakers put the measures on the ballot in February as part of a compromise to close what was then a record $42 billion budget gap. Since then, the deficit re-emerged as California’s economy, which on its own would be the world’s eighth-largest, worsened amid the national recession. “The longer we wait, the worse the problem becomes and the more limited our choices will be,” Schwarzenegger said.

Bankruptcies Swell Deficit at Pension Agency to $33.5 Billion - (www.nytimes.com) The deficit at the federal agency that guarantees pensions for 44 million Americans more than doubled in the last six months to a record high, reaching $33.5 billion, largely as a result of the surging number of bankruptcies among companies whose pensions it must now take over. The Pension Benefit Guaranty Corporation, as of October, had faced a shortfall of $11 billion. But the combined effect of lower interest rates, losses on its investment portfolio and the increase in the number of companies filing for bankruptcy protection resulted in a deepening of its estimated deficit, officials said Wednesday. Because the agency has $56 billion in assets — most of which is invested in Treasury bonds — it is not facing any prospect of default in the short term, officials said. “The P.B.G.C. has sufficient funds to meet its benefit obligations for many years because benefits are paid monthly over the lifetimes of beneficiaries, not as lump sums,” the agency’s acting director, Vince Snowbarger, said in a statementWednesday. “Nevertheless, over the long term, the deficit must be addressed.” The agency, created by Congress in 1974, is now paying benefits of about $4.3 billion a year to about 640,000 people. Employers nationwide with so-called defined-benefit pension programs pay insurance premiums to the agency in return for a promise that it will take over their pension plan if a company fails. On Tuesday, for example, the agency announced that it had assumed the pension plan once run by the Lenox Group, a bankrupt maker of tableware, giftware and collectibles based in Eden Prairie, Minn. Assuming control of pensions for this company’s 4,300 workers will cost the agency an estimated $128 million — the difference between what Lenox had in its pension fund and what the total estimated obligations are. With the bankruptcy of Chrysler and a possible similar move by General Motors, the agency is facing a record surge in demand. The new deficit estimate takes into account both pensions it has taken over in the last six months, and others it believes it will have to assume control of soon.

Japan’s Economy Shrank Record 15.2% Last Quarter - (www.bloomberg.com) Japan’s economy shrank at a record 15.2 percent annual pace last quarter as exports collapsed and consumers and businesses cut spending. The contraction followed a revised fourth-quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. Gross domestic product fell 3.5 percent in the year ended March 31, the most since records began in 1955, confirming that the recession is Japan’s worst in the postwar era. Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy. “There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added that there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect. The yen traded at 95.71 per dollar at 11 a.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.4 percent. The first-quarter contraction was the most severe since records started 54 years ago. Economists predicted the economy would shrink 16.1 percent.




OTHER STORIES:

Southern California median home price falls to $247,000 in April - (www.latimes.com)
Housing: Recovering or Not? - (www.businessweek.com)
Derivatives Market Declines for First Time on Record - (www.bloomberg.com)
Home Depot is ready, but shoppers aren't yet - (money.cnn.com)
U.S. housing starts, permits plumb record lows - (www.reuters.com)

World stocks lackluster after mixed US trade - (news.yahoo.com/s/ap)
Crude trades over $60 before inventories data - (www.marketwatch.com)
Euro up against the dollar to $1.3661 - (finance.yahoo.com)
U.S. Stock-Index Futures Gain as Exxon, Bank of America Advance - (www.bloomberg.com)
Another Bottom for Stocks Coming: Rogers - (www.cnbc.com)
U.S. May Add New Financial Watchdog - (www.washingtonpost.com)
U.S. Weighs How to Let Banks Give Money Back - (www.nytimes.com)
Fed offers spur to buy bubble-era securities - (www.ft.com)
Senate Passes Bill to Restrict Credit Card Practices - (www.nytimes.com)
VIX Falls to Lowest Since Lehman Bankruptcy as VStoxx Drops 32% - (www.bloomberg.com)
Japan’s Economy Shrank Record 15.2% Last Quarter - (www.bloomberg.com)
China tightening controls on bank lending - (finance.yahoo.com)
In Japan, Secure Jobs Have a Cost - (www.nytimes.com)

U.S. Economy: April Housing Starts Drop on Apartments - (www.bloomberg.com)
Mortgage applications rose 2.3% last week: MBA - (www.marketwatch.com)
Southern California median home price falls to $247,000 in April - (www.latimes.com)
Bank of America Raises $13.5 Billion in Sale of Stock - (www.bloomberg.com)
Hewlett-Packard Drops After Saying Slump Will Persist - (www.bloomberg.com)
New Auto Standards vs. Old U.S. Preferences - (www.washingtonpost.com)
Jamie Dimon on the ‘Traumatic TARP Experience’ - (www.nytimes.com)

Sunday May 31 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

 

Providence Mayor Wants to Tax College Students - (news.yahoo.com/s/ap) The mayor of Providence wants to slap a $150-per-semester tax on the 25,000 full-time students at Brown University and three other private colleges in the city, saying they use resources and should help ease the burden on struggling taxpayers. Mayor David Cicilline (sis-ah-LEEN-ee) said the fee would raise between $6 million and $8 million a year for the city, which is facing a $17 million deficit. If enacted, it would apparently be the first time a U.S. city has directly taxed students just for being enrolled. The proposal is still in its early stages. But it has riled some students, who say it would unfairly saddle them with the city's financial woes and overlook their volunteer work and other contributions, including money spent in restaurants, bars and stores. "We want to support the city as best we can, but financially is not really what we can afford to give," said Heather Lee, president of the Brown Graduate Student Council. "We're more able to provide labor, we're more able to apply the things that we're learning in the classroom, than we are to write a $300 check." Cities often look for revenue from universities to compensate for their tax-exempt status, and many schools already make voluntary payments to local governments. Providence's four private schools — Brown, Providence College, Johnson & Wales University and the Rhode Island School of Design — agreed in 2003 to pay the city nearly $50 million over 20 years. The idea of a student head tax has been floated before in other cities, generally to start discussions about collecting money from universities in lieu of taxes.

 

Barney Frank Wants Government To Enter Municipal Bond Insurance Business - (Mish at http://globaleconomicanalysis.blogspot.com) Some people never learn. Representative Barney Frank of Massachusetts is one of them. One might hope that Frank would have learned something from the Fannie Mae and AIG debacles. Sadly that hope is misguided. Barney Frank now wants the government to enter the municipal bond business. Please consider Cities Ask Treasury for $5 Billion to Fund Public Bond Insurer. The National League of Cities says it will ask the U.S. Treasury today for a $5 billion interest-free loan to capitalize a new municipal bond insurer it plans to create. The Issuers Mutual Bond Assurance Co. would be the first publicly owned U.S. financial guarantor. The $5 billion capitalization would make it the biggest in the industry, eclipsing MBIA Inc.’s capital base of $3.8 billion and the $1.1 billion of current market leader Assured Guaranty Inc. The company will apply to the Treasury for a ruling that its income be tax-exempt, said Cathy Spain, director of the League of Cities’ Center for Member Programs. “Fifteen shareholder-owned municipal bond insurers have failed because of the intense pressure to produce 15 percent to 25 percent annual returns for their shareholders,” according to a copy of the preliminary business plan the League submitted to Treasury. In response to the collapse of the bond insurers, a number of would-be replacements said they would enter the field. Rep. Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee, said in February that the federal government should enter the business. IMBAC, as the new insurer would be known, is asking Treasury for $3 billion in cash upfront. It said it would seek to insure only general obligation and essential-purpose revenue bonds. In its cash-flow projections, the firm said it would charge premiums equal to about 70 basis points on a 25-year bond. IMBAC said it would insure $20 billion in bonds during its first year in operation, $40.8 billion in the second year and $108 billion by the fifth year. The firm’s plan estimates that the business would require a staff of at least 30.  Pure Insanity: The IMBAC proposal is pure insanity. The government has proven it no idea how to price risk, and even if it did, government ought not be competing with private enterprise. Fannie Mae (FNM) and Freddie Mac (FRE) are proof enough. Warren Buffett previously expressed an interest in this area, even agreeing to reinsure debt of Ambac (ABK) and MBIA (MBI). If municipal bond insurance makes any sense at all, then let Berkshire Hathaway (BRK) sort it out.

 

Union reluctant to grab wheel in Detroit - (money.cnn.com) Yes, because they know they will drive the company into the ground, and will not be able to blame anyone else.  The United Auto Workers union could end up owning a majority of Chrysler and a large stake at GM. But it's not happy about that. The current plans to restructure General Motors and Chrysler LLC will leave the United Auto Workers union in the driver's seat at both companies. But it appears that the union would rather be in the back seat. The UAW is set to receive a 55% stake in Chrysler through its union trust fund once that automaker emerges from bankruptcy. The trust fund will also likely get up to 38% of GM's stock as part of its reorganization. But that doesn't mean the union will be calling the shots at either company. In fact, UAW president Ron Gettelfinger said the union hopes to sell its stake in both companies quickly because he is more interested in raising cash to cover retiree health care costs than having an ownership stake in GM (GM, Fortune 500) and Chrysler.  "Let somebody else take the stock. Give us the money," Gettelfinger said at a recent press conference. "We are trading debt for equity, and what is the value of the equity? Let's be honest, it's zero today." Since the trust fund, and not individual union members or the union itself, will own the stakes in GM and Chrysler, it is expected that the UAW will not use its newfound role as a large shareholder to push for major changes at either company.

 

Some on Left Souring on Obama - (www.digg.com) When President Barack Obama speaks to the Notre Dame commencement Sunday afternoon, television cameras will search the sea of graduates, looking for turned backs and defaced mortar boards that abortion opponents will likely use to register their disagreement with the president.  But the attention to protests from conservatives who don’t support Obama – and almost certainly never would – could obscure the far more significant political threat he now faces.  Barely four months into his presidency, Obama is confronting growing dissatisfaction among members of his liberal base, who feel spurned by a series of his early decisions on issues ranging from guns to torture to immigration to gay rights.  The list got longer last week as Obama reversed his earlier decision to release photos of detainees abused in U.S. military custody and announced plans to try some terror suspects before military commissions – though on the campaign trail he railed against earlier versions of the tribunals.  A few, like MSNBC’s Rachel Maddow, have even hurled the left’s ultimate epithet – suggesting that Obama’s turning into George W. Bush.  The building anger comes at a critical moment – just as Obama’s about to announce his choice for the Supreme Court. Fulfill their dreams of a “liberal Scalia,” a firebrand from the left, and much would be forgiven.  But if Obama opts instead for a decidedly centrist nominee aimed at winning a large number of Republican votes in the Senate, the growing concern could develop into something more politically dangerous.  “Even though I think he can get away with a more centrist candidate, he has to be careful not to be spitting in the eyes of his base,” said Laura Murphy, a lobbyist and former head of the American Civil Liberties Union’s Washington office.

 

Your Credit Card Company Is Building A Psychological Profile Of You - (www.consumerist.com) The next time you apply for a credit card, your credit report and income will be only a part of the criteria used to determine your creditworthiness. For that matter, as long as you have the card, what you use it for will be noted and added to a growing set of data that makes up your psychological profile, which will then be referred to every time the bank  deals with your or reevaluates your risk as a customer. The New York Times Magazine takes a look at this new method of determining credit risk, pioneered by Canadian Tire executive J.P. Martin about 6 years ago. Martin's measurements were so precise that he could tell you the "riskiest" drinking establishment in Canada - Sharx Pool Bar in Montreal, where 47 percent of the patrons who used their Canadian Tire card missed four payments over 12 months. He could also tell you the "safest" products - premium birdseed and a device called a "snow roof rake" that homeowners use to remove high-up snowdrifts so they don't fall on pedestrians.  It's not just that what you buy reflects your socioeconomic level and current financial status, however; what Martin did was take the raw data and tease out personality traits that explained the the purchases while predicting future behavior. Why did birdseed and snow-rake buyers pay off their debts? The answer, research indicated, was that those consumers felt a sense of responsibility toward the world, manifested in their spending on birds they didn't own and pedestrians they might not know. Why were felt-pad buyers so upstanding? Because they wanted to protect their belongings, be they hardwood floors or credit scores. Why did chrome-skull owners skip out on their debts? "The person who buys a skull for their car, they are like people who go to a bar named Sharx," Martin told me. "Would you give them a loan?"  Lenders have been using this sort of data mining ever since, but until recently they've kept it on the down-low to avoid triggering any privacy fears from customers. Now, with billions of dollars of losses from formerly profitable customers (i.e. the slightly risker ones) who suddenly can't pay, the lenders are using their psychological data not only to screen for the "right" sorts of customers but also to try to convince the bad ones to pay off their debts.

 

Dr. Marc Faber: Capitalism Could Fail Like Communism - (www.cnbc.com)  A sustainable recovery will occur only when the corporate system will be cleaned of losses and capitalism risks collapsing if this does not happen, Marc Faber, the author of "The Gloom, Boom & Doom Report," told CNBC Friday. The central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries, Faber said. The years 2006 and 2007 were "the peak of prosperity" and the world economy is not likely to return soon to that level, he added. "I think the final low in markets will occur when the system is cleaned out," Faber said.

 

Condo associations dying as fees dry up - (www.tampabay.com) Homeowner associations, the de facto local government in much of Florida, are getting desperate. Assessment payments are as low as 50 percent in some communities, causing some board members to consider measures that might include publicly shaming those who are delinquent.  "When I tell you it is an unadulterated nightmare out there, I mean it," said Harry Burnard, who owns Qualified Property Management in New Port Richey, plus a side business that fronts the dues and collects the debts. The problem exists nationwide, most notably in communities built during the boom years. "I haven't seen bake sales yet or carwashes," said association attorney Robert Tankel of Dunedin. "But I have suggested that people who don't pay need to consider doing that. Sell their flat-screen TVs." Things are so bad that the Southpointe condominium association in Orlando sent a letter to all of its members, listing units with unpaid dues. "I thought I'd be getting a lot more rotten eggs," said Malcolm Galvin, an attorney for the association. "I was kind of amazed that most of the feedback was favorable to the association." The urge to shame:  Most area attorneys are advising their boards against any kind of public humiliation. "The nature of communities anymore is that nobody knows their neighbors anyway," Tankel said. But it's been suggested at a lot of homeowner meetings. IKare community newsletter publisher Karen Uhlig, when asked if she would have a problem with such a practice, said, "Personally, not at all. But professionally, I'd have to check for legal advice." One of her clients, the Nassau Pointe townhome section of New Tampa's Heritage Isles, could be among the first to publicize delinquent accounts. "We've been tossing the idea around," said board member Barbara Adams. "We don't want to do it, but we're just having little choice when they ignore us." About 30 percent of her neighbors are not paying the $228 monthly fee. "In our community, it covers cable and water," she said. Dues also pay to landscape the grounds and repair the roof. Uhlig, who serves on two boards in her own Wesley Chapel community, knows associations that are filing liens over very small amounts. Tankel advocates suing quickly instead of waiting for banks to foreclose, essentially beating them to the courthouse steps. Some boards have members literally knocking on doors, a practice attorneys discourage. "You never know when you are going to meet Mister Doberman, or Mister 9-millimeter," Tankel said.

 

2 Firms Accused of Deceiving Consumers Seeking Debt Relief - (www.nytimes.com) The New York attorney general, Andrew M. Cuomo, sued two large debt settlement companies Tuesday, saying they had engaged in fraudulent and deceptive business practices and false advertising. Skip to next paragraphThe suits seek to enjoin the companies, Nationwide Asset Services and Credit Solutions of America, from many of their business practices, including charging customers before any settlement work is done. They also seek restitution and damages for dissatisfied customers.  “These companies claim to be the light at the end of the tunnel, but time after time they have shown that they only add to the burdens of Americans dealing with debt,” Mr. Cuomo said in a statement. Credit Solutions enrolled 18,000 customers in New York State in the last five years, earning $17 million in fees, but settled the debts of fewer than 2,000 of them, the attorney general said.  Nationwide signed up 1,981 New York residents in three years, the suit against it says, but only 64 completed the program. Twenty-seven of those ended up paying more than they originally owed because of Nationwide’s fees, the suit alleges. Mark Walling, a lawyer for Phoenix-based Nationwide, said he had not seen the suit. “My client denies any wrongdoing,” he said. Credit Solutions, based in Richardson, Tex., disputed liability over the complaints and practices in the suit, saying in a statement that they had largely occurred when the company was under different ownership in 2007.

