Tuesday, August 31, 2010

Wednesday September 1 Housing and Economic stories



Las Vegas house values keep going down - (www.lvrj.com) Looking at this year's tax assessments, local property owners won't feel as if they have to stoop over and pick up that loose change on the ground. Better pick it up anyway. The long decline in home prices may lighten the tax load for Las Vegas homeowners, but it's also left 75 percent of them "underwater," or with negative home equity, meaning they owe more than their home is worth, First American CoreLogic valuation service reported. From Mount Charleston to Lake Las Vegas, every area of the valley has been hit hard, housing analyst Dennis Smith of Home Builders Research said. The median resale home price was $126,000 in June, a steep tumble from the peak of $285,000 in 2006, he reported. "I don't think there is one particular area that got hit the hardest," Smith said. "I would suggest it's almost subdivision to subdivision. You could look at the other side of the equation and say, 'Which owners are benefiting the most?'" Many property owners appealed before the state Board of Equalization and had their valuation and tax assessments lowered, even if it wasn't by the full amount they wanted, he said.

Banks to benefit most from White House effort to fight foreclosures - (www.thehill.com) Banks will get the biggest benefit from an Obama administration housing program designed to help unemployed homeowners escape foreclosure. Housing experts expressed concern that banks, not homeowners, will be helped by the White House's $3 billion funding infusion — $2 billion from the Treasury Department and another $1 billion from the Housing and Urban Development Department — going to those states hit hardest by the housing market crash and unemployment. "Giving money to the banks isn't what the government should be doing right now," said Dean Baker, co-founder of the Center for Economic and Policy Research. "I'm not a big fan; it's ill conceived," he said. The basic principle is to help struggling homeowners, but with so many people underwater on their mortgages, the new funding is unlikely to do much good, Baker said. "You need to make sure that someone benefits from the program other than banks," he said. Baker suggested that if the government is going to provide up to $50,000 in loans over the course of two years to those struggling homeowners that the money should be used for any of their needs, not just to pay the mortgage.

The Plutocracy Prevention Act - (www.thenation.com) A century ago this summer, Theodore Roosevelt gave his remarkable "New Nationalism" speech about the dangers of concentrated wealth and corporate power. After witnessing a decade of financial corruption and corporate malfeasance, Roosevelt called on the nation to "effectively control the mighty commercial forces which they have themselves called into being." Some of the tea party's anger at the tax system is justified. We can find common ground with open-minded activists. Part of his vision was a "graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate." Congress instituted an estate tax in 1916 that was in place until last January. For most of the last century, the estate tax was a single tax rate. A person with $5 million was taxed at the same rate as someone with $5 billion. A century later, a group of Senate progressives have heeded Roosevelt's call. On June 24, four US senators introduced the "Responsible Estate Tax Act," which includes a graduated rate structure that taxes billionaires at rates significantly higher than it does multimillionaires. Preliminary estimates indicate the proposed tax would generate $264 billion over the next decade. Led by Senator Bernard Sanders and joined by senators Sheldon Whitehouse, Tom Harkin and Sherrod Brown, the proposed estate tax reform would close loopholes, encourage conservation easements and exclude from the tax the minuscule number of small businesses that would otherwise be subject to the tax. This estate tax rate would range from 45 percent on estates under $10 million to a 65 percent "billionaire surcharge" on estates over $500 million ($1 billion for a couple). The timing is great, because the Senate may deliberate the future of the estate tax in July. Due to Senate inaction last fall, the estate tax expired last January 1. The absence of an estate tax for 2010 will cost an estimated $14.8 billion this year. Already, one Texas oilman, Dan Duncan, became the first billionaire in US history to die without any estate tax in place. Duncan was worth $9 billion and would have paid an estimated $4 billion in estate taxes.