 

 

 

 

OTHER STORIES:

 

"Deadbeats" Beware: The Credit Card Business is Changing - (www.nytimes.com)
American Express to Cut 4,000 - (www.bloomberg.com)
China's Gold Reserves May Back Yuan  - (online.wsj.com)
5000 Cases of Swine Flu in US - (www.reuters.com)
Credit Card Defaults At Record Highs But Worst Is Yet To Come - (globaleconomicanalysis.blogspot.com)

S&P 500 Earnings Fall 90% - (www.chartoftheday.com)
As Detroit Crumbles, China Emerges as Auto Epicenter - (www.washingtonpost.com)
China’s Stockpiles Are New Sovereign Wealth Strategy, RBC Says  - (www.bloomberg.com)
Obama Reverses on Releasing Detainee Photos - (www.politico.com)
Obama Considers Detaining Terror Suspects Indefinitely - (online.wsj.com)
Gitmo Detainee's 'Genitals Were Sliced With A Scalpel'  - (www.digg.com)
Socialist Norway Thrives in Meltdown - (www.nytimes.com)
One of the simplest explanations of Swine Flu is that it’s a laboratory escape - (www.bloomberg.com)

 

Southern California house prices down 51% from 2007 peak, falling - (www.latimes.com)

San Francisco price declines accelerating - (www.sfgate.com)

Hamptons Houses Drop Most Since Records Kept - (www.bloomberg.com)

Housing Starts May Have a Way to Fall - (norris.blogs.nytimes.com)

Government Punishing Responsible People - (www.patrick.net)

Wary of U.S. debt, China shifts gears on investment - (www.reuters.com)

The Destructive Implications of the Bailout - (www.hussmanfunds.com)

Obama's Magic Bubble Deflator - (www.mises.org)

Audit the Fed, Then End It - (rocktrueblood.blogspot.com)

The Truth: Debt Means Financial Death - (thelastgoodidea.blogspotcom)

Banks "can't find anyone with authority" to talk to foreclosees - (www.dailybusinessreview)

 

Is Buying a House Catching Falling Knife or Inflation Hedge? - (Charles Hugh Smith at www.oftwominds.com)

Obama for Single-Payer Before He Was Against It - (www.healthcare-now.org)

Credit Crunch Game - (www.bbc.co.uk)

It Is Time For Vermont To Secede - (ashizashiz.blogspot.com)

Saturday May 30 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Tenant paid thousands in rent for condo that was in foreclosure - (www.tampabay.com) Tampa real estate agent Lori Polin played a key role in one of the state's "most dramatic" mortgage fraud schemes, according to Florida's attorney general. Polin is still an agent — and she's still engaged in questionable dealings, an angry tenant claims. Jeff Cole, who rented Polin's Tampa condo, says she collected over $14,000 in rent yet stopped making mortgage payments and did not inform him that the bank was foreclosing — an increasingly common problem for tenants in a tanking real estate market. Polin, who still has a $50,000 homestead exemption, also asked Cole and his mother not to tell the bank she was renting out the condo for fear it would kill a sale, he said. "She accepted rent for nine months while lying to her mortgage company about her occupancy status," Cole said. "She asked me and my mother to keep her little secret … to save her own a---." Polin, who works for ReMax Power Advantage in Tampa, did not return phone calls seeking comment. Jeremy Anderson, head of the office, would not comment. Even as Florida's real estate boom fizzled in 2006, Polin appeared to be one of the area's most successful agents. ReMax International gave her its Chairman's Club Award for agents with gross commissions of at least $500,000. But in 2007, the Pinellas Realtor Organization and many of Polin's fellow agents received an anonymous letter claiming that at least part of her success was due to alleged mortgage fraud involving nine houses in Pinellas and Hillsborough counties. Polin told the St. Petersburg Timesthen that she had done nothing wrong and was the victim of a "smear campaign" by jealous rivals. This fall, however, Attorney General Bill McCollum sued 10 companies and 15 individuals under Florida's Deceptive Trade Practices Act for their alleged roles in a $37 million fraud scheme. The suit said the co-defendants conspired with Polin and two other agents to inflate sale prices so they could obtain bigger loans and pocket "millions for their own personal use." Polin, 49, was not named as a defendant because real estate agents are exempt from the act and subject to other state laws. The Department of Business and Professional Regulation would not say if she is under investigation. In 2005, Polin got a $257,520, low-interest loan to buy a condo in Tampa's Westchase area for use as her primary residence. She signed a "borrower's occupancy rider" saying that she intended to live there and that the lender could demand full payment of the loan if she didn't. In August, Polin rented the condo to Cole, owner of a firm that helps arrange loans for environmentally friendly projects. Cole, 39, who moved to Tampa to be close to his mother, said Polin agreed to reduce the rent by $75 a month if he prepaid $10,800 for the first six months. He then went on a month-to-month lease at $1,875 because Polin was trying to sell the condo, whose value had plunged. "I knew she was upside-down on the property," Cole said, "but we didn't realize she was that far gone" until a foreclosure notice arrived in February. He said the notice was unusual in that it didn't list him and his wife as tenants. "The reason my name is not on it," he said, "is because the bank didn't know we were here." Cole said Polin told him that the bank had agreed to a short sale of $183,000 but that the deal would fall through if the lender knew she wasn't living in the condo. She asked him and his mother not to say anything to the bank. "I said, 'I'm not going to be part of your lie,' " Cole recalled. "I'm not interested in mortgage fraud except to the extent that I want frauds to be punished. I'm sick and tired of this mess and people and their greed." Foreclosure papers filed Jan. 30 by National City Bank show that Polin had not made a payment since September, about a month after the Coles moved in. In a letter to the bank, Polin wrote that her income had dropped 80 percent during the two years the condo had been on the market. "In any event," she added, "I have three contracts on this property, and National City has approved it for a short sale. The investor is sending their approval and it will be sold/closed by March 31, 2009."

Credit Card Industry Aims to Profit From Sterling Payers - (www.nytimes.com) Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years. Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit. Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups. “It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.” As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time. The legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure. “There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business.

Mass auctions of foreclosed homes not as successful as billed - (www.tampabay.com) It sounds like a great way to work off our housing glut: Banks hire a nationally renowned auctioneer to dispose of hundreds of foreclosed homes at once from hotel ballrooms in Tampa. And if you listen to the auctioneers, their sales success is stellar. Back in February, a company called Real Estate Disposition Corp. announced it had snagged bids for 131 of 176 homes on the block at the Grand Hyatt in Tampa. I thought I'd check up on REDC this week to see how many of those foreclosure homes actually closed. After studying the results, I feel duped. And you should, too. Leave aside the fact that REDC admitted later that only 75 homes actually sold on Feb. 7. When I plowed through the first part of the "sold" list and compared addresses against property appraiser records, I didn't find a single home that closed as of Thursday. Not one. REDC's spokesman maintained this week that the company's auction success rate nationally is 80 percent. Suppress your laughter if you must. I sat in on an auction in Tampa last year and was amazed how cheaply many properties sold. You hear about banks routinely ditching foreclosure homes for 60 cents on the dollar, but many of these were scarfed up for 30 cents. Turns out many never did sell. The banks either turned down the bid or the buyers had deceptively shallow pockets. For enlightenment, I turned to Michael Peters, who runs American Heritage Real Estate Auctioneers in Clearwater. Self-interested though he is, Peters is critical of these assembly-line auctions. According to Peters, there's no substitute for selling properties one at a time by enticing bidders to the actual home. But guess what: When buyers get to stroke the granite and flush the toilets, homes tend to sell better.

$8000 tax credit not actually for down-payment - (www.boston.com) Remember that promise that Shaun Donovan, HUD Secretary made at the Realtor mid-year meeting on Monday? The one about that the $8000 tax credit being made available for down payments? Well, the promise is broken. I got this notice from NAEBA headquarters this afternoon: According to contacts with both FHA and HUD, Mortgagee Letter 2009-15, which stated that first-time homebuyers would be allowed to use the tax credit for their downpayment, has been rescinded. On a phone call with FHA, Kim Kahl was told, "The mortgagee letter has been rescinded for the time being.” NAEBA President John Sullivan was told something similar when contacting HUD. Neither FHA nor HUD gave further details. I am not surprised. I think when HUD officials look at it, they see a buyer who needs that $8000 for a down payment as a buyer without enough reserve to be a homeowner. This may be a good sign for Federal lending policy, IMHO.

U.S. keeps California waiting on plea for debt backstop - (www.latimes.com) The Obama administration seems in no rush to decide on California's request for a federal guarantee on billions in short-term borrowing the state must undertake this summer. Then again, nobody in Sacramento was expecting an affirmative answer before Tuesday’s special election. Given the prospect for the stopgap budget measures on the ballot to go down in flames, there would be no point in aiding the "no" vote by telling voters that federal help was on the way. As reported last week, California Treasurer Bill Lockyer has formally asked the U.S. Treasury to provide a backstop for potentially tens of billions of dollars of short-term notes the state plans to sell beginning in July. (See Lockyer's letter to Treasury Secretary Timothy F. Geithner here.) Without such a guarantee, the state fears it will have to pay exorbitant tax-free interest rates on the debt -- say, 5% instead of 1% or 2% -- blowing an even bigger hole in the budget. Lockyer’s spokesman said today that the state was "continuing to have discussions with the administration and members of Congress" about the backstop request. A group of California cities and counties is asking for the same kind of guarantee on $335 million in short-term borrowing to occur in June, according to Paul McIntosh, executive director of the California State Assn. of Counties. The group tentatively includes Mendocino County, Redondo Beach and Chula Vista, according to the association’s letter to the White House.

TARP is a "sham" and a ripoff to taxpayers - (www.huffingtonpost.com) Did a TARP beneficiary accidentally speak the truth about the program to a reporter from theTelegraph? At first, the Daily Telegraph reported that Mark Patterson of MatlinPatterson, "a firm that invested in a Michigan bank with help from TARP," referred to the Troubled Asset Relief Program thusly: "The taxpayers ought to know that we are in effect receiving a subsidy. They put in 40pc of the money but get little of the equity upside," said Mark Patterson, chairman of MatlinPatterson Advisers. .. Mr Patterson said the US Treasury is out of its depth and seems to be trying to put off drastic action by pretending that the banking system is still viable. "It's a sham. The banks are insolvent. The US government is trying to sedate the public because they are down to the last $100bn (£66bn) of the $700bn TARP funds. They think they're doing this for the greater good of society," he said, speaking at the Qatar Global Investment Forum. That drew the attention of Joe Weisenthal of Clusterstock. But since then, the Telegraph has taken down the story! Weisenthal's on the case: We're still trying to get to the bottom of this one... this morning we linked to an article in UK paper The Telegraph, written by the aggressive reporter Ambrose-Evans Pritchard, which claimed that TARP investor Mark Patterson called the program a "sham" and a ripoff to taxpayers, even though his own firm had taken advantage of the program. Now the paper has taken the article down at the behest of Patterson's attorney, who claims the reporting was not factual. We went back and forth with the lawyer, who was a little evasive with the real story, though he sent us the following statement. Ok, so Patterson claims he didn't call the TARP a "sham". But what did he say? That's what we're trying to figure out.

US judges admit to jailing children for money - (www.reuters.com) Two judges pleaded guilty on Thursday to accepting more than $2.6 million from a private youth detention center in Pennsylvania in return for giving hundreds of youths and teenagers long sentences. Judges Mark Ciavarella and Michael Conahan of the Court of Common Pleas in Luzerne County, Pennsylvania, entered plea agreements in federal court in Scranton admitting that they took payoffs from PA Childcare and a sister company, Western PA Childcare, between 2003 and 2006. "Your statement that I have disgraced my judgeship is true," Ciavarella wrote in a letter to the court. "My actions have destroyed everything I worked to accomplish and I have only myself to blame." Conahan, who along with Ciavarella faces up to seven years in prison, did not make any comment on the case. When someone is sent to a detention center, the company running the facility receives money from the county government to defray the cost of incarceration. So as more children were sentenced to the detention center, PA Childcare and Western PA Childcare received more money from the government, prosecutors said. Teenagers who came before Ciavarella in juvenile court often were sentenced to detention centers for minor offenses that would typically have been classified as misdemeanors, according to the Juvenile Law Center, a Philadelphia nonprofit group. One 17-year-old boy was sentenced to three months' detention for being in the company of another minor caught shoplifting.




OTHER STORIES:

Foreclosures show more Tampa Bay home owners struggle with mortgage - (www.tampabay.com)
April Tampa Bay area foreclosures dip from March, soar from year ago - (www.tampabay.com)
House Price Drops Leave More Underwater - (www.finance.yahoo.com)
Rich default on luxury houses like subprime victims - (www.palmbeachpost.com)
Distressed property sales hit upscale condos - (www.latimes.com)
Bank-owned houses sell slowly on the coast - (www.mortgage.freedomblogging.com)
Sellers and buyers don't see eye to eye on pricing - (www.sfgate.com)
Down 58% in Aptos, CA 95003 - (www.patrick.net)
Fannie, Freddie in critical condition - (www.money.cnn.com)
Board to Ban Accounting Practice That Helped Lending Proliferate - (www.washingtonpost.com)

Commercial Real Estate Defaults: You Ain't Seen Nothing Yet - (www.businessinsider.com)
Aurora fights foreclosure blight by billing banks - (www.denverpost.com)
Housing crash bringing work to Lee County - (www.nbc-2.com)
The Geography of Jobs - (www.tipstrategies.com)
Bad Collateral - (www.jameshowardkunstler.typepad.com)
US banks scramble to repay bail-out cash - (www.ft.com)
Derivatives Market Declines for First Time on Record, BIS Says - (www.bloomberg.com)

Companies face higher hedging costs - (www.ft.com)
Agricultural Bank Raises $7.3 Billion in Bond Sale - (www.bloomberg.com)
German Investor Confidence Rises to Three-Year High - (www.bloomberg.com)
American Express Will Slash 4,000 Jobs, Take Charge - (www.bloomberg.com)
U.S. to Issue Tougher Fuel Standards for Automobiles - (www.nytimes.com)
Meltdown will leave vastly changed economy - (www.msnbc.msn.com)
Waking up from the American Dream - (www.mercurynews.com)
US Government Paying Houseowners to 'Walk Away' - (www.seekingalpha.com)
Guatemalan Attorney Predicts his Own Murder on YouTube - (www.dvorak.org)
Buffett’s Berkshire Scales Back Stock Purchases as Cash Erodes - (www.bloomberg.com)

Friday May 29 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

 

Battery makers vie for US aid  - (www.reuters.com) A handful of US battery makers is scrambling for government support ahead of a deadline this week as the US struggles to win back lost ground from Asian competitors in one of the world’s next important technologies. The race is also the first test of how the administration will use the near-$190bn in stimulus money earmarked this year to support “green” technologies, from alternative fuels to energy-efficient building materials. Advanced batteries are seen as a strategic technology, given their importance to electric and hybrid vehicles, and their military applications.  As with the chip industry two decades ago, the US has lost the lead to manufacturers in Asia that have invested in high-volume manufacturing. “The US and the Europeans have been asleep at the switch,” said Paul Beach, head of business development at Quallion, a battery maker that hopes to raise up to $200m with support from the stimulus funds.  “This industry probably couldn’t get kick-started without this,” he added. “US companies are already well behind in process manufacturing technology,” added Jim Greenberger, head of a consortium of small battery makers that is looking for $600m to build a joint manufacturing plant. “As bad a state as our auto industry is in right now, it will be much worse if we don’t start building [battery] cells in the US.” Many of the breakthroughs in the lithium-ion technology used in advanced batteries were made in Japan, and most manufacturing is centred in Japan, South Korea and China. With finance hard to come by, how the US uses the $2bn of stimulus money set aside for advanced battery makers could shape the industry. Applications are due on Tuesday, with a decision on how to use the money expected as early as July. That is months ahead of decisions about how to apply the rest of the stimulus money, which are expected to play a similarly ­critical part in structuring other parts of the “green tech” industries. “There’s absolutely no question the government will be picking winners and losers” in the environmental technologies, said Brian Fan, head of research at the Cleantech Group.

 

Las Vegas house prices plummet toward ZIP - (www.lasvegassun.com) Ten Las Vegas ZIP codes reported drops of more than 60 percent in home sales prices from 2008’s first quarter through March, according to a research firm that tracks regional sales. Thirteen of 56 ZIP codes in the Las Vegas Valley reported median sales prices below $100,000 in the first quarter. The drop in prices spurred 10,733 sales, a 30 percent increase from the first quarter of 2008 to 2009’s similar period. Overall, the median price of homes sold in Southern Nevada, including Laughlin and Mesquite, fell 40 percent in the first quarter to $150,000 or $84 per square foot, according to San Diego-based DataQuick. The firm reported that 89103 in Spring Valley, an area bounded by Spring Mountain Road to the north, Tropicana Avenue to the south, Rainbow Boulevard on the west and Interstate 15 on the east, reported an 83 percent decline to a median price of $88,000. That ZIP code is in unincorporated Clark County, but Las Vegas and North Las Vegas reported some steep drops as well. One of the lowest median prices of any ZIP code was $45,500 or $39 per square foot in 89101, which includes areas surrounding downtown Las Vegas. That’s a 75 percent drop from the first quarter of 2008. The drop sparked 112 sales between January and March, a 167 percent increase over 2008. Prices fell 77 percent in 89102, an area southwest of downtown Las Vegas, to $98,000. Despite the price decline, sales in that area fell 52 percent. The lowest median price of any ZIP code was in 89030, the area surrounding downtown North Las Vegas, at $39,000 or $34 per square foot. That’s a 78 percent drop from 2008, but it spurred the biggest increase in sales in the valley. The 195 sales in the first quarter was a 354 percent increase.

 

As Detroit Crumbles, China Emerges as Auto Epicenter - (www.washingtonpost.com) America's auto titans are dismantling their global empires. But across the Pacific, it's as if the global economic forces that have pummeled Detroit never struck. Chinese auto sales are up, and this year China is projected to displace Japan as the world's largest car producer. Now, the auto world is buzzing that China's auto industry may try to pick up the pieces of Detroit -- at a bargain.  Chinese companies have tried to dampen speculation, issuing regulatory filings that deny bids to buy Ford's Volvo or General Motor's Saab. But there's little doubt among analysts that Chinese automakers are interested in the United States and that Detroit's automakers are interested in them.  Buying up iconic brands such as Hummer or Saturn could supply Chinese automakers with the technological expertise to help them leapfrog past long-established competitors, said Kelly Sims Gallagher, a lecturer at Harvard University's Kennedy School of Government, who wrote a book on Chinese automakers. "That's where Chinese firms are weakest," she said. "They have world-class business and manufacturing capabilities now. What they still lack is technological know-how, systems integration, being able to design new vehicles from scratch and get them to a manufacturing line."

 

Buyout Firms Elude Fed as OTS Lets Private Equity Acquire Banks  - (www.bloomberg.com) The Office of Thrift Supervision is opening a door the Federal Reserve has closed, allowing leveraged buyout firms to take control of banks amid the worst financial crisis since the Great Depression. The OTS, which oversees about $1 trillion of assets at U.S. thrifts, approved MatlinPatterson Global Advisers LLC’s purchase of Flagstar Bancorp Inc. in Troy, Michigan, and may allow similar takeovers. That puts the agency at odds with the Fed, which has told private-equity companies it won’t permit a firm that isn’t regulated as a bank to own a majority stake in a lender, even if it walls off its investment in a so-called silo deal, according to a Fed lawyer who declined to be identified. “This may give buyout firms the opportunity to make controlling investments that the Fed has denied,” said Patricia McCoy, who teaches banking and securities regulation at the University of Connecticut School of Law in Hartford. “The OTS has an interest in keeping remaining thrifts alive with fresh capital, and private equity is one of the only options available.” Blackstone Group LP and Carlyle Group, the world’s two biggest LBO firms, are among those eager to snap up banks on the cheap after global losses tied to the credit crisis topped $1.4 trillion and slashed the valuations of lenders. While the Fed has set out guidelines that allow private-equity investors to increase their minority stakes in lenders it regulates, it has taken the position that conflicts exist when an LBO firm owns a bank and non-banking interests, said two people with knowledge of the matter.