Let's Use Tax Money To Subsidize Manhattan Luxury Condos! Good idea? - (www.bloomberg.com) Whitney Gollinger, marketing chief for a Manhattan condo building with an outdoor movie theater and panoramic city views, is highlighting a different amenity to spur sales: the financial backing of the federal government. The Federal Housing Administration agreed in March to insure mortgages for apartments at the 98-unit Gramercy Park development, known as Tempo. That enables buyers to make a down payment of as little as 3.5 percent in a building where apartments are listed at $820,000 to $3 million. “It’s a government seal of approval,” said Gollinger, a director at the Developments Group of New York-based brokerage Prudential Douglas Elliman Real Estate. “We need as many sales tools as we can have these days, and it’s one more tool.” The FHA, created in 1934 to make homeownership attainable for low- to moderate-income Americans, is now providing a lifeline to new Manhattan luxury condominiums after sales stalled. Buildings featuring pet spas, concierges and rooftop lounges are applying for agency backing to unlock bank financing for purchasers. The FHA guarantees that if a homebuyer defaults on his mortgage, the agency will pay it.


Housing Is Entering 'Double Dip': Economist Zandi - (www.cnbc.com)

July's Home Sales Have a Lot Stacked Against Them - (www.cnbc.com)

Cramer: 7 Changes to Bring Investors Back to Market - (www.cnbc.com)

Market Pros: If S&P Breaks 1010, Back To 878? - (www.cnbc.com)

Is Yahoo's Carol Bartz Running Out of Time? - (www.cnbc.com)

Let house prices shrink to affordable levels! - (www.market-ticker.org)

Phoenix house prices down - (www.azcentral.com)

Washington State house sales tumble - (www.columbian.com)

Government doesn't report number of houses held on bank's books - (www.cnbc.com)

Millions stay put, await foreclosure or help - (www.newsok.com)

US banks seizing houses at record levels - (www.telegraph.co.uk)

Houses lost to foreclosure up 6 pct from last year - (www.finance.yahoo.com)

US housing market statistics - (www.realestateconsulting.com)

Bubble Psychology and Lessons from History - (www.theautomaticearth.blogspot.com)

Thoughts of real estate double dip deter investors - (www.usatoday.com)

US 'Virtually Certain' to Fall Into A New Recession - (www.cnbc.com)

Hoenig calls Fed policy 'dangerous gamble' - (www.marketwatch.com)

Tax reform for the rich and ultra-rich - (www.newyorker.com)

Portable Housing, Made in Montana - (www.nytimes.com)

Philadelphia Housing Authority chief Carl Greene facing foreclosure - (www.philly.com)

Monday, August 30, 2010

Tuesday August 31 Housing and Economic stories



Stock Swing Still Baffles, Ominously - (www.nytimes.com) It sounds like “Wall Street” meets “The X-Files.” The stock market mysteriously plunges 600 points — and then, more mysteriously, recovers within minutes. Over the next few weeks, analysts at Nanex, an obscure data company in the suburbs of Chicago, examine trading charts from the day and are stunned to find some oddly compelling shapes and patterns in the data. To the Nanex analysts, these are crop circles of the financial kind, containing clues to the mystery of what happened in the markets on May 6 and what might have caused the still-unexplained flash crash. The charts — which are visual representations of bid prices, ask prices, order sizes and other trading activity — are inspiring many theories on Wall Street, some of them based on hard-nosed financial analysis and others of the black-helicopter variety. To some people, like Eric Scott Hunsader, the founder of Nanex, they suggest that the specialized computers responsible for so much of today’s stock trading simply overloaded the exchanges. He and others are tempted to go further, hypothesizing that the bizarre patterns might have been the result of a Wall Street version of cyberwarfare. They say high-speed traders could have been trying to outwit one another’s computers with blizzards of buy and sell orders that were never meant to be filled. These superfast traders might even have been trying to clog exchanges to outflank other investors. Jeffrey Donovan, a Nanex developer, first noticed the apparent anomalies. “Something is not right,” he said as he reviewed the charts.

Facing Budget Gaps, Cities Sell Parking, Airports, Zoo - (online.wsj.com) Cities and states across the nation are selling and leasing everything from airports to zoos—a fire sale that could help plug budget holes now but worsen their financial woes over the long run. California is looking to shed state office buildings. Milwaukee has proposed selling its water supply; in Chicago and New Haven, Conn., it's parking meters. In Louisiana and Georgia, airports are up for grabs. About 35 deals now are in the pipeline in the U.S., according to research by Royal Bank of Scotland's RBS Global Banking & Markets. Those assets have a market value of about $45 billion—more than ten times the $4 billion or so two years ago, estimates Dana Levenson, head of infrastructure banking at RBS. Hundreds more deals are being considered, analysts say. The deals illustrate the increasingly tight financial squeeze gripping communities. Many are using asset sales to balance budgets ravaged by declines in tax revenues and unfunded pensions. In recent congressional testimony, billionaire investor Warren Buffett said he worried about how municipalities will pay for public workers' retirement and health benefits and suggested that the federal government may ultimately be compelled to bail out states.

(Desperate) Bankers Pitch 100-Year Bonds - (online.wsj.com) Bond investors are buying almost anything the market throws at them. Now some bankers want to put those appetites to a full test. They have begun sounding out investors about 100-year bonds. Such long-term bonds are considered some of the most exotic available because they are issued only by the strongest companies—those that are expected to be around a century from now. Hundred-year bonds were in vogue in the mid 1990s and early 2000s, when a few dozen companies issued them. Most were bought in 1993, 1996 and 1997. But they remained relatively rare because companies have to pay a premium over 30-year bonds, typically the longest-dated asset. With interest rates now at some of their lowest levels in history, some companies are tempted to press for longer-dated paper, knowing that demand for corporate bonds is outstripping supply. Such bonds won't pay off their principal until 2110, a date so far that the people doing today's buying and selling will all be dead. The risk is that over the next century, interest rates will rise to a level that diminishes the value of the century bond. Given the vagaries of any market over 100 years, that is a near certainty.

Housing Fades as a Means to Build Wealth, Analysts Say - (www.nytimes.com) Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg. The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming. More than likely, that era is gone for good. “There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

LA unveils $578M school, costliest in the nation - (news.yahoo.com/s/ap) Next month's opening of the Robert F. Kennedy Community Schools will be auspicious for a reason other than its both storied and infamous history as the former Ambassador Hotel, where the Democratic presidential contender was assassinated in 1968. With an eye-popping price tag of $578 million, it will mark the inauguration of the nation's most expensive public school ever. "New buildings are nice, but when they're run by the same people who've given us a 50 percent dropout rate, they're a big waste of taxpayer money," said Ben Austin, executive director of Parent Revolution who sits on the California Board of Education. "Parents aren't fooled." The RFK complex follows on the heels of two other LA schools among the nation's costliest — the $377 million Edward R. Roybal Learning Center, which opened in 2008, and the $232 million Visual and Performing Arts High School that debuted in 2009. The pricey schools have come during a sensitive period for the nation's second-largest school system: Nearly 3,000 teachers have been laid off over the past two years, the academic year and programs have been slashed. The district also faces a $640 million shortfall and some schools persistently rank among the nation's lowest performing. Los Angeles is not alone, however, in building big. Some of the most expensive schools are found in low-performing districts — New York City has a $235 million campus; New Brunswick, N.J., opened a $185 million high school in January.


Bond Funds Gain Cash Like Stocks in Dot-Com Era: Credit Markets - (www.bloomberg.com)

Wall Street debates prospect of bond bubble - (www.usatoday.com)

Investors Shake Up Fund Industry With Record Bond Love Affair - (www.bloomberg.com)

European Services, Manufacturing Industries Slow - (www.bloomberg.com)

Blackstone Makes Big Move into Chinese Housing - (www.cnbc.com)

Morgan Stanley Research? There's an App for That - (www.cnbc.com)

China ex-adviser: priority is to prevent slowdown - (www.reuters.com)

Bernanke Must Raise Benchmark 2 Points in Latest Rajan Warning - (www.bloomberg.com)

BHP in Canadian Charm Offensive for Potash Bid - (www.cnbc.com)