 

Pension Gap at $334 Billion Forces U.K. Dividend Cuts - (www.bloomberg.com) The 220 billion pound ($334 billion) hole in U.K. corporate pensions may push companies to cut dividends, damping the recovery in Europe’s largest stock market. The 1.17 percentage point drop in corporate bond yields since October is forcing companies from BT Group Plc to BAE Systems Plc to set aside more cash for future obligations. London-based BT slashed its dividend by 89 percent last week to support a plan for more than 340,000 current and retired employees. More will follow, adding to the biggest dividend reductions in Europe since at least 1997, according to data compiled by Paris-based Societe Generale SA and UBS AG in Zurich. U.K. companies are the most susceptible because English corporations typically run pension funds, unlike the rest of Europe, where the state is responsible for retirees. “Pension managers are caught in the perfect storm,” said Chetan Ghosh at Investment Solutions Ltd. in London, which oversees more than $13.8 billion. “Bond yields are falling and stocks have not recovered from last year’s sell-off. This will increasingly be a problem through 2011.” Dividend reductions would add pressure to share prices already battered by the global recession and the region’s first annual net gain in equity sales since 2005. ‘Under-Funded’: BT, the U.K.’s largest phone company, and BAE Systems, Europe’s biggest arms maker, rank with British Airways Plc and Dusseldorf, Germany-based ThyssenKrupp AG, Germany’s largest steelmaker, as having a “high risk” of using cash to shore up pensions, Societe Generale said in a report last month. BAE Systems plans to contribute an additional 200 million pounds to help cover its U.K. pension deficit and $250 million for its U.S. plan. London-based British Airways, Europe’s third- largest airline, may have to set aside more money for its growing pension deficit, analysts at Paris-based brokerage Oddo Securities wrote in a March 6 report.

 

At Geithner's Treasury, Key Decisions on Hold - (www.washingtonpost.com) Seven weeks after the Treasury Department announced that it was ousting General Motors chief G. Richard Wagoner Jr. in the federal bailout of the company, he is still technically on GM's payroll. Wagoner's removal has been held up because senior Treasury officials have yet to decide whether he should get the $20 million severance package that the company had promised him.  The delay is one of many hitches that have slowed a host of important policy actions in the four months since Timothy F. Geithner became Treasury secretary. While Geithner has taken dramatic steps to address flashpoints in the economy, the work of carrying out those policies has bogged down because critical decisions about how to do so aren't being made, interviews with a broad range of federal officials show.  Government officials, inside the Treasury and out, say the unresolved issues are piling up in part because of vacancies in the department's top ranks. But some of the officials also cite the Treasury's ad-hoc management, which is dominated by a small band of Geithner's counselors who coordinate rescue initiatives but lack formal authority to make decisions. Heavy involvement by the White House in Treasury affairs has further muddied the picture of who is responsible for key issues, the officials add. One of the department's signature initiatives, considered vital for getting at the root of the financial crisis, aims at relieving banks of their toxic assets. But to those familiar with the program, it remains unclear who will decide some of the practical details, such as whether foreign firms will be allowed to participate in the funds that buy the assets. This uncertainty is slowing the rollout of the program, which in any case has proven daunting to design. Announced in early February, it may not launch until July, officials say. In March, Treasury officials clashed over a $15 billion initiative to use money from the federal bailout package to free up credit for small businesses. Geithner's counselors pressed to announce the program quickly, despite protests from the career staff members who said it would not work. Unable to raise the issue with Geithner himself, the staff members appealed directly to the White House but were rebuffed, according to sources familiar with the episode.

 

 

 

 

 

OTHER STORIES:

 

Energy prices bounce back - (finance.yahoo.com)

Treasuries Decline as Stocks Rise, Reducing Demand for Safety  - (www.bloomberg.com)

U.S. Stocks Gain as Bank of America, Lowe’s Shares Advance  - (www.bloomberg.com)

Dollar Libor Drops Most in Two Months as Credit Thaw Quickens - (www.bloomberg.com)

TARP is a "sham" and a ripoff to taxpayers - (www.huffingtonpost.com)

99 Years in Prison for Mortgage Fraud. Not a Typo - (www.nationalmortgagenews.com)

America Forgot Lessons It Taught China - (www.nytimes.com)

China's yuan 'set to usurp US dollar' as world reserve currency - (www.telegraph.co.uk)

China’s Stockpiles Are New Sovereign Wealth Strategy, RBC Says - (www.bloomberg.com)

Bunds Beating Treasuries for First Time Since 2005 - (www.bloomberg.com)

Smaller US banks need additional $24bn - (www.ft.com)

India Stocks, Rupee, Bonds Surge on Congress Win; Exchange Halts  - (www.bloomberg.com)

 

Global Insight: Unemployment experience - (www.ft.com)

Central banks may need more power for financial stability - (www.reuters.com)

U.S. Homebuilder Confidence Rises to Eight-Month High  - (www.bloomberg.com)

New Mood in Antitrust May Target Google - (www.nytimes.com)

Personal Credit Crisis Of NY Times Economics Reporter - (www.nytimes.com)

Who, Me? Yes You, Greenspan! - (www.lewrockwell.com)

$8000 tax credit not actually for downpayment - (www.boston.com)

Real Estate Developer Sues Banks That Loaned It Money - (www.businessinsider.com)

 

More high-end properties sitting on the market - (www.sfgate.com)

Mass auctions of foreclosed houses not as successful as billed - (www.tampabay.com)

Deep Property Depreciation Still Ahead - (www.seekingalpha.com)

States like California, Arizona and Florida still have far to fall - (businesswire.com)

Worst Is Yet To Come - (finance.yahoo.com)

Multimillion Dollar House Price Cuts - (www.finance.yahoo.com)

No sign of foreclosures slowing - (www.nctimes.com)

Silicon Valley Foreclosures To Accelerate - (www.viewfromsiliconvalley.com)

 

Mortgage modifications make housing dead asset class for years - (www.fieldcheckgroup.com)

Anatomy of an economic meltdown - (www.sfgate.com)

Jeff Walser, FDIC Economist, Charged With Attempted Bank Robbery - (www.huffingtonpost.com)

Thursday May 28 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Jeff Walser, FDIC Economist, Charged With Attempted Bank Robbery - (www.huffingtonpost.com) An economist on leave from the federal agency that insures bank deposits has been charged with the April 11 attempted robbery of a Kansas City-area bank. Jeff Walser said he had a bomb in his briefcase and demanded money at the Bank of America branch in Independence, but did not take $41,000 brought to him by an employee, according to an indictment filed Tuesday. Walser, 51, surrendered to police and was being held in federal custody, the U.S. attorney's office said. Walser told police that he has health problems and was "alone, discouraged and tired of working" and that his plan was to be arrested and not tell police he required thrice-weekly dialysis treatments to survive.

FBI Probes Possible Insider trading by SEC Lawyers - (www.cnbc.com) Federal prosecutors and the FBI have been investigating possible illegal insider trading by two Securities and Exchange Commission enforcement attorneys who were in a position to receive sensitive information about agency probes of public companies. The SEC's inspector general, David Kotz, found that the frequent stock trades over a two-year period by the pair raised suspicions of insider trading. Earlier this year, he referred the matter to the Fraud and Public Corruption Section of the U.S. attorney's office in Washington. That office, together with the FBI, "is conducting an investigation of possible criminal and civil violations," Kotz told SEC Chairman Mary Schapiro in a memo dated March 3. The memo and Kotz's report of his investigation were provided by the office of Sen. Charles Grassley, R-Iowa, who has been an active critic of the SEC's operations. Kotz's report also found that the SEC "has essentially no compliance system in place to ensure that ... employees, with the tremendous amount of nonpublic information they have at their disposal, do not engage in insider trading themselves." The agency's disclosure and compliance requirements is based on the honor system and there is no way to determine whether an employee fails to report a transaction. "We take seriously even the suggestion that any SEC employee would engage in insider trading," according to a statement from the agency.

NAR Shovels Shit To The Press - (www.nypost.com) WHO the hell would be stupid enough to pay to hear Alan Greenspan's opinion of anything! Notice, that isn't a question because I already know the answer. Rather, it's a statement with one of those exclamation points to show that my voice is being raised in a mix of bewilderment and anger. The National Association of Realtors, which is probably suffering from combat fatigue, asked the former Federal Reserve chairman and the chief suspect in the destruction of the US economy, to address its Washington conference Tuesday and tell real estate people what they want to hear -- that things are getting better. So Greenspan did just that. "We are finally beginning to see the seeds of a bottoming" in the housing industry, Greenspan told the gathering. Adding, according to Bloomberg News, that the US is "at the edge of a major liquidation" in the stock of unsold houses. Applause, applause. Here's your check, Alan. I figured it was worth knowing how much Greenspan gets these days for defending his own indefensible actions at the Fed while also trying to pull the wool over the eyes of would-be homeowners. So I asked someone named Lucien Salvant, managing director of the NAR's public affairs department. His answer in an e-mail: "None of your business. How much is the NY Post paying you to ask that question?" Whoa! Calm down, Lucien. Most p.r. people know better than to pick a fight with the press, especially when they don't know whether the media guy asking the question is an SOB who'll print the nasty response verbatim in a column that would have otherwise been pretty harmless. Now? Well, Lucien got my blood stirred. The fact is that The Post paid me nothing, per se, to ask that specific question. I was just sitting around on Tuesday watching the wire services when Greenspan's speech came out. Then stories followed saying how the stock market was reacting favorably to news that Greenspan had said the same thing he always says.

Barney Frank is a Genius -- Not - (www.freedompatrol.blogspotcom) Barney Frank is my personal hero. His latest crusade is one of his most admirable yet. He has determined that municipalities are paying too high an interest premium to borrow debt and that he Barney Frank is going to save them by reducing their borrowing costs. I'm not quite sure what it means when he says that rates are too high. I assume he doesn't like the way the free market works and is unhappy with the actual numerical interest rate municipalities are paying. I'm sure he is right too. Municipalities are being screwed. After all, everyone knows the private market has a vendetta against these municipalities and the fact that they are paying unfairly high rates has nothing at all to do with the fact that they are massively insolvent and therefore huge credit risks. But this is why Mr. Frank is so amazing and is my personal hero. He is able to act with 100% confidence without anything at all resembling logic. He, Barney Frank, hero of the people, is going to lower the cost to municipalities so all the corrupt, inefficient payments to his voting constituents can continue unabated. Now how is he going to do this you ask? How is he going to somehow magically lower costs without any unintended consequences? Well this is why Barney Frank is my hero and you are not. You are a skeptic who doubts the power of the almighty one. Just believe. Don't question. God knows you will be happier. Of course if you, like me, are still skeptical I'll give you the answer. He can't. He is a buffoon who has no idea what he is doing but views himself as a Messiah - a savior of those who can't defend themselves.

Cities to be beautified by shutdown of auto dealerships - (www.latimes.com) A wave of closures by GM and Chrysler is likely to leave many car lots sitting empty. Dozens of cities also depend on sales tax revenue from the dealerships to balance their budgets. With struggling automakers expected to announce the shutdown of thousands of dealerships starting today, cities are bracing for a wave of blight. The closings will dump thousands of large, oddly configured parcels into an already reeling commercial real estate market. Many are likely to remain empty for a long time, monuments to the decline of the U.S. auto industry and the intensity of this recession. Chrysler told a Bankruptcy Court today that it will break its contracts with 789 dealerships nationwide. General Motors Corp. will tell 1,000 to 1,200 dealers Friday that it will not renew their franchises. The automaker plans to eventually close a total of 2,600 operations. In California, the moves will have far-reaching implications for dozens of cities, which depend on sales tax revenue from the dealerships to fund substantial portions of their budgets. The dealerships join a growing list of retailers felled by the dour economy: Sites that once held Mervyn's, Circuit City and Linens 'n Things stores remain empty except for a few locations. And as difficult as it has been to sell or lease those properties, at least they can be easily adapted for other uses. Car dealerships, on the other hand, are special-purpose properties that are hard to adapt. "There are not a lot of uses that can go right back into a dealership," said Jodi Meade, director of the automotive properties group at real estate brokerage CB Richard Ellis. "Usually they have to scrape it" and start over to make way for another business. San Bernardino, for example, had 12 dealerships when the economy was booming. Now there are just seven -- and it's unclear whether more will be felled with the GM and Chrysler announcements. At an abandoned Cadillac dealership, weeds poke through cracks in the asphalt. Vandals have painted graffiti over the Chevrolet logo at another site. Windows are broken and dead grass from a once-tended lawn covers the ground. One of the car lots, now called Arrowhead Motors, is operating only because a credit union had so many repossessed vehicles that it decided to go into the auto business. "The whole model of auto sales through dealership networks is open to question," said Jim Morris, chief of staff to San Bernardino Mayor Patrick J. Morris. Finding a car seller for the Arrowhead Motors site was a coup for the city, which is struggling to figure out what to do with its empty car lots, Jim Morris said. Auto dealership sites have lost a third to half of their value compared with the peak about three years ago, Meade said.

Menlo Park Real Estate In Distress - (www.patrick.net) Wow, I was biking by and saw THREE houses for sale right near each other in a really rich neighborhood in Menlo Park. Here’s a photo: I think these are the listings, which of course each fail to mention that the neighbors are trying to sell at the same time: http://www.redfin.com/CA/Menlo-Park/800-Hermosa-Way-94025/home/890061; http://www.redfin.com/CA/Menlo-Park/866-Hermosa-Way-94025/home/1601197; http://www.realtor.com/realestateandhomes-detail/829-Hermosa-Wy_Menlo-Park_CA_94025_1107844310; One house for sale is normal. Two houses next to each other for sale is a bit odd. Three houses for sale by each other is an indication that the market is seriously hurting. There is no way each of them are going to get $3 to $4 million. I bet we have greater than 50% reductions in Menlo Park coming soon. It would be a disaster to buy at these prices when there is so much on the market, and more coming up for sale all the time. Just think, a buyer could easily lose a million dollars in the next year alone!

Most US houseowners still disconnected from reality - (www.reuters.com) Most American homeowners believe their home's value has declined over the past year, but a majority also think a bottom has been reached, real estate website Zillow.com said on Thursday. A majority, or 60 percent, believe their home lost value during the past 12 months, according to the Zillow Q1 Homeowner Confidence Survey. In reality, 80 percent of homes across the country lost value during the past 12 months, according to Zillow's first-quarter Real Estate Market Reports. Additionally, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey. That resulted in a Zillow Home Value Misperception Index of five -- the lowest it has been since Zillow introduced the index in the second quarter of 2008 and down from 10 in the fourth quarter of 2008. A Misperception Index of zero would mean homeowners perceptions' were in line with actual values. "The perception of American homeowners is finally catching up to reality, which is that 80 percent of all homes in the country lost value during this past year," Dr. Stan Humphries, Zillow's vice president of data and analytics, said in a statement accompanying the survey. "While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months. Unfortunately, there are few markets we expect to perform this well," he said. Most homeowners -- 74 percent -- believe their home will not decline in value in the coming six months, effectively calling a bottom to their own home's housing slide, Zillow said. Specifically, one in four homeowners, or 27 percent, think their home's value will increase in the next six months, while nearly half, or 47 percent, believe its value will remain the same. Homeowners were similarly optimistic when it came to predicting home values in their local markets, the survey showed. About two-thirds of homeowners believe home values in their local markets will increase or stay the same, at 26 percent and 37 percent respectively, over the next six months. Thirty-seven percent believe home values will decrease, the survey showed. It also showed a significant number of potential sellers are holding back due to the current market. When asked about future plans to sell, 31 percent of homeowners said they would be at least "somewhat likely" to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround, the survey showed. "Also interesting is the information we have for the first time this quarter on the levels of 'shadow inventory' - homes that people would like to sell but that aren't currently on the market, and thus aren't captured in the official number of homes on the market," said Humphries. "With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices." With a Misperception Index of 2 -- down from 13 in the fourth quarter -- the perception of homeowners in the West was closest to reality, along with that of homeowners in the Midwest. Northeastern homeowners' perception of their own homes' values was the farthest from reality, with a Misperception Index of 11, up from 3 in the fourth quarter, the survey showed.




OTHER STORIES:

Suburban Housing Markets Are Unsustainable - (www.seekingalpha.com)
Decoupling From Reality - (www.jameshowardkunstler.typepad.com)
The Problem with Debt: Leverage - (www.finance.yahoo.com)
Foreclose and Work the System - (www.blog.youwalkaway.com)
Commercial Rents Crashing in London to 1991 Prices - (www.bloomberg.com)
Small-business credit card rates increase - (www.jan.freedomblogging.com)

On the road with the Airpod air-powered car - (www.guardian.co.uk)
SEC recommends civil fraud charges against Mozilo of Countrywide - (www.latimes.com)
Government Underestimates Fannie, Freddie Money Pits - (www.seekingalpha.com)
California treasurer requests TARP help - (www.marketwatch.com)
Economic-Stimulus Cash Is Moving Slowly - (www.online.wsj.com)
Geithner enriches speculators in "sham" bank bail-outs - (www.telegraph.co.uk)
Author Thomas Woods talking about the Fed - (www.booktv.org)

Stanford Investors 'Shocked' by $20 Million Fee Request - (www.cnbc.com)
Volkswagen Halts Talks with Porsche on Tie-Up - (www.cnbc.com)
Price of Gasoline Jumps 25 Cents in 3 Weeks - (www.cnbc.com)
Two Of The World's Richest Men Game Market - (www.cnbc.com)
Week's Top Videos: Dr. Doom, Otellini, Cohen & More - (www.cnbc.com)
Buffett's Berkshire Boosts Stakes in J&J, Wells Fargo - (www.cnbc.com)
Economic Recovery Still Months Away: Roubini, Rogoff - (www.cnbc.com)

Wednesday May 27 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

 

Therapists Get an Earful About Career Anxiety – (www.nytimes.com) Because of the downturn, more mental health professionals are spending more time talking to people with job-related issues.  DENNIS PALUMBO, a Los Angeles-based psychotherapist who treats many artists and other creative types, says his patients previously tended to talk about problems like writer’s block, procrastination and fear of rejection. “Now it’s ageism, fear of job loss and anxiety surrounding the job search,” said Mr. Palumbo, who is also an author and a former screenwriter. “The problems have shifted from creative to structural concerns.” Amid high unemployment and layoffs, mental health professionals are seeing a marked increase in the time they spend talking about career-related issues with patients. Many people are seeking guidance from therapists about how to confront the storm that has hit the job market and toppled their lives. Sessions are often becoming a mosaic of traditional therapy, loosely defined as more process-oriented and focused on the past, and of coaching, which tends to be more goal- and behavior-oriented.  “In many of my sessions we role-play networking, how to talk about skills and accomplishments, and how to get a raise in this market,” says Robert C. Chope, a professor of counseling at San Francisco State University and president of the employment counseling division of the American Counseling Association. Peter Turkl, a clinical social worker and executive coach based in New York, says the method he uses to look at behavior patterns and ways to change them has come to the forefront in the last few months, as opposed to talking about relationships and issues lingering from the past. “Sometimes an entire session will just be devoted to coaching, and I’ll give my patient homework to deal with a particular obstacle,” he said.