Other Suitors Line Up for Potash? - (www.cnbc.com)

Hiring Spree Gets Long in the Tooth - (online.wsj.com)

Gilead Finds Possible Cocaine Addiction Treatment - (www.cnbc.com)

AIG's ILFC Unit Repaid Nearly $4 Billion of US Loans - (www.cnbc.com)

Sunday, August 29, 2010

Monday August 30 Housing and Economic stories



VIDEO: And Now We're Headed For The GREATEST Depression - (www.finance.yahoo.com) The fake "recovery" was nice while it lasted, says famous apocalyptic forecaster Gerald Celente, founder of the Trends Research Institute. But now the fun's over, and we're headed for what Celente describes as the "Greatest Depression." Specifically, the always startling Celente says the country is headed for rising unemployment, poverty, and violent class warfare as the government efforts to keep the economy going begin to fail. The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives. But now a collusion of state and corporate interests that Celente describes as "fascism" have conspired to help only the biggest companies and the richest Americans. This has put a shocking amount of the country's wealth in the hands of a privileged few and left the rest of the country to subsist on chicken-feed wages and low job satisfaction as Wal-Mart "associates" -- or worse. The answer, Celente says, is to bring back the laws that prevented huge companies from getting so big and powerful, and put some opportunity back in the hands of ordinary people. But doing that is going to take a while. And in the meantime, we're headed for trouble. (Celente's dead right about U.S. wealth inequality, by the way. It's shocking. And it's getting worse. For a quick overview, see "15 Mind-Blowing Facts About Wealth And Inequality In America)

Thousands Crowd Atlanta Area Housing Authority For Section 8 WAITING LIST, Fights Break Out (VIDEO) - (www.huffingtonpost.com) Officials now estimate that a crowd of 30,000 turned out, three times what they had originally anticipated. Some in attendance may have been accompanying actual applicants even if they were not applying themselves. 13,000 applications were handed out. The large numbers indicate a huge demand, but there is literally no supply. The housing agency director "stressed that none of her agency's 455 housing aid vouchers is available at the moment." According to the Atlanta Journal-Constitution, "Concern is rising that a similar scene could occur Thursday when the housing authority of this small city begins accepting the completed applications. Wednesday's event was only to hand out the paperwork. The housing authority will begin accepting applications at 9 a.m."

Here are the original videos:

· http://www.msnbc.msn.com/id/21134540/vp/38667261#38667261

· http://www.myfoxdc.com/dpps/money/Hundreds-Hope-for-Federal-Housing-Assistance-20100811-am-sd_9118102

More US Workers Tapping Pensions Early - (www.cnbc.com) A record number of U.S. workers are tapping into their retirement accounts to make it through the economic downturn, Fidelity Investments found in a survey released Friday. Among the 11 million workers whose 401(k) plans are run by Fidelity, 11 percent took out a loan from their plan during the 12 months ended June 30, the company said, up from 9 percent at the same point a year earlier. By the end of the second quarter, plan participants with loans outstanding against their 401(k) accounts had reached 22 percent versus 20 percent a year earlier. Hardship withdrawals were also on the rise, although in absolute terms remain quite low. During the quarter, 2.2 percent of Fidelity's active 401(k) participants took a hardship withdrawal, up from 2 percent a year earlier, and another peak, Fidelity said. Often those withdrawals were used to prevent foreclosure on a home or pay college tuition.

How to Be Frugal and Still Be Asked on Dates - (www.nytimes.com) Saving may be making a comeback, but it still hasn’t gotten its sexy back, particularly if you’re a man. Earlier this month, the Commerce Department reported that the personal savings rate in June was a much-improved 6.4 percent and that the number had risen as high as 8.2 percent in the depths of the stock market doldrums in the spring of 2009. Those who are single may not have been rewarded for their parsimony, though. Now comes some survey data from ING Direct, the people who would like you to save more money in their online savings accounts. In June, the company asked 1,000 people which words would come to mind if someone was fixing them up on a blind date with someone described as frugal. Just 3.7 percent answered “sexy,” while 15 percent picked “boring” and 27 percent chose “stingy.”