 

Resuscitating ethanol - (www.marketwatch.com) Will the ethanol industry get a second chance? It sure could use one. After the initial rush to build plants, fueled by easy money and a federal mandate to ease the nation's dependence on foreign oil through the use of home-grown biofuels, the ethanol business is suddenly scrambling to protect troubled investments and keep itself a relevant part of U.S. energy policy.  Major headwinds for the industry surfaced a year ago, when a record-high spike in energy and corn prices sowed havoc in the market. Things went from bad to worse during the subsequent collapse of commodity prices, exacerbated by a deep recession and the drop in fuel demand. Many producers found themselves unable to pay their bills.  The past six months have been especially brutal for producers who just two years ago bet big on what appeared to be a rosy future. Several are now bankrupt, dozens of plants are shut, plans to build others are on hold, and investors -- including such luminaries as software magnate Bill Gates and hedge fund manager David Einhorn -- are smarting from losses.  The industry has a "black eye financially. It's been a poor performer," said Scott Brown, CEO of New Energy Capital, which sold its interest in an ethanol plant in 2007.  "Too much was built too fast. There still is too much capacity for the Renewable Fuel Standard," he added, referring to the federal blueprint for the industry.  It's but the latest in a long history of setbacks for ethanol. A distant predecessor of the fuel was heavily taxed to help pay for the Civil War. After World War II, demand dried up and commercial ethanol went into a 30-year hibernation. Only last year, however, ethanol producers laid claim to 23% of the nation's corn crop, attracting widespread blame for a spike in food prices.  President Barack Obama, as part of his overall energy plan, seeks to bring some relief to struggling ethanol producers, including refinancing. The Environmental Protection Agency also is considering a rule that, if approved, would raise the amount of ethanol that must be blended into gasoline to 15% from 10%. Meanwhile, ethanol makers are looking to catch a break from lenders. Some banks and debt holders, reluctant to sell valuable agricultural or transportation properties at fire-sale prices, are sitting tight until ethanol's profit margins improve, bankers said. "We think the worst case scenario is that we have to wait for the Renewable Fuel Standard to ramp up to meet the existing capacity," said Jerry Peters of TD Bank North, a lender to ethanol makers. "It will be a six to 18-month period before all the capacity is absorbed."  Other bankers are weighing whether they want to try and sell plants at a substantial loss. Oil companies, private equity firms, and big agribusinesses are hunting for bargains.  Based on installed production capacity, lenders have somewhere between 80 cents and $1.50 per gallon invested in a plant, Peters said.

 

Firing state employees won't help revenue drop - (www.sfgate.com) Gov. Arnold Schwarzenegger's latest grim budgets bring to mind assertions by opponents of Propositions 1A-1F that, in the words of gubernatorial candidate Meg Whitman, "We don't have a revenue problem. We have a spending problem." Given that the state is facing a $21.3 billion hole, does not a $11.7 billion revenue drop count as a problem?  According to figures worked up by the state controller, that's the amount by which total "revenue receipts" have declined since April 2008. The three major sources of state revenue - income taxes, sales taxes and corporate taxes - fell by $12.4 billion, a 16.4 percent drop. The only revenue line that grew was "not otherwise classified." The state's Department of Finance is projecting a total revenue shortfall of more than $12 million by next month.  Presumably, these revenue numbers have something to do with California's version of the Great Recession, including an unemployment rate of 11.5 percent. One wonders how throwing thousands more public employees out of work - as Schwarzenegger is threatening and some opponents of the propositions are gleefully cheering for - will further prove that "we don't have a revenue problem."

 

Miami's vise: Florida banks face possible seizure - (www.marketwatch.com) Sunshine State's long-term allure may have delayed closure wave. BankUnited Financial, the largest lender based in Florida, warned earlier this week that it could be seized by regulators. Many smaller banks might face a similar gloomy fate as the real-estate crisis lingers in the Sunshine State -- but there is a ray of hope. When Florida's real-estate slump finally ends, the state could still be a very attractive place for banks to do business. Indeed, some experts say the long-term allure of the state may be the main reason so few Florida banks have failed so far -- and why a bidding war for BankUnited may still be brewing.  "We have many problem banks, and we may be losing our biggest," said Kenneth Thomas, a banking expert and economist based in Miami. "But when things get better, Florida will come back strong, and those who are positioned well in the banking sector will benefit."  A Florida recovery seems a long way off, though. 'We're starting to see pockets of improvement nationwide, but in Florida there's a huge amount of surplus property that's been built.' Karen Dorway, Bauer Financia. In Miami, homes are staying on the market for nearly 250 days on average, by far the slowest inventory turnover along the 10 major U.S. cities tracked by Altos Research. Miami has experienced the slowest market turnover every month since September 2007.  Bauer Financial, which tracks the health of U.S. banks, rated 58 Florida-based banks "problematic" or worse at the end of 2008.  BankUnited, based in Coral Gables, garnered Bauer's lowest rating. Miami-based Ocean Bank, one of the largest independent commercial banks in Florida, and Orion Bank, a big community bank in Naples, also got Bauer's lowest rating as of the end of last year.  On the regulatory front, the Federal Deposit Insurance Corp. said May 8 that it's opening an office in Jacksonville with space for 500 temporary staff and contractors. The new location will help the regulator "manage receiverships and to liquidate assets from failed financial institutions primarily located in the eastern states," it said.  More than 5% of loans made by Florida banks were either delinquent or not accruing at the end of last year, according to the FDIC. That was up from 1.98% a year earlier.  Residential mortgages made up 145% of these banks' Tier 1 capital, while commercial-real-estate loans -- a bigger concern for regulators these days -- made up 449% of Tier 1 capital, according to the FDIC.  And Florida banks' commercial-real-estate exposure is larger than banks in other problem states such as California, Nevada and Arizona, FDIC data show.  Root of the problem: The main problem in Florida has been overbuilding: There are still too many new houses, condominiums and commercial-real-estate projects seeking buyers in the face of waning demand.

 

CALLING ALL LOAN MOD FIRMS: A Family in LA Needs Help NOW! – (www.ml-implode.com) - The family gave the con man their life savings of $12,000 back in August of 2008 to get the process started, and the family hasn’t heard from him since. Their home was foreclosed on and now they’ve been evicted.  They have young children and have been living on the street… sleeping outside… just steps from their foreclosed home.  Dear God. This family needs help now… like today.  And those in the legitimate loan modification industry are in the best position to help them.  Not only can everyone help financially, but someone needs to step up and help them with their bank, if possible.  Something has to be done about this, and the industry needs to step up and show that it does care… NOW!  TODAY! I spoke with Maggie Carnot, the Operations Supervisor at California Finance Group this morning.  She is helping the family in every way she can, and getting the District Attorney involved on Monday, but as we all know the DA can’t turn back the clock. Maggie and the California Finance Group has set up a fund at Bank of America… Account #0162567380.   You can wire funds or you can write a check and deposit it to that account.  PLEASE DO IT TODAY… RIGHT NOW! On Monday, CBS will be reporting how things are going for this family who was thrown into this tragic situation… and I really want to hear them say that the legitimate loan modification professionals of this country stepped up to help.  I realize we won’t be able to help everyone.  But we can help this family.  And we very much should… and NOW!

 

"Roubini is Dishonest"  - (ashizashiz.blogspot.com) - ...when I hear Barney Frank and Barack Obama and Henry Paulson and Ben Bernanke and Paul Krugman and Nouriel Roubini promote increased governmental spending---trillions of dollars in deficit spending, thus exponentially increasing the common man's future debt burden---to try and loosen credit markets so that all of the people in debt “choose” to go deeper into debt, I simply see these men as I see the guy who sells the daggers upon which the Juliet’s of the world impale themselves. Dealers in death, no better.

 

 

 

OTHER STORIES:

 

Fed Up  - (www.ml-implode.com)  - The necessary first step to restoring economic stability in this country is to audit the Fed, to find out the multitude of secto...

Live Free or Die - (www.ml-implode.com) - "Indolence," in Machiavelli's word: There are stages to the enervation of free peoples. America, which held out against the tren...

Consumer price drop is biggest since '55  -(money.cnn.com)

Whatever You Call It, This Rally May Not Last - (www.nytimes.com)

SEC Chief Mary Schapiro: The Watchdog's New Teeth - (www.businessweek.com)

King’s Plan May Exceed 150 Billion Pounds, Morgan Stanley Says  - (www.bloomberg.com)

FTC: It's war on car warranty 'robocalls' -(money.cnn.com)

Big banks fire up lending -(money.cnn.com)

Insurer to Treasury: No thanks on TARP -(money.cnn.com)

Falling Gas Prices Deny Russia a Lever of Power - (www.nytimes.com)

China Has IPO Backlog Up to 400 Companies, Citic Says - (www.bloomberg.com)

Hot in recession: Cheaper wine, chocolate, Spam - (news.yahoo.com/s/ap)

 

When a Company Tries It, a ‘Say on Pay’ Works - (www.nytimes.com)

A car dealer survives | Hard times on dealer row  -(money.cnn.com)

Mortgage rescue: Still more hurdles -(money.cnn.com)

My Personal Credit Crisis  - (www.nytimes.com)

Hedge Fund Manager’s Farewell  - (www.nytimes.com)

 

Gas jumps 25 cents in 3 weeks -(money.cnn.com)

Why small businesses fail -(money.cnn.com) 

Tuesday May 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

 

Paulson Told Bankers to Take U.S. Taxpayer Aid or Be ‘Exposed’  - (www.bloomberg.com)  Former Treasury Secretary Henry Paulson, describing nine U.S. banks as “central to any solution” of the credit crisis, told their leaders to take government aid or be forced to by regulators, according to a memo his staff prepared for a private meeting in October. “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance,” Paulson’s one-page list of talking points for the session with the banks’ chief executive officers said.  “We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed,” the memo said.  Investing $125 billion in the financial institutions was a shift for the Bush administration, which had proposed buying troubled assets with $700 billion Congress approved 10 days earlier. The memo is among newly released Treasury Department documents containing details about the Oct. 13 meeting.  “Most Americans are going to be uncomfortable with the government forcing the banks into this arrangement,” said Tom Fitton, president of Judicial Watch, a nonprofit research group in Washington that obtained the documents under a Freedom of Information Act request. Andrew Williams, a spokesman for the Treasury, didn’t return calls seeking comment.

 

Troubled trucker YRC to seek $1 bln pension bailout - (money.cnn.com)  Says needs bailout money to cover pension debt, has $2B in obligations over next four years. YRC's chances of TARP bailout seen slim, shares fall 7 percent. Struggling No. 1 U.S. trucking company YRC Worldwide Inc plans to seek $1 billion in bailout money from the Troubled Asset Relief Program to help it cover pension obligations, a move analysts say is unlikely to succeed as the company has no financial charter. "YRC's chances (of a TARP bailout) are probably zero," Joshua Rosner, managing director of independent research firm Graham, Fisher & Co. said Friday "Without a financial charter in their holding company it will be impossible for YRC to obtain TARP funds." The U.S. Treasury Department's $700 billion TARP has thus far been devoted mainly to capital investments in financial firms, support for housing rescue program, backing for Federal Reserve lending companies and aid for the auto industry. The $35.6 billion allocated largely to prop up General Motors Corp and Chrysler LLC includes a $5 billion financing program for suppliers that is administered through the two automakers. YRC, which has been shedding jobs and closing facilities to cut costs in the face of the U.S. recession, faces an estimated $2 billion in pension obligations over the next four years. YRC will submit an application to the Treasury as early as Friday, a move that was first reported by the Wall Street Journal. The Treasury Department did not immediately respond to a request for comment. PENSION FUND PROBLEMS: Company Chief Executive Bill Zollars complained in the WSJ article that the Central States multi-employer pension fund that it pays into is unfair because YRC ends up paying for truckers who never worked for the company. Multi-employer pension funds were set up decades ago prior to the deregulation of the trucking industry to ensure that workers' pensions were protected even if they changed companies. Over the past 20 years, thousands of trucking companies have collapsed, leaving their pension obligations to be funded by those left in the fund. The Central States fund has been in trouble for years as a result of this problem. The world's largest package delivery company United Parcel Service Inc , which had more than 40,000 employees in Central States, paid a $6.1 billion fee to withdraw from the fund in 2007 and have those employees covered by a single-employer fund jointly managed by UPS and the Teamsters union. UPS' move was widely regarded by analysts as a smart one, given the poor condition of the Central States fund.

 

California treasurer asks U.S. to backstop state borrowing - (www.latimes.com)  Bill Lockyer requests the federal government to in effect guarantee California's debt against default, so that investors would be willing to provide the financing at reasonable interest rates. California Treasurer Bill Lockyer on Wednesday formally requested federal help to backstop a wave of short-term borrowing the cash-strapped state will need to undertake this summer. In a letter to U.S. Treasury Secretary Timothy F. Geithner, Lockyer asked the government to in effect guarantee the state's debt against default, so that investors would be willing to provide the financing at reasonable interest rates. A Treasury spokesman in Washington said the department had no immediate comment on Lockyer's request. California will be forced to borrow at least $13 billion, and possibly much more, beginning in July to bridge the gap between the state's current cash needs and future tax revenue. In normal economic times these short-term municipal note sales are routine. But because of California's deepening budget woes and its low credit rating, Lockyer said investors are likely to demand exorbitant interest rates on the notes if they're sold without a third-party guarantee. Major banks typically provide that guarantee, but Lockyer said they aren't willing this time to do so on their own. "The enormous size of the required funding together with the state's current credit condition and the continued weakness of the municipal finance market . . make it highly unlikely that the state can access the short-term market for its borrowing based on its own credit," Lockyer told Geithner.

 

California Budget Deficit Resurfaces as Voters Weigh Options - (www.bloomberg.com) California faces a resurgent $15 billion deficit and unprecedented cash shortage that may leave the most-populous U.S. state unable to pay its bills for the second time since January.  Governor Arnold Schwarzenegger, a Republican, is scheduled today to release his annual May revision to the budget, in which he will detail how he intends to close the deficit. He said May 11 that the gap would swell to $21 billion if voters on May 19 reject a package of measures, including one to borrow $5 billion of bonds backed by lottery profits. Polls show the proposals heading for defeat. “We’re steering away when the deficits are growing and it looks like it’s going to get worse down the road,” said Robert Millikan, who manages $5 billion in bond investments for BB&T Asset Management Inc. in Raleigh, North Carolina, referring to California debt. The state’s immediate financial needs were underscored by Treasurer Bill Lockyer, who in a letter to Treasury Secretary Timothy Geithner yesterday asked that the federal government become a standby purchaser of short-term notes in the event of default. Such a guarantee makes it easier for states to purchase the bond insurance policies needed to attract investors. “If we cannot obtain our usual short-term cash-flow borrowings, there could be devastating impacts on the ability of the state or other governments to provide essential services to their citizens,” Lockyer said.

 

California's Budget Deficit: What The Hell Is It?  - (Mish at http://globaleconomicanalysis.blogspot.com) Inquiring minds are asking "What the Hell is California's budget deficit?" That's a good question so let's see if we can answer it. On Thursday in California is a Complete Basket Case; Treasurer Requests Tarp Funds; LA Mayor Declares Emergency I noted the following: California Treasurer Bill Lockyer estimated that California's cash flow shortfall in fiscal 2009-2010 will be more than $13 billion. Governor Schwarzenegger has sent a letter asking the feds to reconsider, noting the cuts were taken in response to "an unprecedented fiscal crisis." Even now the state faces an estimated cash-flow problem of some $17 billion by July. Today I see California ordering layoffs to cover $15.4B deficit. California Gov. Arnold Schwarzenegger says thousands of state employees must be laid off and billions of dollars must be slashed from the budget to deal with the state's latest budget deficit. Schwarzenegger said Thursday he has no choice but to order layoffs and cut spending, and added that more cuts may be needed within days. The state approved billions in budget cuts and revenue increases earlier this year but they were not enough to keep up with a sharp drop in tax revenue as the recession batters the state's economy. California still faces a deficit of $15.4 billion in the fiscal year that starts July 1. That will grow to $21.3 billion if voters reject budget-related measures during a special election next week. Let's Do The math: According to Schwarzenegger, California faces a deficit of $15.4 billion (growing to $21.3 billion if voters reject the propositions). Also according to Schwarzenegger, California faces a $17 billion shortfall by July (with assumptions unknown as to the propositions). If you prefer, Treasurer Bill Lockyer estimates the cash flow shortfall in fiscal 2009-2010 will be more than $13 billion. Note that propositions 1A through 1F are supposed to raise $16 billion. However, it's important to remember that the $16 billion supposedly raised by the propositions will be spread over 4 years to miraculously end at that point in time as if every California problem will be cured. How much of this is front loaded is anyone's guess. If you can untangle that mess, please be my guest. I have been tracking California for quite some time and this is how I look at the situation: California is sinking further into the hole at a rate of $2 billion per month. I see no end in sight to the carnage. Thus, if California passes the propositions raising $16 billion, it will need another $24 billion (minimum) a year from now. The solution is not more taxes, the solution is more spending cuts. If you vote for these propositions you are nuts. Schwarzenegger's layoffs are cleverly timed to persuade voters to increase taxes. Don't fall for it.