Wild Trading in Metals Puts Fund Manager in Cross Hairs - (online.wsj.com) Christopher Pia was the quintessential hedge-fund success story: a hard-charger from a working-class New York City neighborhood whose trading prowess earned him a top job at fund giant Moore Capital Management. He bought a sprawling house in Armonk, N.Y., and tooled around town in an orange Lamborghini. But his 18-year relationship with Moore Capital and its founder, hedge-fund tycoon Louis Bacon, came to an abrupt end in late 2008. Mr. Bacon forced out his onetime head trader, friend and protégé, and Mr. Pia launched his own fund. The story behind the rupture is only now surfacing, and it involves allegations of a kind of improper trading that regulators worry is becoming more widespread. The Commodity Futures Trading Commission is investigating whether Mr. Pia's trading at Moore involved market manipulation, according to a person close to the situation. Specifically, CFTC investigators are looking into whether Mr. Pia improperly tried to push up prices of platinum and palladium, possibly to boost Moore's returns and his own compensation, this person says. In late April, the CFTC filed a civil complaint against Moore claiming that an unnamed former portfolio manager attempted to manipulate prices in the futures markets. People familiar with the case say the former manager is Mr. Pia. Moore paid a $25 million fine to settle the matter, without admitting or denying wrongdoing, but the investigation of Mr. Pia is continuing. A spokesman for Mr. Pia declined to comment.

Greek crisis refuses to go away - (www.telegraph.co.uk) The European Commission has approved the next €9bn (£7.4bn) tranche of loans for Greece but the underlying economy continues to deteriorate as Greek banks suffer a record loss of deposits and output contracts at a quickening pace. A report by HSBC said banks had lost 8pc of their entire deposit base in the five months to May. "The Greek market has never, since the first data in 2001, experienced such attrition," said banking analyst Joanna Telioudi. While some withdrawals point to capital flight by wealthy Greeks, it is clear that households and companies are running down savings to make ends meet. The Athens Chamber of Commerce warned yesterday that its members are in "dire straits", with a majority facing a liquidity threat. Simon Ward from Henderson Global Investors said Greek lenders are covering their funding gap through loans from the European Central Bank (ECB), which reached a record €96bn in July. "The question is how much eligible collateral they have left to take to the ECB. It must be nearing the limits," he said. "What is worrying is that this is not just Greeks. Portuguese banks borrowed €50bn in July compared to €41.5bn in June. Together with Ireland and Spain they have borrowed €387bn from the ECB," he said. Oli Rehn, the EU economics commissioner, said Greece has achieved "impressive budgetary consolidation and swift progress with major structural reforms" , meeting the terms for a second loan under the €110bn rescue plan with the International Monetary Fund.


Western profits wilt on China's surging wages - (www.telegraph.co.uk)

Banks Stuck With Bill for Bad Loans - (www.nytimes.com)

Time is running out for the West - (www.telegraph.co.uk)

Factories in Philadelphia Area Unexpectedly Shrink - (www.bloomberg.com)

'Just a bad trend' - 500,000 jobless claims

Oil Falls to Six-Week Low on Signals U.S. Recovery Is Slowing - (www.bloomberg.com)

For a Change, U.S. Debt Is Staying in the U.S. - (www.nytimes.com)

Pellegrini Said to Return Money to Hedge-Fund Clients - (www.bloomberg.com)

Resource demand spurs M&A deal surge - (www.ft.com)

Coffee squeeze sends Arabica to 12-year peak - (www.ft.com)

Munis Rally Eighth Day as Weekly Sales Poised to Drop by Half - (www.bloomberg.com)

August M&A Augurs Revival as Companies Tap $3 Trillion of Cash - (www.bloomberg.com)

Weber Says ECB Should Plot Out Exit Strategy in First Quarter - (www.bloomberg.com)

China's Investing Turns to Neighbors - (online.wsj.com)