 

California is a Complete Basket Case; Treasurer Requests Tarp Funds; LA Mayor Declares Emergency - (Mish at http://globaleconomicanalysis.blogspot.com) MarketWatch is reporting California formally asks Geithner for TARP assistance. California Treasurer Bill Lockyer asked U.S. Treasury Secretary Timothy Geithner on Wednesday to authorize assistance for his state from the federal Troubled Asset Relief Program, warning that depressed tax revenues may cut into basic services and halt the building of infrastructure. In a letter, Lockyer asked Geithner for TARP assistance for California and "other financially strapped states and local governments which face a severe cash flow crunch." "If we cannot obtain our usual short-term cash-flow borrowings, there could be devastating impacts on the ability of the State or other governments to provide essential services to their citizens," Lockyer wrote. In addition, Lockyer warned in the letter that California's cash flow problems may lead to trouble accessing the long-term bond market, which could "eventually even halt our infrastructure construction programs." Lockyer estimated that California's cash flow shortfall in fiscal 2009-2010 will be more than $13 billion.  A $13 Billion Deficit? Who does Lockyer think he is fooling? California has not yet passed and should not pass $16 billion in Propositions 1A through 1F as noted in California, Please Send A Message! Note that the proposed $16 billion in tax hikes was supposed to plug the budget but it is already another $8 billion in the hole. And judging from what Lockyer said, it appears the gap is up to $13 billion, assuming California passes those hikes. I am betting California does not pas those propositions. Moreover I encourage California to not pass those propositions or they will be taxing themselves to death. Assuming the hikes do not pass, California will be $29 billion in the hole, and counting, with the important phrase being "and counting". California is going $2 billion more in the hole every month like clockwork and I see no reason for that to stop now. LA Mayor To Declare Fiscal Emergency: Meanwhile, Villaraigosa calls on City Council to declare a fiscal emergency. With Los Angeles facing a $529-million budget deficit, Mayor Antonio Villaraigosa on Tuesday urged the City Council to declare a fiscal emergency that would grant him the authority to lay off and furlough thousands of city workers. The request signals a more hard-line tack by the mayor to win salary and benefit concessions from the city's public employee unions, which had soured on Villaraigosa's call for a salary freeze, furloughs and increased benefit costs to save $230 million and avert the need for layoffs. Villaraigosa said the worsening economy and an expected $300-million drop in city tax revenue gave him "very few options." L.A.'s budget gap is expected to grow to $1 billion in the 2010-2011 fiscal year because of investment losses in the city's pension systems, which the city is required to keep solvent. "The gravity of the fiscal emergency that we face is enormous," Villaraigosa said in his letter to the council. "Unless we act with urgency, the city will face a cash flow crisis, raising the prospect of running out of cash between November and February." The city council is required to have a balanced budget by July 1. Good luck with that. My plan for LA is simple: declare bankruptcy just like Vallejo did and hope the unions get what they deserve in court, nothing.  Unions Hold California Hostage: Are unions out of their minds in this environment to object to a wage freeze? On the surface it would appear so. However, unions may be emboldened by the Obama Administration's willingness to bend over backwards for union demands. Please consider Demoting California. One of the biggest stories in politics earlier this year was about California's budget teetering on the edge of a $42-billion deficit abyss. It only staved off insolvency when its legislature ended three months of gridlock to pass a budget with steep tax hikes and spending cuts. Guess what the Obama Administration is doing? It is telling Governor Arnold Schwarzenegger that it will revoke nearly $7 billion in federal stimulus money unless the state restores legislated wage cuts for unionized health-care workers. Governor Schwarzenegger has sent a letter asking the feds to reconsider, noting the cuts were taken in response to "an unprecedented fiscal crisis." Even now the state faces an estimated cash-flow problem of some $17 billion by July. Restoring the union money will require a two-thirds vote of the Legislature, a task in California somewhat akin to moving the Sierra Nevadas. Still, it's worth noting where the Obama team ranks the political authority of a legislative enactment by the state of California versus the political clout of a union. Come to your senses California. If you are dumb enough to pass Propositions 1A through 1F, expect yet another round of tax hikes to follow.

 

 

 

OTHER STORIES:

 

Consumer price drop is biggest since '55  - (money.cnn.com)  

Oil demand seen dropping at fastest pace since '81 - (finance.yahoo.com)

Treasury asks for control of derivatives market - (news.yahoo.com/s/ap)

GM whacks 1,100 dealers - (money.cnn.com)  

U.S. seeks crackdown on loosely regulated derivatives - (www.washingtonpost.com)

Slow Start to Federal Plan for Modifying Mortgages  - (www.nytimes.com)

NWeber, Kranjec Clash a Week After Trichet Calls Truce - (www.bloomberg.com)

Toyota Cuts Dividend, Forecasts Loss on Lower Sales - (www.bloomberg.com)

Spanish Economy Shrinks Most in 40 Years in First Quarter - (www.bloomberg.com)

 

Insurer to Treasury: No thanks on TARP  - (money.cnn.com)  

Chinese Stimulus, Lending May Drive Rebound as Exports Slide - (www.bloomberg.com)

Thriving Norway Provides an Economics Lesson - (www.nytimes.com)

U.S. Producer Prices Rose 0.3% in April as Food Costs Jumped - (www.bloomberg.com)

Jobless Claims in U.S. Increase More Than Forecast - (www.bloomberg.com)

Obama Administration Expands Housing Plan - (www.time.com)

 

Fewer will be flying - but expect full planes - (money.cnn.com)  

Wal-Mart posts flat quarterly profit - (www.reuters.com)

Banks Sue MBIA Over $5 Billion Restructuring - (www.cnbc.com)

SEC staff recommends civil fraud charges against Mozilo of Countrywide - (www.latimes.com)

As trucking goes, so goes the economy  - (www.msnbc.msn.com)

Stocks tumble at end of tough week | Oil falls - (money.cnn.com)  

25 jobs and a new road: A stimulus boost - (money.cnn.com)  

Monday May 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Lenny Dykstra facing foreclosure - (www.zillow.com) Say it ain’t so, Lenny. Almost a year ago, we did a post on former New York Mets and Philadelphia Phillies baseball player Lenny Dykstra and the glorious home he owns at 1072 Newbern Ct, Thousand Oaks, CA, which was on the market for $25 million. It was a dream story about how a scrappy infielder — not Hall of Fame quality, but just a good, tough player — parlayed his so-so sports career into an amazingly successful post-sports career. A 2008 New Yorker article on Dykstra describes him as a day trader who was starting a magazine called The Players Club, an exclusive magazine for pro athletes advising them how to spend their money wisely (here’s a scary first-person account of someone who worked for Dykstra at The Players Club). Dykstra also had a Maybach, a Gulfstream jet and this glorious home in Thousand Oaks that he purchased from hockey star Wayne Gretzky for $18.5 million. All in all, a pretty nice, lucrative life. Now, the NY Post is reporting that “Lienny Dykstra” is flat-out broke and facing foreclosure. According to the article, “The private-equity firm Index Investors filed foreclosure papers March 11 on Dykstra’s sprawling Thousand Oaks estate…” Also, Washington Mutual filed its own notice of default on his $12 million mortgage on March 18. To top it off, his jet has been impounded. According to Luxist, the home was on the market last year for $24.95 million and when it didn’t sell, it was lowered to $16.5 million. Now, the list price is back up to $25 million. Sotheby’s International has Dykstra’s listing.

Condo Auction Ends Abruptly Due To Low Bids - (Mish at globaleconomicanalysis.blogspot.com) Bids for condos at City Federal Condominium Auction Ends Abruptly Due To Low Bids. The owner of the City Federal condo tower abruptly halted an absolute auction of 20 units in the building after just 11 sold, saying the bids were too low. Condos that had been on the market for $239,000 to $935,000 ended up selling for $80,000 to $320,000. Atlanta-based Synergy Realty Services LLC exercised its right to end the auction at any time, even before the 20 condos National Auction Group had advertised it would be selling. A two-bedroom, two-bathroom condo on the 16th floor selling for $80,000 proved to be the last straw. Randy Herron, principal with Synergy, said he believes the auction generated interest in the building and hopes it will lead to more sales of condos at regular prices. Bobby Wells purchased the only penthouse to sell. He picked up the three-bedroom, three and one-half bathroom condo on the 23rd floor for $320,000, nearly one-third of the original asking price. "I didn't like that it ended because I was planning on buying some more," Wells said. "I am happy with the deal I got." Assuming the building is well maintained, $80,000 for a two bedroom City Federal Condo in a historic district in downtown Birmingham does seem like a bargain, especially for someone working in the downtown area. However, the hope that the "auction generated interest in the building [that will] lead to more sales of condos at regular prices" is a bit far-fetched. Who is going to offer $935,000 or even $635,000 for something that just sold for $320,000? There were plenty of bidders and I think every unit would have sold had the auction continued, so the floor may be in. However, it may take years before prices return to as much as 50% of what the owner thinks is "regular pricing".

Credit Card Issuer Advanta Has Huge Losses, Halts Lending - (Mish at globaleconomicanalysis.blogspot.com) The credit card industry is in huge stress and things are about to get worse. Please consider Advanta Halts Credit-Card Lending Amid Surging Losses. Advanta Corp., the issuer of credit cards for small businesses, will shut down accounts for its 1 million customers next month and seek to pay off securitized debtholders early as the recession pushes defaults higher. Lending will cease June 10 as part of a plan to preserve capital after uncollectible debt reached 20 percent on some cards as of March 31, the Spring House, Pennsylvania-based firm said yesterday in a statement. Advanta will use as much as $1.4 billion to pay investors as little as 65 cents on the dollar to buy back securitized credit-card loans. That would be the first so-called early amortization of a trust since 2003, according to JPMorgan Chase & Co. analyst Christopher Flanagan. “Early-amortization has been viewed as a catastrophic event for issuers,” Scott Valentin, an analyst at Friedman Billings Ramsey & Co., said today in a research note. “Given that all credit-card accounts in the trust will be shut down to future use, we expect losses to increase as the cards have substantially less utility to cardholders.” The company plans to use up to $1.4 billion to make cash offers to trust investors at a price of 65 percent and 75 percent of the debt’s face value. While the company has “no indication” if investors will accept that offer, the price is “relatively consistent with recent trading levels of the bonds,” Browne said.

Victoria Gotti’s house is in foreclosure - (www.nypost.com) MAFIA PRINCESS LOSING TV CASTLE TO FORECLOSURE AFTER STIFFING BANK OUT OF $650,000. Victoria Gotti's palatial Long Island estate -- which she and her sons once flaunted in the reality show "Growing Up Gotti" -- is now under foreclosure. Despite a vast fortune amassed by her late father, Gambino boss John "Dapper Don" Gotti, the flashy Mafia princess has skipped two years of loan payments and will lose her home in tony Old Westbury, according to court records. The 46-year-old former reality-TV star owes $650,000 to lender JPMorgan Chase -- a debt secured by a mortgage on the nearly $4.2 million mansion that she won in her divorce with ex-husband Carmine Agnello. "I was awarded full ownership of marital property . . . and all I inherited was a house with millions of dollars' worth of debt," Gotti told The Post yesterday. "This should finally put to rest all the government lies and rumors that I have $200 million buried in my back yard." The couple split in 2003, while Agnello was serving a prison stint for racketeering, and the grandiose, 6-acre home was deeded over to Gotti in 2005. But Gotti claims Agnello had secretly taken out an $850,000 loan in 1997 without her knowledge and has left her holding the bag. Not so, according to lawyers for the bank, who convinced judges with the Brooklyn Appellate Division that Gotti is crying wolf. Last week, the appeals court gave the bank a green light to start foreclosure proceedings and reversed a Nassau County judge's ruling that would have allowed Gotti more time to fight the case. "Good riddance," said one neighbor on Birch Hill Court, who asked not be identified. This isn't the first time Gotti has faced losing her house. Upon taking ownership of the house in 2005, Gotti immediately defaulted, and JPMorgan scheduled to auction off the estate that summer -- even as she and her three hair-gel-loving sons preened for the cameras for "Growing Up Gotti," which ran from 2004 to 2005 and was canceled after 41 episodes because of poor ratings. Gotti persuaded the bank to give her an extension on the mortgage with the condition that she would pay $200,000 by February 2006, at a rate of $25,000 each month. Court records show Gotti forked over an unspecified portion of the cash -- and then stopped paying. In the latest ruling, the appeals court granted JPMorgan's request for summary judgment and ordered Nassau County Supreme Court Justice Roy Mahon to appoint a referee to determine how much money is owed and whether the property can be sold in one lot. The estate, which Gotti once tried to sell at $4.8 million, is currently listed with Century 21 at $3.2 million, a source said. Since its reality-TV days, the estate's grounds have turned into an eyesore.

There’s the OUTRAGE: Riverside Man Booby-Traps Foreclosed Home - (mandelman.ml-implode.com) Here’s how the LA Times, in just a few brief paragraphs, reported the story today: “A 42-year-old Riverside man has been arrested on suspicion of setting up fake booby traps outside his foreclosed home, authorities said today. Former homeowner Daniel Gherman was booked on suspicion of attempting to assemble a device designed to cause great bodily injury and on four counts of assembling or possessing a facsimile explosive, officials said. The investigation is ongoing. A U.S. Bank representative was checking the house Tuesday in the 1400 block of Orange Street when he discovered several explosives outside the structure. Officers from the Riverside Police Department arrived about 2:45 p.m. and confirmed the explosives were made to look like pipe bombs, officials said in a statement. At least nine homes in the neighborhood were evacuated, police said.” There’s the “outrage,” AND, I’M AFRAID IT’S ONLY JUST BEGUN. “Former homeowner Daniel Gherman?” Now that’s a way to phrase something, don’t you think? That really encapsulates a man who got so angry, so enraged, so desperate to make a statement, and felt so powerless that he was willing to blow up his house and potentially kill unknown others… children, maybe. In January of this year, I wrote an article on MSNBC’s Newsvine titled: “Where is the Outrage,” which I have re-published below… because I think it’s important that my readers on ML-Implode see it. It asked the question and offered an answer. Where is the outrage over what’s being allowed to happen to millions of American homeowners? Why aren’t there people marching in the streets? I mean, here in LA there was marching in the streets over gay marriage being voted down, but millions losing homes… quiet as a church mouse. I asked the question because I’m a student of human behavior. And I know America and Americans… and we’re not a calm, serene, sit-back-and-take-it kind of people.

Foreclosures: 'April was a shocker' - (money.cnn.com) Foreclosures in April exceeded even March's blistering pace with a record 342,000 homes receiving notices of default, auction notices or undergoing bank repossessions, according to a regular industry report. One of every 374 U.S. homes received a filing during the month, the highest monthly rate that RealtyTrac, an online marketer of foreclosed properties, has recorded in four-plus years of record keeping. "April was a shocker," said Rick Sharga, a spokesman for RealtyTrac. "I would have bet on a dip because March foreclosures were so high. Instead, filings inched up 1% from March and rose 32% compared with April 2008. There were 63,900 bank repossessions, the last stop in the foreclosure process. More than 1.3 million homes have now been lost to foreclosure since the market meltdown began in August 2007. The increasing foreclosures will force RealtyTrac to rethink its forecasts, according to Sharga. "We had been predicting 3.4 million filings for the year," he said, "but we'll blow those numbers out of the water." The lion's share of April's filings were ones in the early stages of the process, such as notices of default, according to James Saccacio, RealtyTrac's CEO. Bank repossessions actually fell 11% for the month, compared with March. That's due, according to Saccacio, to the many legislative and company moratoriums that have prevented the foreclosure process from starting on delinquent loans. Because fewer loans entered the process in past months, there had been fewer getting all the way to repossession. But now that those moratoriums are over, the volume of foreclosure filings is increasing. "It's likely that we'll see a corresponding spike in [repossessed properties] as these loans move through the foreclosure process over the next few months," Saccacio said in a prepared statement. Ten states accounted for 75% of all foreclosure activity, and they fell generally into two categories: one-time bubble markets and the rust belt. California, which easily outpaced every other state with with 96,560 filings. Other hard-hit former boom towns were Florida, Nevada and Arizona.

As GM Bankruptcy Looms, Congress Faces Pressure - (www.cnbc.com) With General Motors planning to end production of Saturns and Pontiacs at its Delaware plant which employs more than 1,000 people, state leaders are scrambling to win new work at the facility or persuade the company to move other operations to the region. "This would appear on the surface to leave us in bleak circumstances," said U.S. Sen. Thomas Carper, a Democrat and former governor who helped save the 62-year-old Wilmington plant from closure in the early 1990s. "We're encouraging them not to close the plant. At some point, GM will need more capacity," Carper said in an interview with Reuters just weeks ahead of a June 1 deadline for GM to show a White House/Treasury task force overseeing industry restructuring that it can be viable without government aid. Failure to satisfy the task force would trigger bankruptcy where GM could try to finalize concessions. It is seeking givebacks from debtholders and the United Auto Workers and wants to more than halve its network of 6,000 dealers. GM plans to cut 21,000 factory jobs. Lawmakers deferred to the task force as smaller Chrysler spiraled into a bankruptcy court. But there has been a broader political response to GM over the past week since a second carmaker bankruptcy would compound Detroit's uncertainty and likely radiate economic anxiety beyond the industry's Midwest core.

Hard-drive giant slashes jobs - (money.cnn.com) Hardware manufacturer Seagate Technology said Wednesday that it would reduce its staff by 1,100 employees. Seagate (STX), based in Scotts Valley near Santa Cruz, Calif., said the reduction of 2.5% of its total workforce was part of an ongoing restructuring to bring its company into profitability by fiscal year 2010. The company's stock bumped up slightly in pre-market trading. Seagate, a manufacturer of hard drives and data storage appliances, said it was trying to bring its development, marketing and administration costs below $300 million per quarter. Through the reductions, the company intends to save $125 million annually. The company said that reductions would be "largely complete" by July, and would cost the company $72 million, primarily through termination costs. Earlier this year, the company announced salary reductions and the closing of a research facility in Pittsburgh, as well as two other facilities



OTHER STORIES:

American Idol star Fantasia Facing Foreclosure - (www.zillowblog.com) Media sites and bloggers were buzzing yesterday with word that Season 3’s American Idol winner, Fantasia Barrino, is facing foreclosure on her home at 5500 Bevington Pl, Charlotte, NC 28277. Word on the street is that the home will be auctioned off to the highest bidder for cash unless some last-minute agreement comes through. Zillow’s Zestimate for the home is $1.3 million and it is located in the Rain Tree neighborhood of Charlotte where the Zillow Home Value Index is $300,500 (at this writing).

AIG's Liddy grilled on repayment - (money.cnn.com)
U.S. moving ahead on bank oversight - (money.cnn.com)
Auto dealer cuts: Painful surgery - (money.cnn.com)
Behind Intel's $1.45 billion fine - (money.cnn.com)
Recession hits the safety net - (money.cnn.com)
Keeping the 401(k) faith - (money.cnn.com)
Beware a premature return to 'normal' - (money.cnn.com)

The Madoff Affair - (www.pbs.org)
House Prices in US Drop Most on Record in Quarter - (www.bloomberg.com)
San Diego house prices drop at quick pace - (www.signonsandiego.com)
San Francisco Sale "Over Asking Price" Conceals Actual Drop - (www.socketsite.com)
Even realtors see bigger CA house-price drops - (lansner.freedomblogging.com)
Atlanta house prices fall 25 percent in past year - (www.ajc.com)
Median house prices fall in 88 percent of cities - (www.sfgate.com)
Are Loan Modifications a Reality or Simply an Outlet for Hope? - (www.examiner.com)
Houseowners Turn to Renting, Waiting for Market to Recover - (finance.yahoo.com)
American Tenants Association Mission Statement - (www.americantenants.com)
Was It a Sucker's Rally? - (online.wsj.com)
Economists Downgrade US Recovery Outlook - (www.bloomberg.com)
Five Economic Storms Raging Now - (www.moneyandmarkets.com)
Bloated Empire and the Financial Crash - (www.consortiumnews.com)
Obama Targets Financiers to Close Loopholes in Tax Code - (www.bloomberg.com)
Housing Boom and Bust by Sowell - (article.nationalreview.com)
Freedom From Want as a Right - (www.miller-mccune.com)
Banks Brace for Credit Card Write-Offs - (www.nytimes.com)

Sunday May 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Senator Urges Discount For Retail Cash Payments - (www.nytimes.com) Democratic Senator Richard Durbin plans to introduce a measure allowing retail stores and restaurants to offer discounts to customers who pay with cash instead of a credit card. The measure is expected to be introduced in the Senate during debate on credit card reform legislation offered Monday by Senate Banking Committee Chairman Christopher Dodd. Legislative efforts are aimed at stopping credit card companies from imposing certain late fees, restricting retroactive rate increases, as well as other questionable billing practices and marketing to minors. With the backing of the committee's top Republican, Richard Shelby of Alabama, the full Senate is expected to pass Dodd's bill that allows credit card issuers to raise rates on balances that are 60 days late. The controversial issue centers on fees, called "interchange" fees, charged to merchants by banks for using the payment system provided by Visa Inc and MasterCard Inc. American Express Co provides merchants with its own payment system. It is at the heart of long-running dispute between banks and merchants who pay on average a 2 percent fee on credit card transactions. Durbin, an Illinois Democrat, said an establishment should be allowed to offer a discount if a customer pays by cash, check or a debit card to counter what he called a "hidden inflaters" in the cost of products paid by credit cards. "I don't think that's unreasonable," Durbin said on the Senate floor.

Chrysler bankruptcy may take up to two years: report - (www.reuters.com) Chrysler's bankruptcy may take as long as two years, instead of the two months that President Barack Obama suggested as a target, Bloomberg said, citing an administration official. The 60 days projected by Obama at an April 30 press conference announcing Chrysler's bankruptcy only applies to a sale of the automaker's best assets to a new entity, the official told the news agency. Creditors would then fight over unwanted factories and other assets to recover money, the news agency cited lawyers as saying. Chrysler has received bankruptcy court approval to proceed with a rapid sale of most of its assets to a new company held by Italy's Fiat SpA, a United Auto Workers union-aligned trust and the U.S. and Canadian governments.

Car dealers fight rapid closures; 180,000 workers could lose jobs - (www.usatoday.com) Car dealers from around the nation will be in Washington Wednesday to urge President Obama's automotive task force to let the economics, not the government, decide which car dealers should shut down, and when. The task force has been pushing General Motors(gm) to trim its dealer ranks faster than the several years originally planned as part of its overall restructuring. Speeding up that process will only dump 180,000 more workers onto unemployment rolls in a recession, the dealer group argues. John McEleney, president of the National Automobile Dealers Association, says he understands that fewer dealerships are needed. But since dealers are independent business owners and get little financial support from the automaker, he argues, they aren't adding to GM's financial problems. "We understand the realities of the marketplace, but we just think this is the worst time to be doing this," says McEleney, who says the delegation will include about 150 dealers. "By forcing the issue, it's going to have some real negative consequences in many communities, where dealers are the biggest private employers and are involved in the local communities supporting charities." GM, which is operating on $15.4 billion in U.S. loans, now plans to cut 2,600 of its 6,200 U.S. dealers in 18 months. In its original plan released in February, GM said it would cut 400 dealers a year until 2012. The administration said that was not fast enough. The task force also has pressed Chrysler to quickly trim its storefronts from 3,200 outlets, and that process now is being worked out in bankruptcy court. In filings with the court, Chrysler said about 50% of its dealers make up 90% of its sales. John Bowis, president of Chevy Chase Cars in Bethesda, Md., recently sent a letter to customers saying he would no longer sell Chevrolet vehicles, and instead will sell Nissans along with his current Acuras. The move was his decision, and gave him time to find a new automaker to work with. "I feel very fortunate that I got out when I did, because I'm very worried about my friends who are GM dealers," Bowis says. "It's going to be a tough road for them." Many dealers are looking at their options, trying to sign new franchise agreements, selling their stores or finding a way to wind down operations slowly, Bowis says. Forcing them to close too fast could create more problems than the auto task force anticipates, he says.

Medicare, Social Security Funds Worsen in Recession - (www.bloomberg.com) The financial health of Social Security and Medicare, the two main safety nets for American retirees and the elderly, is declining as the recession cuts payroll-tax contributions just as the baby-boom generation begins to retire. The Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast, the trustees said today. Spending on Medicare, the health insurance plan for the elderly, will reach a legal limit by 2014, the same year predicted in 2008, the trustees’ report said. The deteriorating position of the two funds puts pressure on Congress and President Barack Obama to come up with ways to cut costs and boost revenue for both. Obama yesterday said fixing the nation’s health-care system is an “imperative for America’s economic future.” “After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security,” Treasury Secretary Timothy Geithner said today in a statement. The trustees’ annual report also estimated that Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago.

College graduates struggle to repay student loans - (www.usatoday.com) Thousands of college graduates are facing a student loan crisis. The job market is shrinking, and the sour economy is preventing employers, parents and relatives from helping those who are behind on payments. Student loan defaults are at their highest rate since 1998, and likely will go higher. And though federal student loans offer some payment modification options, private loans are far more onerous, because even filing for bankruptcy rarely wipes out the debt. Congress might tackle bankruptcy law reform again this year, but it decided as recently as last year not to allow student loans to be easily discharged through bankruptcy filings. Without such an option, many college grads are saddled with debt and unable to buy a home or obtain other credit. That can leave them in some cases unable to pursue the careers they studied for because they must take low-paying jobs just to try to keep up. But lawmakers should move carefully on any reform, banking industry officials say. "If private student debt can be discharged in bankruptcy, that creates risk, and the result will increase the cost of tuition," says Scott Talbott, chief lobbyist for the Financial Services Roundtable. The cost of going to college or graduate school is rising. On average, the public college experience cost a student $6,585 this school year, up 6.4% from last year. Private tuition costs $25,143 on average, up 5.9%. Help for gamblers, but not for students: FinAid.org, a financial aid information source, says that two-thirds of four-year undergraduates leave college with debt. Graduate and professional students borrow $27,000 to $114,000. Bankruptcy law allows for discharges of credit card debt, car loans and even gambling debt, but not student loans. A student loan debtor must try to claim an "undue hardship" to seek bankruptcy protection — a claim that is successful at best about 50% of the time. Unlike a traditional bankruptcy filing, a hardship filing requires debtors to file a lawsuit against creditors. That pits the student against corporate lawyers and defense teams, and often requires an expert witness, which can cost the graduate thousands of dollars to arrange. "We're talking about people who are in bankruptcy because they don't have money," says Rafael Pardo, associate professor of law at Seattle University and co-author of a recent research report about undue hardship litigation. "Yet we're asking them, 'If you want relief, you have to find a way to pay for a full-blown lawsuit.' "

Obama may eliminate evil debt-mongers Fannie and Freddie! - (www.bloomberg.com) Options for overhauling Fannie Mae and Freddie Mac, the government-run mortgage-finance companies, may eventually include liquidating their assets, according to an analysis released today by the Obama administration. The Office of Management and Budget also projected today in its budget analysis for fiscal 2010 that the companies, which have received or requested $78.8 billion in aid since their federal takeover in September, will need at least $92.2 billion more. The Treasury Department doubled an emergency capital commitment for each company in February to $200 billion. The 2010 fiscal year ends Sept. 30, 2010. Alternatives range from “a gradual wind-down of their operations and liquidation of their assets,” to returning the two companies to their previous status as government-sponsored enterprises that seek to maximize shareholder returns while pursuing public-policy goals, according to OMB’s analysis of President Barack Obama’s proposed federal budget. “The last entities that are going to be set free will be Fannie and Freddie because they’re so key to the housing market,” said Bradley Hintz, an analyst at Sanford C. Bernstein & Co. in New York, in a phone interview today. The companies are coming under increasing strain as the Obama administration leans on them to help refinance and modify loans at risk of foreclosure amid the worst housing market since the Great Depression, Fannie Mae and Freddie Mac have said in securities filings. The government-sponsored enterprises pose a risk to the economy, though the federal takeover and Treasury backing have “substantially reduced” that threat, OMB said.

Former owners buy back foreclosed houses, much cheaper - (www.boston.com) Thomas Quinn did something that most people who lose their homes to foreclosure can only dream about: He bought back his family's Hyde Park house. Quinn, 48, a father of two teenage daughters, was forced to give up the deed to the 1920s bungalow last year after his wife died of cancer and he could no longer afford the payments on their subprime loan. But he refused to leave the property, outraged that his lender wouldn't rework the mortgage. And then, with the help of a local nonprofit, the fire pump salesman was able to repurchase his home and secure an affordable 30-year, fixed-rate mortgage nine months after the foreclosure. "I'm a happy homeowner again with a payment I can live with," he said. "It is saving me over $1,000 a month." Quinn is one of a small but growing group of former owners who are not only staying in foreclosed homes but are buying them back, with the help of nonprofit groups and housing advocates. And in some cases, they are getting their homes at significant discount the second time around, because real estate values have plunged. "We are in the process of helping a lot of people buy back their homes," said Zoe K. Cronin, a housing attorney for Greater Boston Legal Services. "There is not likely going to be another buyer. If there is someone willing to buy it back at a real value, that's probably the best option" for lenders, she said.

Ships Tread Water, Waiting for Cargo - (www.nytimes.com) To go out in a small boat along Singapore’s coast now is to feel like a mouse tiptoeing through an endless herd of slumbering elephants. Skip to next paragraphOne of the largest fleets of ships ever gathered idles here just outside one of the world’s busiest ports, marooned by the receding tide of global trade. There may be tentative signs of economic recovery in spots around the globe, but few here. Hundreds of cargo ships — some up to 300,000 tons, with many weighing more than the entire 130-ship Spanish Armada — seem to perch on top of the water rather than in it, their red rudders and bulbous noses, submerged when the vessels are loaded, sticking a dozen feet out of the water. So many ships have congregated here — 735, according to AIS Live ship tracking service of Lloyd’s Register-Fairplay in Redhill, Britain — that shipping lines are becoming concerned about near misses and collisions in one of the world’s most congested waterways, the straits that separate Malaysia and Singapore from Indonesia. The root of the problem lies in an unusually steep slump in global trade, confirmed by trade statistics announced on Tuesday. China said that its exports nose-dived 22.6 percent in April from a year earlier, while the Philippines said that its exports in March were down 30.9 percent from a year earlier. The United States announced on Tuesday that its exports had declined 2.4 percent in March. “The March 2009 trade data reiterates the current challenges in our global economy,” said Ron Kirk, the United States trade representative. More worrisome, despite some positive signs like a Wall Street rally and slower job losses in the United States, is that the current level of trade does not suggest a recovery soon, many in the shipping business say.




OTHER STORIES:

U.S. Stock-Index Futures Extend Losses After Retail Sales Slide - (www.bloomberg.com)
Treasuries Rise After Retail Sales Unexpectedly Fall in April - (www.bloomberg.com)
Sour commercial real estate loans threaten to hurt regional banks - (www.latimes.com)
US foreclosure programme may be insufficient - (www.ft.com)
OPEC Raised Oil Output for the First Time Since July - (www.bloomberg.com)
Japanese Housewives Lead $125 Billion Bet Against Yen - (www.bloomberg.com)
U.S. Considers Financial Pay Guidelines - (www.nytimes.com)
Records Show Billions Withdrawn Before Madoff Arrest - (www.nytimes.com)
European March Industrial Production Declines by Record 20.2% - (www.bloomberg.com)
ECB’s Weber Sees ‘No Need’ for Further Debt Purchases - (www.bloomberg.com)
Berlin backs toxic assets plan - (www.ft.com)
China’s Factory Output Grows Less-Than-Estimated 7.3% - (www.bloomberg.com)
U.S. Retail Sales Unexpectedly Fall for Second Month - (www.bloomberg.com)
Home Prices in U.S. Drop Most on Record in Quarter - (www.bloomberg.com)

U.S. MBA Mortgage Applications Index Fell 8.6 Percent Last Week - (www.bloomberg.com)
RealtyTrac: April foreclosures rise 32 percent - (news.yahoo.com/s/ap)
Taylor Says Fed May Not Have Much Time Before Rate Rise Needed - (www.bloomberg.com)
Prices of imported goods rise 1.6% in April - (www.marketwatch.com)
Intel hit with record $1.45 billion antitrust fine - (www.reuters.com)
Freddie Mac to Tap $6.1 Billion in Aid After Loss - (www.bloomberg.com)
Freddie Mac Loses $10 Billion for Quarter - (www.washingtonpost.com)
Health Care, a Lesson in Pain - (www.nytimes.com)
GM sinks to fresh low as Chapter 11 looms - (www.ft.com)
America’s triple A rating is at risk - (www.ft.com)

Saturday May 23 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Ford Shares Plunge, While GM Hits 76-Year Low - (www.cnbc.com) Investors dumped shares of both Ford Motor and General Motors on Tuesday, with GM hitting its lowest level since the Great Depression. Ford Motor dropped almost 9 percent a day after disclosing a public offering of 300 million shares of common stock that will help it fund its health care trust for retired autoworkers and their families. Meanwhile, shares of General Motors plunged nearly 20 percent to a 76-year low a day after a group of GM executives disclosed they had sold shares in the struggling automaker. Ford , the only major U.S. automaker that has not accepted government aid, said late Monday it will use the proceeds of the offering for "general corporate purposes" including funding its Voluntary Employee Beneficiary Association, or VEBA, with cash instead of stock. Dearborn, Mich.-based Ford owes $6.3 billion to its VEBA by the end of this year. In March, United Auto Workers members approved a new contract that, besides freezing wages and cutting benefits, allows Ford to use stock to make payments to the retiree health care trust. The public offering of common stock is a first for the 105-year-old Ford, which went public when the Ford Foundation liquidated its shares of the company in 1956. Since then, the number of shares has multiplied with employee stock options, stock splits and preferred stock offerings. Shares of Ford have enjoyed a strong rally in recent months, with some investors saying it is well-positioned to recover once the vehicle market improves. The company has also been picking up market share amid deeper problems at its crosstown competitors, Chrysler and General Motors. Chrysler filed for bankruptcy protection earlier this month, while GM is working to restructure out of court but may also face bankruptcy. The companies have received billions in government loans, which Ford has not asked for.

GM Executives Dump Stock - (www.cnbc.com) It's kind of like watching a car crash. You know it's sad. You know it's awful. But you can't stop looking at it. I'm not trying to be trivial about the plunge in GM shares this week. While it should not come as a surprise to anyone, it is still tough to see shares of the automaker slide to their lowest price since April of 1933. No wonder six GM executives have cashed out of their GM holdings. The six executives: Bob Lutz, Vice Chairman; Thomas Stephens, Vice Chairman; Ralph Szygenda, CIO; Troy Clarke, President; Gary Cowger, Group Vice-President; Carl-Peter Forster, GM Europe; I can't blame any of them for cashing out before GM shares drop any further. Whatever gains they made from their holdings are a small percentage of what their investment once represented.

Many GM, Chrysler Dealerships Are Facing Disaster - (www.cnbc.com) For months we've all heard the warnings. If GM and Chrysler go bankrupt it will trigger a host of other bankruptcies from suppliers to dealers. So far, Chrysler has not dragged the supplier base down and I think the Treasury Department's supplier support program should keep most of "at-risk" companies from sliding into Chapter 11. The same cannot be said for dealerships. This week, Chrysler and GM will notify about 3,400 dealerships they are being dropped. For some dealers it will mean closing distribution points while keeping another store or stores that sell Chevy, GMC, Chrysler, Jeep, etc. Those guys will survive being dropped. Their bottom line will take a hit, but they should have the resources to weather this storm. On top of that, their remaining dealer points should strengthen with less competition cannibalizing profits. The dealers who are worried, and for good reason, are those who will be completely dropped by GM and Chrysler. That in itself will mean a loss of revenue, access to captive financing, and marketing support that could push those dealers to the brink of bankruptcy. What could push many over the edge is the inability to service their debt payments. For them, this economic storm will turn into disaster if they can't pay loans they've taken out for their dealerships. This is the part of the dealer story that hasn't received much attention. Those close to the industry estimate up to 20 percent of the dealers are over-leveraged. They've borrowed heavily over the years to expand their businesses.

Enjoy the rally while it lasts - but expect to take a sucker punch - (www.telegraph.co.uk) Our delicious spring rally is nearing the limits. The 40pc rise on global bourses since March assumes that central banks have conjured away the debt overhang by slashing rates to zero and printing money. Nothing of the sort has occurred. Two thirds of the world economy will be in deflation by July. Bear market rallies can be explosive. Japan had four violent spikes during its Lost Decade (33pc, 55pc, 44pc, and 79pc). Wall Street had seven during the Great Depression, lasting 40 days on average. The spring of 1931 was a corker. James Montier at Société Générale said that even hard-bitten bears are starting to throw in the towel, suspecting that we really are on the cusp of new boom. That is a tell-tale sign. "Prolonged suckers' rallies tend to be especially vicious as they force everyone back into the market before cruelly dashing them on the rocks of despair yet again," he said. Genuine bottoms tend to be "quiet affairs", carved slowly in a fog of investor gloom. Another sign of fakery – apart from the implausible 'V' shape – is the "dash for trash" in this rally. The mostly heavily shorted stocks are up 70pc: the least shorted are up 21pc. Stocks with bad fundamentals in SocGen's model (Anheuser-Busch, Cairn Energy, Ericsson) are up 60pc: the best are up 30pc. Teun Draaisma, Morgan Stanley's stock guru, expects another shake-out. "We think the bear market rally will end sooner rather than later. None of our signposts of the next bull market has flashed green yet. We're not convinced the banking system has been fully fixed," he said. Mr Draaisma said US housing busts typically last nearly about 42 months. We are just 26 months into this one. The overhang of unsold properties on the US market is still near a record 11 months. He expects the new bull market to kick off later this year – perhaps in October – anticipating real recovery in 2010. Keep an eye on the upward creep in yields on the 10-year US Treasury, the benchmark price of world credit. This alone threatens to short-circuit the rally. The yield reached 3.3pc last week, up over 1pc since January and above the level in March when the US Federal Reserve first launched its buying blitz to pull rates down. Bond vigilantes are taunting the Bank of England in much the same way, driving the 10-year gilt yield to 3.73pc.