Weber Says Next ECB President Doesn’t Need to Be a ‘Diplomat’ - (www.bloomberg.com)

At Treasury, Geithner Struggles to Escape a Past He Never Had - (www.nytimes.com)

Paychecks to shrink because of higher health premiums - (www.washingtonpost.com)

Egg Recall Is Expanded Again - (www.nytimes.com)

Saturday, August 28, 2010

Sunday August 29 Housing and Economic stories



Four banks face big losses on repurchases - (www.reuters.com) The four largest U.S. banks could face as much as $42 billion in losses as they repurchase faulty mortgages from housing finance giants Fannie Mae and Freddie Mac, Fitch Ratings said on Wednesday. Total repurchases are based on the success of Fannie Mae (FMNA.OB) and Freddie Mac (FMCC.OB) proving their cases, but Fitch said it is concerned that more aggressive requests by the companies could expose banks to greater than expected losses. Under an "extremely adverse scenario," the pool of "at risk" loans for JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), Bank of America Corp (BAC.N) and Wells Fargo & Co could total $175 billion to $180 billion, Fitch said. Spokesmen for the banks declined to comment on the Fitch report, or had no immediate comment. Fannie Mae and Freddie Mac are pushing to recover losses on loans that failed to meet "representations and warranties," which state that loans sold into mortgage bond programs fit strict underwriting requirements. As the government-sponsored enterprises (GSEs) are life support from the U.S., repurchases would help offset the tens of billions of dollars being laid out by taxpayers. Banks have responded by increasing reserves for repurchases, but are also challenging the claims. Under an "adverse but less likely" scenario where Fannie Mae and Freddie Mac successfully put back 50 percent of bad loans and the banks can still recovery 50 percent of the assets' value, the institutions could lose $42 billion, Fitch said. If the GSEs put back 25 percent of the loans, the expected loss could be $17 billion, it said.

Mexico Under Siege - (online.wsj.com) A surge of drug violence in Mexico's business capital and richest city has prompted an outcry from business leaders who on Wednesday took out full-page ads asking President Felipe Calderón to send in more soldiers to stem the violence. 'Es momento de hacer un alto y decidir sobre la mejor forma de responder a las bandas de criminales que ... buscan establecer un nuevo parámetro de terror.' 'It's time to stop and decide the best way to respond to criminal bands ... looking to establish a new boundary of terror.' – Excerpt from newspaper ad by Mexican business leaders….

The growing violence in Monterrey, long one of Mexico's most modern and safe cities, is a sign that the country's war against drug gangs is spreading ever further from poorer battlegrounds along the border and into the country's wealthiest enclaves. Residents opened their newspapers Wednesday morning to find the ads taken out by Mexican business leaders, begging the government to send more military into the city. "Enough already," said the notice that ran in national and local papers, criticizing what it said was a slow response of police against "criminal bands that in every act look to establish a new boundary of terror." Later that day, the body of Edelmiro Cavazos, mayor of the Monterrey suburb of Santiago, was found beside a highway. Mr. Cavazos had been abducted Sunday night, the latest in a string of attacks against politicians in Mexico's north.

US banks receive Basel III boost - (www.ft.com) The committee in July made significant changes to the definition of what banks could count toward highest-quality “tier one” equity capital and effectively trimmed the amount of liquid assets they would be required to keep on hand. The banks had argued – and some regulators agreed – that a tougher package could impede the still-patchy economic recovery by crimping new lending. Two separate studies released on Wednesday by the Basel Committee and the Financial Stability Board, however, concluded that tightened capital and liquidity rules would have only a modest impact on world economic growth patterns if they were phased in over time, as planned. A one percentage point increase in bank tangible equity capital – capital that cannot be withdrawn in the event of a crisis – would lead to a 0.2 per cent average decline in global output, the studies found. Commentators on both sides of the Atlantic see the July changes to the Basel proposals, commonly known as Basel III, as a big victory for lenders.