Economic downturn deepens in Baltics - (www.ft.com) Latvia’s economy shrunk by 18 per cent year on year in the first quarter – and by a staggering 28.7 per cent compared to the previous quarter – showing how the worst recession in the European Union is continuing to deepen. The once booming Baltic states of Latvia, Lithuania and Estonia have gone into reverse gear over the past year after foreign banks stopped funding an unsustainable consumer and real estate boom. Lithuania’s economy contracted by 12.6 per cent in the first quarter and Estonia is expected to announce on Wednesday that its gross domestic product plunged by between 14 per cent and 16 per cent. The Baltic states’ fall in output now looks likely to be worse than even during their rocky transition from the Soviet planned economy in the early 1990s. The decline has been worsened by the Baltic governments’ refusal to devalue their fixed exchange rates, forcing them to depress domestic demand to prevent a balance of payments crisis. At the end of last year Latvia – once the fastest growing economy in the EU – was forced to agree a €7.5bn IMF stabilisation plan to defend its currency peg; Lithuania is widely expected to follow it in the next few months. However, Latvia is struggling to keep its budget deficit to the level of 5 per cent of GDP agreed with the IMF because of the severity of the downturn, and doubts are growing that it will be able to stabilise its economy without devaluing its currency. All three Baltic countries are now being forced to make round after round of expenditure cuts as tax revenues collapse, depressing their economies even further and sparking political protests. Demonstrations in January helped to bring down Latvia’s unpopular government after one round of IMF-approved budget cuts. The new government now plans to make another austerity package next month to cut public spending by 40 per cent but even this will only bring the budget deficit down to 7 per cent of GDP. The IMF has halted disbursement of €200m in loans to Latvia until it sees more progress in cutting public spending, a move that also blocks euro1bn in EU assistance due to be paid out next month. The IMF is widely expected to agree to the higher deficit target and to disburse the second loan tranche. Otherwise it risks the collapse of the stabilisation plan, which could spark a chain reaction of devaluations throughout the Baltic states and beyond.

Behind the Bank Equity Blitz - (www.businessweek.com) Do bank stress tests and the latest round of capital-raising mean it's finally safe to invest in financial stocks? The last week has been a Rorschach test for investors. Bearish investors question the assumptions and results of government-conducted stress tests, which required top U.S. banks to raise billions in new capital. Bullish investors cite realistic hopes that this round of capital-raising could signal an end to the financial crisis. At first the bulls seemed to win the day, with financial stocks helping to lead the market higher last week. Then, on May 11, bank stocks gave up some of their gains. So is it really, finally, safe to invest in financial stocks? There's no doubt that something has changed. In just a few days, institutions from U.S. Bancorp (USB) and Wells Fargo (WFC) to Keycorp (KEY) and Capital One Financial (COF) have been able to raise billions—not from the government but from private investors. A long crisis of investor confidence appears to have ended, at least temporarily, from a combination of stress test results, a stabilizing financial and economic situation, and the passage of time. "It's showing investors are regaining some confidence in the banks," says Mark Batty, an equity analyst at PNC Capital Advisors (PNC). "That's a positive for the system overall." Still, bank stocks retreated on May 11 after a strong rally in the past two months that saw many financial equities double in price. Batty thinks an oversupply of new shares on the market may be to blame. Indeed, banks are offering equity shares not just because they were required to do so (by the results of government stress tests), but because they want to.

NYC subway, bus fares to go up on June 28 - (finance.yahoo.com) Mark your calendars: The price of a single bus or subway ride in New York City goes up by a quarter on June 28 to $2.25. Fares for the Long Island Rail Road and Metro-North Railroad will increase by about 10 percent on June 17. And tolls on the Metropolitan Transportation Authority bridges and tunnels will rise on July 12. The MTA board authorized the fare and toll hikes Monday after the state Legislature passed a rescue package last week that included higher fees and a payroll tax for employers in New York City and seven surrounding counties.

Negative Repo Rates Revive ‘Specials’ Trading, Barclays Says - (www.bloomberg.com) The emergence of sub-zero rates in the $7 trillion-a-day market to borrow and lend government debt since a new penalty system began has revived trading in the most sought-after Treasuries, according to Barclays Capital Inc. U.S. securities in scarce supply were traditionally traded in the repurchase market at so-called special rates, below the general charge that’s typically close to the federal funds rate. After the Federal Reserve cut its target rate to a range of zero to 0.25 percent in December, there was little room for specials. A new penalty on failed trades changed that by generating negative-rate trading, Barclays said. “Before the fails fee, when an issue became scarce, dealers would simply back away from the market and fail to make delivery, as repo rates couldn’t go below zero percent,” said Joseph Abate, a money-market strategist in New York at Barclays, in an interview. The firm is one of the 16 primary dealers that trade with the Fed. “Zero was not a market-clearing rate.” A negative repo rate means investors who lend cash in exchange for obtaining Treasuries as collateral pay interest instead of receiving it on the money they loan. It is currently a more appealing option that paying the 3 percent failed-trade penalty. In a repurchase agreement, one party provides securities as collateral to another in exchange for cash. When a security is not delivered as promised, the uncompleted trade is called a fail.

Schwarzenegger Tells Lawmakers Deficit May Swell to $21 Billion - (www.bloomberg.com) California’s budget deficit has grown so severe that Governor Arnold Schwarzenegger said he may be forced to release 40,000 prisoners or lay off 51,000 teachers if voters next week reject three budget balancing measures. The state’s projected deficit will swell to $15 billion between now and June 2010, Schwarzenegger told lawmakers late yesterday. Half the gap falls in the current fiscal year that ends in seven weeks. If voters reject plans to sell bonds backed by lottery profits and siphon tax receipts from tobacco and high earners already dedicated to special programs then the deficit would expand by another $6 billion. The ballooning deficit comes three months after lawmakers passed a package of spending cuts and tax increases to fill a record $42 billion shortfall and end a cash shortage that prompted officials to prepare to issue IOUs for the first time since the Great Depression. In the intervening months, tax revenue declined further along with the state’s economy. “The severe economic downturn that California, like the rest of the nation, has been facing has worsened substantially,” Schwarzenegger said in a letter to lawmakers. “These changes in the state’s economic and revenue pictures have caused a significant new budget problem to emerge.”

Far From Over - (www.nytimes.com) It’s a measure of just how terrible the economy has become that a loss of more than a half-million jobs in just one month can be widely seen as a good sign. The house is still burning down, but not quite as fast. I can understand why people are relieved that we no longer seem to be hurtling toward a depression, but beyond that I see very little to be happy about. The economy is in shambles. Nearly 540,000 jobs were lost in April, a horrifying number. The unemployment rate rose to 8.9 percent. Even the most optimistic observers expect the job losses to continue, although, hopefully, at a slower pace. The unemployment rate is expected to keep on climbing, like some monster from the movies, toward double digits. We are stuck in what is — or will soon be — the worst economic downturn since the 1930s. Newspapers and the U.S. auto industry are on life support. The employment picture for even the most well-educated Americans — men and women with four-year college degrees or higher — is the worst on record. If there is something about this economy to be cheerful about — something real — I wish someone would let me know. Poverty and homelessness are increasing and, as Lawrence Mishel, the president of the Economic Policy Institute, said during an interview this week, “There are a whole lot of people who are going to be economically desperate for many years.” Joblessness is like a cancer in the society. The last thing in the world that you want is for it to metastasize. And that’s what’s happening now. Don’t tell me about the stock market. Don’t tell me about the banks and their perpetual flimflammery. Tell me whether poor and middle-income families can find work. If they can’t, the country’s in trouble. One reason the employment losses slowed somewhat in April was that the government added 72,000 jobs, most of them temporary hires as part of the preparation for the 2010 Census. The private sector dumped 611,000 jobs. Moreover, the Labor Department revised the job losses for March upward, from 663,000 to 699,000, and for February, from 651,000 to 681,000. Some 5.7 million jobs have been lost since the start of the recession in December 2007.

Banks Brace for Credit Card Write-Offs - (www.nytimes.com) It used to be easy to guess how many Americans would have problems paying their credit card bills. Banks just looked at unemployment: Fewer jobs meant more trouble ahead. The unemployment rate has long mirrored banks’ loss rates on card balances. But Eddie Ward, 32 and jobless, may be one reason that rule of thumb no longer holds. For many lenders, losses are now starting to outpace layoffs. Mr. Ward, of Arkansas, lost his job at a retail warehouse in April and so far has managed to make minimum payments on his credit card debt, which he estimates at $15,000 to $20,000. Asked whether he thinks he will be able to pay off his balance, he said, “Not unless I win the lottery.” In the meantime, he said, “I’m just doing what I can.” Experts predict that millions of Americans will not be able to pay off their debts, leaving a gaping hole at ailing banks still trying to recover from the housing bust. The bank stress test results, released Thursday, suggested that the nation’s 19 biggest banks could expect nearly $82.4 billion in credit card losses by the end of 2010 under what federal regulators called an adverse economic situation.




OTHER STORIES:

Krugman fears lost decade for US due to half-steps - (www.reuters.com)
Banks Won Concessions on Tests - (online.wsj.com)
Snipping Credit Lines for Small Businesses - (www.businessweek.com)
Still Feeling Stressed - (www.nytimes.com)
California could be broke by July, state official warns - (www.latimes.com)

Gold Rises in London as Weaker Dollar, Higher Oil Spur Demand - (www.bloomberg.com)
U.S. Treasuries Decline as Data Show Recession May Be Easing - (www.bloomberg.com)
Crude Trades Above $60 on Speculation Recovery May Spur Demand - (www.bloomberg.com)
Copper, Pound Increase; Europe Stocks, U.S. Futures Pare Gains - (www.bloomberg.com)
U.S. Stock-Index Futures Rise as Citigroup Gains, Oil Hits $60 - (www.bloomberg.com)
Bank Stock Sales Add Billions in New Capital - (www.washingtonpost.com)

Indian Output Declines by Most in 16 Years Amid Slump - (www.bloomberg.com)
China’s Investment Surges 30.5%; Exports Decline - (www.bloomberg.com)
EU Bank Regulators to Conduct Confidential Stress Tests of Risk - (www.bloomberg.com)
China April Iron Ore Imports Rise 33% to Record Level - (www.bloomberg.com)
Mexico Debt Rating Outlook Cut to Negative by S&P - (www.bloomberg.com)
Russia Stockpiles the Gems, Awaiting the Return of Demand - (www.nytimes.com)
Trade Deficit in U.S. Widens for First Time in Eight Months - (www.bloomberg.com)

Despite Stimulus Funds, States to Cut More Jobs - (www.washingtonpost.com)
Economists Downgrade U.S. Recovery Outlook, Survey Indicates - (www.bloomberg.com)

Prices Fall To Match A New Frugality - (www.washingtonpost.com)
Citigroup: TARP loans near $45 billion mark - (news.yahoo.com/s/ap)
Bank of America Said to Sell $7.3 Billion CCB Stake - (www.bloomberg.com)
Dollar Rally Will End, Rogers Says; May Short Stocks - (www.bloomberg.com)
Swine Flu Is as Severe as 1957 Pandemic, Study Shows - (www.bloomberg.com)

Friday May 22 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Banks Blocking Way Out Of Foreclosure Crisis - (www.huffingtonpost.com) Brett Ellis, a real estate agent in Fort Myers, Fla., was thrilled when he got an offer for a property in Bell Tower Park in May 2008. "It was a gorgeous property on the corner lot," Ellis told the Huffington Post. The owner, who had lost his job, wanted to sell the apartment for a loss rather than go into foreclosure, a strategy known as a short sale. The offer was for $350,000, and Ellis, who is a certified distressed property expert trained in executing such sales, knew it was as good an offer as he was going to get in this market. He immediately sent the paperwork into the bank. He waited for four months. The bank finally told him it wouldn't take anything less than $400,000 -- a price Ellis was sure he could never get. In September, the buyer's agent called to say, "You know what, we gotta move on, we gotta buy something else." Now the property is sitting vacant as it slides into foreclosure. Its former owner's credit is destroyed, and the house is losing value every day. "God knows what the condition is today," Ellis said, adding he'd be surprised if the property is worth more than $290,000 when it resurfaces on the market. Add in the legal expenses involved in a foreclosure, and the bank cost itself a hundred thousand dollars more that it otherwise would have. It's a scenario that plays out constantly, everywhere in the United States. In a time of collapsing real estate values, where one in five homes are now under water, a short sale is increasingly the only option before foreclosure. It is less damaging to credit scores and spares the homeowner the shame of foreclosure. It is also a better option for banks: According to one analysis, short sales resulted in loan losses of only 19 percent, compared with an average loss of 40 percent on homes sold after foreclosure. So why aren't these sales more widely used? The broad answer is that the American financial system simply can't handle a collapse of this magnitude. The fates of the banking and real estate industries are intertwined. But they don't work together -- and the result is that they end up working against each other.

The hookers no longer cost too much: geopolitics and the price of prostitutes in the Baltic States - (brontecapital.blogspot.com) At least partly for effect I noted that one of the most important (perhaps the most important) export industries in Latvia has been tourism. And it is not any type of tourism – it has traditionally been sex tourism. Latvians are beautiful Scandinavian people (if you like that Northern European look). They also have a more Scandinavian sexual morality and they were relatively poor. This meant that Ryanair put on discount flights and filled them with salivating Irish and English lads. Swill beer on the Friday flight over. Party all weekend, soil the plane on the way home. You could not walk around Riga as a single English guy and not be thought of as a Ryanair sex tourist. The only problem is that the ridiculous exchange rate made the hookers very expensive. Ryanair canceled the Shannon/Riga flight (and the Irish lads now go to Prague). The London Riga flights are less full. There are plenty of complaints on the web about over-priced bars and rip-offs in Riga. The oldest and one of the most dependable of professions was – due the ridiculous exchange rate situation – just priced out of existence. Still markets are correcting in the end. Now that there is a Great Depression in Latvia there is price deflation. Lots of it. The faster the deflation happens the faster Latvia will again become competitive. [Hint to the IMF – just float the currency and deal with the consequences of the new exchange rate rather than try to defend the old rate.] Anyway the problem is that most industries have contractual arrangements which fix prices. Wages are very hard to flex downwards. Rents are fixed over sustained periods and the like. All of this means that people go bust rather than reduce prices – simply because prices are sticky. Well – most prices. The contractual terms of prostitution are short (an hour, a night) and entry to the industry is unconstrained. That means that the prices are very flexible. Extraordinarily flexible. The price – looking at websites I will not link for decency's sake – has fallen by at least two thirds in the past year – and the advertised price (for a non-English speaking young woman) is LVL30 – or less than 60 US dollars. I am sure the rip-offs are still there – but anecdotal evidence suggests the hookers no longer cost too much.

No, the Free Market Did Not Cause the Financial Crisis - (www.lewrockwell.com) In March 2007 then-Treasury secretary Henry Paulson told Americans that the global economy was “as strong as I’ve seen it in my business career.” “Our financial institutions are strong,” he added in March 2008. “Our investment banks are strong. Our banks are strong. They’re going to be strong for many, many years.” Federal Reserve chairman Ben Bernanke said in May 2007, “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” In August 2008, Paulson and Bernanke assured the country that other than perhaps $25 billion in bailout money for Fannie and Freddie, the fundamentals of the economy were sound. Then, all of a sudden, things were so bad that without a $700 billion congressional appropriation, the whole thing would collapse. In the wake of this change of heart on the part of our leaders, Americans found themselves bombarded with a predictable and relentless refrain: the free market economy has failed. The alleged remedies were equally predictable: more regulation, more government intervention, more spending, more money creation, and more debt. To add insult to injury, the very people who had been responsible for the policies that created the mess were posing as the wise public servants who would show us the way out. And following a now-familiar pattern, government failure would not only be blamed on anyone and everyone but the government itself, but it would also be used to justify additional grants of government power. The truth of the matter is that intervention in the market, rather than the market economy itself, was the driving factor behind the bust. F.A. Hayek won the Nobel Prize for his work showing how the central bank’s intervention into the economy gives rise to the boom-bust cycle, making us feel prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayek’s theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the quacks who blame the market for problems caused by the manipulation of money and credit. The artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end “in a crisis and a slump, and…worse than the slump itself may be the public delusion that the slump has been caused, not by the previous inflation, but by the inherent defects of ‘capitalism.’ Although my recently released book, Meltdown explains the process in more detail, an abbreviated version of Austrian business cycle theory might run as follows: Government-established central banks can artificially lower interest rates by increasing the supply of money (and thus the funds banks have available to lend) through the banking system. This is supposed to stimulate the economy. What it actually does is mislead investors into embarking on an investment boom that the artificially low rates seem to validate but that in fact cannot be sustained under existing economic conditions. Investments that would have correctly been assessed as unprofitable are falsely appraised as profitable, and over time the result is the squandering of countless resources in lines of investment that should never have been begun. If lower interest rates are the result of increased saving by the public, this increase in saved resources provides the material wherewithal to see the additional investment through to completion. The situation is very different when the lower interest rates result from the Fed’s creation of new money out of thin air. In that case, the lower rates do not reflect an increase in the pool of savings from which investors can draw. Fed tinkering, in other words, does not increase the real stuff in the economy. The additional investment that the lower rates encourage therefore leads the economy down a path that is not sustainable in the long run. Investment decisions are made that quantitatively and qualitatively diverge from what the economy can support. The bust must come, no matter how much new money the central bank creates in a vain attempt to stave off the inevitable day of reckoning.