SEC’s New Jersey Fraud Case Seen as Harbinger in Muni Crackdown - (www.bloomberg.com) The Securities and Exchange Commission’s fraud case against New Jersey may presage a wave of lawsuits seeking to crack down on misdeeds by public officials who raise money in the $2.8 trillion municipal bond market. New Jersey yesterday settled claims it didn’t disclose to investors that it failed to put enough cash into its two biggest pension plans when it sold $26 billion of bonds from 2001 to 2007. The case is the first SEC fraud charge against a state and follows the creation of a unit set up this year to focus on municipal securities and pension funds. “They will be looking for other cases,” said James Doty, a former SEC general counsel who’s now an attorney with Baker Botts LLP in Washington. “It’s a harbinger that they expect disclosure standards to be scrutinized and be increased.” SEC Chairwoman Mary Schapiro has pressed for tougher disclosure rules for municipal bonds, whose history as a safe investment has been jeopardized by dwindling tax collections, record budget deficits and rising defaults by state and local borrowers. Investment losses also left states $500 billion short of funds to cover promised pensions by mid-2008, even before the collapse of Lehman Brothers Holdings Inc. sent stocks tumbling, the Pew Center on the States said.

"Why I'm Not Hiring" - (online.wsj.com) The key phrase from the article is: When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits.

With unemployment just under 10% and companies sitting on their cash, you would think that sooner or later job growth would take off. I think it's going to be later—much later. Here's why. Meet Sally (not her real name). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She's been with us for over 15 years. She's a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay. Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally. Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security. When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits.


Basel Committee Says Bank Bond Investors Should Absorb Losses - (www.bloomberg.com)

China FX exchange says could add more currency pairs - (www.reuters.com)

Druckenmiller exit marks end of era - (www.ft.com)

Japanese step up foreign bond buys- (www.ft.com)

Nordics Face Housing Losses That May Spark Double Dip - (www.bloomberg.com)

Asian labour militancy on the rise - (www.ft.com)

Taiwan’s Economy Grows Faster-Than-Expected 12.53% - (www.bloomberg.com)

U.K. Posts Smaller Deficit in July Than Economists Forecast - (www.bloomberg.com)

Factories in Philadelphia Area Unexpectedly Shrink - (www.bloomberg.com)

Jobless Claims in U.S. Rose to Highest Since November - (www.bloomberg.com)

U.S. Budget Deficit Put at $1.066 Trillion in 2011 - (www.bloomberg.com)

Asian PC Makers Signal U.S. Consumers to Extend Spending Slump - (www.bloomberg.com)

Egg Recall Is Expanded After Salmonella Outbreak - (www.nytimes.com)

Intel to Buy McAfee - (www.bloomberg.com)

Talks Resume on Internet Traffic - (online.wsj.com)

Friday, August 27, 2010

Saturday August 28 Housing and Economic stories



Loan Mod Profiles: Delayed then Denied, Often Mistakenly - (www.propublica.org) Retired pastor David Moe describes the process of trying to get a loan modification -- only to be denied after more than a year -- as nothing short of "The Twilight Zone." "I keep waiting for Rod Serling to walk out and sit down in my living room," he says. Moe is one of more than 520,000 homeowners who have had trial modifications through the government's foreclosure relief program but have eventually been denied permanent modifications, according to Treasury Department data [PDF]. The program puts eligible homeowners in three-month trials, at which point their mortgage servicer determines if they qualify for a permanent modification. An additional 538,000 homeowners have been rejected for even trial modifications by the eight largest mortgage companies participating in the program. (The Treasury Department has not released program-wide data.) Program guidelines say homeowners can be denied for a number of reasons, including further reductions in income, missing trial payments or not being able to document their income. However, it appears that in many cases, servicer errors, such as losing paperwork and improperly calculating income, have caused denials.