Scammy Mortgage Program Resurfaces in Congress - (www.washingtonindependent.com) Seller-Funded Downpayments Created High Foreclosure Rates, IRS Deemed Them 'Scams'. A housing program blamed in part for high default rates on government-backed loans, derided as a “scam” by the Internal Revenue Service and targeted for years for elimination by the agency that ran it looked like it finally had reached its end this fall, after Congress finally banned it. But now, in a sign that some lessons of the housing crisis have yet to be learned, a movement is afoot to bring it back. The program is called seller-funded down payment assistance. When U.S. Department of Housing and Urban Development Secretary Shaun Donovan told Congress last month that dramatic growth in seller-funded down payment assistance programs in recent years had added to high default rates on Federal Housing Administration-backed loans, it might have seemed like the final blow. The programs, initially intended to help low and moderate income people buy homes, had long been under fire, the subject of complaints from HUD, the General Accounting Office, and the IRS. And with FHA default rates threatening to trigger yet another taxpayer bailout, policymakers have plenty of motivation to steer clear of any lending approaches deemed risky or problematic. But supporters of seller-funded down payment assistance aren’t giving up. Despite Donovan’s stance, they’re still supporting a bill to revive the program - a measure now before the House Financial Services Committee. Sponsored by Rep. Al Green (D-Tex.), the bill has 17 co-sponsors, among them powerful lawmakers such as Rep. Maxine Waters (D-Calif.). Backers include builders and realtor groups, the National Association of Mortgage Bankers, and the Congressional Black Caucus. Committee Chairman Barney Frank, D-Mass., told the Wall Street Journal last year he wants to reform the program, not kill it. And supporters are continuing to pressure HUD to preserve it. “We do agree there were problems with the previous program,” said David Ledford, senior vice president for housing policy at the National Association of Home Builders. “But we still support the legislation. HUD was somewhat at fault for not properly monitoring it. It can be done more carefully, and with tighter controls. But HUD is just throwing up its hands and saying things turned out badly and we shouldn’t do it at all.” But Ledford’s views aren’t widely shared by many in the mortgage industry, and they simply don’t reflect reality, according to the program’s numerous critics. FHA’s seller-funded down payment assistance should have ended years ago, given ample evidence of its problems, said Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda, Md. company that covers the lending industry. The GAO concluded that homes purchased using the programs were appraised at and sold for 2 to 3 percent more than comparable homes bought without the assistance. The IRS in 2006 revoked the tax-exempt charitable status of providers of seller-funded down payment assistance - and called the programs “scams.” HUD’s Inspector General and the FHA itself have complained the programs raise home ownership costs and lead to more foreclosures, saying homeowners using the assistance were two to three times more likely to default on payments than other borrowers.

Subprime Lending Is Back With a Vengeance - (www.minyanville.com) Just when you thought it was safe to go back in the water... Subprime lending has come roaring back. But this time, reckless financial innovation isn’t being hatched on Wall Street. Instead, state governments are angling to “monetize” first-time homebuyer tax credits so borrowers can purchase homes with little or no money down. If this sounds eerily similar to the type of lending practices that got us into this mess, well, it should. The federal government, as part of the recently passed economic stimulus package, will refund first-time homebuyers up to $8,000 if they meet certain eligibility requirements. The program is frequently cited as one of the myriad reasons a bottom in the housing market is imminent. Critics, however, argue that rebates don't end up in a buyer’s pockets until his or her 2009 tax returns are filed - even though rebates are credits, not just deductions. Homebuilders like Pulte Home (PHM), Lennar (LEN) and KB Home (KBH), along with their lobbying arm, the National Association of Homebuilders, have thrown their full weight behind the rebate program, but say it still doesn't go far enough. In an effort to boost home buying -- even for marginally qualified borrowers -- a number of states are finding creative ways to advance the tax credit to buyers on the day they get their new keys, rather than having to wait for next year's refund check. This allows buyers to pay for things like closing costs, mortgage points - or even the down payment. States are employing schemes whereby they offer prospective buyers low or no-interest loans for the amount of the tax credit, due upon of receipt of their money from Uncle Sam. If the borrower doesn’t make good, the loan becomes a junior lien on the property, with an interest rate that is far from usurious - usually just a bit over the prime lending rate.

New Hotels’ Big Expansion Plans Get Squeezed - (www.nytimes.com) When NYLO Hotels unveiled its loft-style hotel brand in 2005, the plan was to have more than 50 properties open by 2010. Ambitions were so high that the company announced another brand, XP by NYLO Hotels, in early 2008. But so far, just two NYLO hotels have opened their doors to guests — in Plano, Tex., and Warwick, R.I. — with a third scheduled to open in a community in Irving, Tex., in late June. NYLO is certainly not the only fledgling hotel brand struggling amidst the recession. Besides the decline in travel, the new brands have been particularly hit by the drying up of credit. NYLO’s troubles were compounded when its equity partner, Lehman Brothers, declared bankruptcy last September. According to Bjorn Hanson, who teaches hospitality at New York University, hotel companies introduced 42 new brands in the last four years, a big surge that has been drastically scaled back. “Whether they were announced or internal goals — like 500 hotels within five years — all of those targets have been ignored or so reduced,” Mr. Hanson said. “They’re just trying to get some properties up and running.” NYLO is a good example of that kind of stake-in-the-ground effort. “Our plan was always to grow by franchising,” said John Russell, NYLO’s chief executive. “We would do the first three to five hotels ourselves, then have a franchise platform to be able to grow aggressively.” Although Mr. Russell said NYLO had more than 40 franchises “in some form of development or negotiation,” he acknowledged that the company would be lucky to have 30 hotels open by the end of 2011. “It’s going to be slow because right now debt financing is almost nonexistent,” he said, though he was optimistic about the prospects for the XP brand, which is known as a select-service hotel, meaning it lacks some amenities, like a 24-hour restaurant. Mr. Russell estimated that an XP hotel would cost $12 million for a developer to build, versus $23 million for a full-service NYLO Hotel.

The Fed's GSE Tab: $248.3 Billion and Counting - (www.nationalmortgagenews.com) - The Federal Reserve Bank of New York has invested at least $248.3 billion in MBS and debt issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System, according to a budget addendum released Monday by the White House. The figure represents asset and debt purchases as of March 31. A spokeswoman for the New York Fed was asked to provide an updated figure for the end of April but at press time had not gotten back to National Mortgage News. The MBS (Fannie/Freddie guaranteed) bought by the government total $201.5 billion, with the debt at $46.8 billion. The debt number includes $11.1 billion in bonds issued by various FHLBs. In the new "Analytical Perspectives, Budget of the U.S. Government" the White House also discusses the future of the GSEs, mentioning — as one option — their dissolution.

OTHER STORIES:

I Would Not Own Bank Stocks: Meredith Whitney - (www.cnbc.com)

Oil Prices Back at $100 a Barrel? Not Likely, Traders Say - (www.cnbc.com)

Oil Tomorrow: What Energy Traders Will Watch Tuesday - (www.cnbc.com)

Are Investors Too Optimistic About Overseas Growth? - (www.cnbc.com)

GM CEO: Bankruptcy Likely; Firm May Leave Detroit - (www.cnbc.com)

General Motors to Let Go of Thousands of Dealers - (www.cnbc.com)

Ford to Sell 300 Million Common Shares - (www.cnbc.com)

Bill Would Let Credit Card Holders Return to Lower Rates - (www.cnbc.com)

Obama Wants Fed as Finance Supercriminal, uh, Supercop - (www.money.aol.com)

Taxpayers paid IOU triggered by Deutsche Bank's gambling losses - (www.patrick.net)

Despite Signs to the Contrary, Real Estate Will Get Worse - (www.time.com)

Stressing The Positive, Ignoring The Rest - (www.nytimes.com)

Government's mortgage debt subsidies create disaster - (www.city-journal.org)

Countrywide, KB accused of inflating house prices - (www.lasvegassun.com)

Court decision targets mystery closing fees - (www.latimes.com)

Validity of Zillow values questioned - (www.redding.com)

20% Underwater In Silicon Valley - (www.viewfromsiliconvalley.com)

Mortgage defaults grow in Toronto - (www.yourhome.ca)

How France is surviving the economic crisis - (www.economist.com)

America's Medical System Makes Fainting a $10,000 Malady - (www.miller-mccune.com)

Indicted ex-official gets $500,000 annual pension - (www.latimes.com)

Congressional Bailout Commercial - (www.youtube.com)

And Thus Capitalism Ended - (www.dilbert.com)

Thursday May 21 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Economic Casualties Pile Into Tent Cities - (www.usatoday.com) Jim Marshall recalls everything about that beautiful fall day. The temperature was about 70 degrees on Nov. 19, the sky was "totally blue," and the laughter from a martini bar drifted into the St. Petersburg park where Marshall, 39, sat contemplating his first day of homelessness. "I was thinking, 'That was me at one point,' " he says of the revelers. "Now I'm thinking, 'Where am I going to sleep tonight? Where do I eat? Where do I shower?' " The unemployed Detroit autoworker moved to Florida last year hoping he'd have better luck finding a job. He didn't, and he spent three months sleeping on sidewalks before landing in a tent city in Pinellas County, north of St. Petersburg, on Feb. 26. Marshall is among a growing number of the economic homeless, a term for those newly displaced by layoffs, foreclosures or other financial troubles caused by the recession. They differ from the chronic homeless, the longtime street residents who often suffer from mental illness, drug abuse or alcoholism. For the economic homeless, the American ideal that education and hard work lead to a comfortable middle-class life has slipped out of reach. They're packing into motels, parking lots and tent cities, alternately distressed and hopeful, searching for work and praying their fortunes will change. "My parents always taught me to work hard in school, graduate high school, go to college, get a degree and you'll do fine. You'll do better than your parents' generation," Marshall says. "I did all those things. … For a while, I did have that good life, but nowadays that's not the reality." Tent cities and shelters from California to Massachusetts report growing demand from the newly homeless. The National Alliance to End Homelessness predicted in January that the recession would force 1.5 million more people into homelessness over the next two years. Already, "tens of thousands" have lost their homes, Alliance President Nan Roman says. The $1.5 billion in new federal stimulus funds for homelessness prevention will help people pay rent, utility bills, moving costs or security deposits, she says, but it won't be enough. "We're hearing from shelter providers that the shelters are overflowing, filled to capacity," says Ellen Bassuk, president of the National Center on Family Homelessness. "The number of families on the streets has dramatically increased."

Experts say GM bankruptcy almost inevitable - (www.msnbc.msn.com) For General Motors Corp., the task at hand is so difficult that experts say a Chapter 11 bankruptcy filing is all but inevitable. To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business — all in three weeks. “I just don’t see how it’s possible, given all of the pieces,” said Stephen J. Lubben, a professor at Seton Hall University School of Law who specializes in bankruptcy. GM, which is living on $15.4 billion in federal aid, faces a June 1 government deadline to complete its restructuring plan. If it can’t finish in time, the company will follow Detroit competitor Chrysler LLC into bankruptcy protection. Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now is lining up majorities of stakeholders to make its court-supervised reorganization move more quickly. “If we need to pursue bankruptcy, we will make sure that we do it in an expeditious fashion. The exact strategies I’m not getting into today, but we’ll be ready to go if that’s required,” CEO Fritz Henderson said last week. The threat of bankruptcy, however, may be just a negotiating ploy to pull reluctant bondholders into the equity swap deal. In Chrysler’s case, some secured debtholders resisted taking roughly 30 cents on the dollar for what they were owed, but most gave in after they were identified in court documents. Henderson, who took over in March when the government ousted Rick Wagoner, said last week there’s still time to get everything done by the deadline, although he conceded it will be difficult to meet a government requirement that 90 percent of its thousands of bondholders agree to the stock swap. The biggest obstacle to GM restructuring out of court appears to be its bondholders, who have been reluctant to sign on to the stock swap when the government and United Auto Workers union would get far more stock in exchange for debts owed by GM. GM has proposed issuing 62 billion new shares, 100 times more than the 611 million now offered publicly. Even though the U.S. government has agreed to back up GM and Chrysler new-car warranties, potential car buyers already view GM as if it’s in bankruptcy, reflected by the company’s steep revenue drop in the latest quarter, Lubben said. On Thursday, GM posted a $6 billion first-quarter loss and said its revenue dropped plunged by nearly half, largely because bankruptcy fears scared customers away from showrooms.

Ambac Financial posts $392M loss in 1st quarter - (finance.yahoo.com) Bond insurer Ambac Financial Group Inc. said Monday it lost $392.2 million in the first quarter, a narrower loss than the year before, in part due to a rise in value in credit derivatives. Ambac lost $1.36 per share in the quarter that ended March 31. That compares to a loss of $1.66 billion, or $11.69 per share, a year earlier. Analysts polled by Thomson Reuters had expected a loss of 93 cents per share. Revenue moved into positive territory to $1.13 billion, improved from year-earlier negative revenue of $1.66 billion. Negative revenue usually occurs when a company is forced to reverse gains it recorded as revenue in an earlier period. Net premiums earned rose 5 percent to $196.8 million. Like others in its industry, Ambac was hit hard in the past two years by losses on its coverage of risky financial instruments such as mortgage-backed securities and has been working to reduce its exposure to such debt instruments. Ambac said its quarterly results included $279.7 million in pretax income from a rise in the value of credit derivatives.

GM ducks question about moving HQ - (www.freep.com) Is General Motors thinking about moving its corporate headquarters from Detroit? GM CEO Fritz Henderson didn’t rule out the idea today in a conference call with reporters. He stressed that there wasn’t a plan currently to do so but noted that the struggling automaker is looking at every idea to improve its business. “We’re looking, frankly, at everything within our business but it’s not like we have that queued up at the top of our list. As we look at the structure, look at the business, we’re looking at everything,” Henderson said. “At this point, I don’t really have anything to report. Our headquarters is here, we’ve got a fairly large complement of people here. And we’re proud to be here.” Henderson added: “We don’t have ... such plans but if we did, it would be motivated by business rationale, which would be cost, efficiency and speed.” The idea of moving GM’s headquarters out of Detroit seems to have emerged last week during a meeting between Warren Mayor Jim Fouts and Ed Montgomery, President Barack Obama's director of recovery for auto communities and workers. Fouts today told the Free Press that he brought up the proposal Friday during his talks with Montgomery and Gov. Jennifer Granholm. “General Motors is going to be looking to consolidate. They’re looking to collaborate, and obviously, they’re looking to save money. The GM Tech Center has everything you want — they have research, they have design, they have administrative offices,” Fouts said. “I pointed out to them that they just recently made an investment of $1.5 billion in new development at the Tech Center.” “It would seem to me that they would want to consolidate and move most of their facilities ... to Warren to save money,” the mayor added. He noted that Warren has provided $100 million in tax abatements to the Tech Center, which occupies about 1 square mile in the suburb, and the city does not have a city income tax. “We have some things to offer General Motors. We have no city income tax unlike our sister city to the south,” Fouts said of Detroit. “We have clean and safe neighborhoods.”

Treasuries Gain as Fed Buys Debt Amid Rising Mortgage Rates - (www.bloomberg.com) Treasuries rose as the Federal Reserve bought $3.51 billion of U.S. debt amid speculation the central bank will increase its purchases as rising yields send mortgage rates above 5 percent. Thirty-year bonds led the gains as the Fed bought government securities maturing between August 2026 and May 2038, the first of three buybacks this week as policy makers seek to lower consumer lending rates. The central bank bought $2.5 billion at its last buyback of securities of that maturity on March 30. The yield on the 30-year bond climbed last week to the highest since November after an auction of $14 billion of the securities suggested waning demand. Stocks fell. “As rates climb, it puts pressure on mortgage rates, which puts pressure on the Fed to buy back paper to keep rates lower,” said Theodore Ake, head of U.S. Treasury trading in New York at Mizuho Securities USA Inc., one of 16 primary dealers that trade with the Federal Reserve. The 30-year bond yield fell eight basis points, or 0.08 percentage point, to 4.20 percent as of 11:15 a.m. in New York, according to BGCantor Market data. The 4.25 percent security due in May 2039 gained 1 9/32, or $12.81 per $1,000 face amount, to 100 29/32. Ten-year yields fell eight basis points to 3.22 percent. Mortgage Rates: The Standard & Poor’s 500 Index lost 1.8 percent after an increase of 5.9 percent last week. Treasury 10-year yields have risen for seven consecutive weeks, the longest advance in five years, as President Barack Obama borrows record amounts to stimulate the economy and service a widening budget deficit. The government will sell $3.25 trillion of debt in the fiscal year ending Sept. 30, according to primary dealer Goldman Sachs Group Inc. Obama’s administration raised its estimate of the deficit this year to $1.84 trillion, up 5 percent from the February estimate, and to $1.26 trillion next year, up 7.4 percent. The administration also projected Obama’s budget for 2010 will end up at $3.59 trillion, compared with the $3.55 trillion it estimated previously.

Foreclosure looms for McAfee mansion in CO Springs - (www.denverpost.com) One of the Pikes Peak region's most star-studded home sales in recent years - the purchase of the sprawling mountain estate built by software pioneer John McAfee - is in danger of becoming one of its highest-profile foreclosures. Jeffrey "Patrick" Wu, a Chicago commodities trader who bought the property from McAfee at an on-site auction in May 2007, still owes about $3.2 million on a loan he took out to finance the $5.72 million purchase, according to a published notice by the Teller County Public Trustee's Office. A June 3 sale of the 280-acre compound, near Woodland Park, has been scheduled by the Trustee's Office in Cripple Creek, according to the notice. The estate, once McAfee's yoga retreat center and one of several residences he owned, includes a 10,000-square-foot main residence, with an entertainment center, three guest homes, nine cabins, four trout ponds, a horse paddock and unobstructed mountain views. McAfee, who gained fame as being one of the first to market antivirus computer software with the company that bears his name, reportedly spent $25 million to build the estate and spent more than 15 years filling it with collectibles from around the world. "People are curious, so we've had general-interest calls on the property, but nothing serious so far," said Pam Cronce, deputy public trustee.




OTHER STORIES:

U.S. Stocks Retreat From Four Month High on Valuations - (www.bloomberg.com)
Analysts Turning Bearish on S&P 500 After 14% Rally - (www.bloomberg.com)
Hedge funds cut fees for investors - (www.ft.com)
Banks Brace for Credit Card Write-Offs - (www.cnbc.com)
Credit-Card Reform Bill Goes Before Senate Later Today - (www.cnbc.com)
Shifting Their Energies - (www.nytimes.com)