U.S. Alleges Fraud in New Jersey Pension Funding - (www.nytimes.com) Federal regulators accused the State of New Jersey of securities fraud on Wednesday for claiming it was properly funding public workers’ pensions when it was not. The Securities and Exchange Commission said the action was its first ever against a state, and only its second against any government over the handling of a public pension fund. The city of San Diego was the first. The S.E.C. settled its civil complaint with New Jersey by issuing a cease-and-desist order, which the state accepted without admitting or denying the findings. The agency did not impose a financial penalty. The S.E.C.’s powers of enforcement against the states are tightly limited by states’-rights concerns and constitutional law, and it has standing to get involved only when there is a clear-cut case of fraud. Nor did the S.E.C.’s order name the bond underwriters whose job it was to vouch for the state’s financial statements. That raised the possibility that investors might decide to file suit. The action could also put pressure on other states and cities that have used various accounting maneuvers to portray their pension funds as healthier than they currently are. Actuaries have been raising questions, for example, about the plans Illinois has laid out for strengthening its pension funds.

Subsidies Cuts Worry Renewables Investors - (www.online.wsj.com) Salvador Guerra i Salamo can't sleep at night. "I fear that I can't pay back the bank loan. And this after I've honored my debts all my life," he says as he walks through the 2.1-megawatt Riudarenes II solar park near the Catalan city of Girona, in which his family owns a stake. His family has invested €7 million ($9 million) in solar parks, but now Spain's cash-strapped government is contemplating steep cuts to subsidies for renewable power, even for plants already producing power. Investors in these plants thought subsidies had been guaranteed by the government. Such cuts could push small businesses like Mr. Guerra's over the edge. In the years before the financial crisis of 2008, many European governments granted generous subsidies to boost their fledgling renewable-energy sectors and meet ambitious goals to reduce greenhouse-gas emissions: The European Union has set 2020 as the date by which 20% of its energy consumption will be met from renewable energy sources, helping it cut greenhouse-gas emissions by 20% compared with 1990 levels. But now, amid budgetary pressures and worries about high power prices eroding consumer spending, those governments are finding themselves forced to scale back that aid, causing pain for investors and the renewables industry. Mr. Guerra's venture into the solar industry started eight years ago, after he sold his stake in a beverage-distribution business and was looking for a low-risk sector in which to reinvest his capital. His then-15-year-old son, Pere, who in school had been studying photovoltaic power generation—which converts the rays of the sun into electricity using solar panels—persuaded him to invest part of the profits in solar installations and tap into Spain's lavish subsidy regime.

Zombie Love: Do Fannie and Freddie Provide Any Benefit to the U.S. Economy? - (www.irabankratings.com) Andrew Ross Sorkin wrote in the New York Times Monday about a conversation with Rep. Barney Frank (D-MA). He quotes the Chairman of the House Financial Services Committee as saying that the GSEs -- Fannie Mae and Freddie Mac -- are dead and no longer creating losses to taxpayers. Perhaps Chairman Frank misunderstands the nature of the zombie in the American economy, but we think not. Anthony Sanders at George Mason University says that GSEs not only pump-primed the housing market far beyond what the stated policy goals justified, but also caused more damage by actively helping to push up household leverage during the real estate boon. This aspect of the "benefit" of Fannie and Freddie is little understood publicly as it contradicted their stated underwriting policies. So just where is the benefit here Chairman Frank? "Fannie Mae CEO James Johnson said in Q3 1998 that they were going to ramp up homeownership when it was 66.8%," Sanders notes. "Now, it is 66.9%. So, after trillions of dollars, a housing bubble, a banking sector crash, and a 90%+ market share for Fannie, Freddie and the FHA, we are back where we started. Not to mention about $6 trillion in wealth destruction. Can we politely ask that the Feds please stop screwing up the U.S. housing market?" As Achim Duebel illustrates, the cost to the taxpayer of the continued existence of the GSEs far outweigh any benefit to society. Only an immediate decision to liquidate and close Fannie and Freddie and reduce and refocus public guarantees can end the damage, contrary to the public statements of Chairman Frank. Politicians such as Frank as well as the homebuilders and the rest of the Housing Industrial Complex are the real beneficiaries of the zombie housing GSEs. Still more significant to the U.S. economy and to taxpayers is the way in which Frank, other Congressional Democrats and state and federal regulators have come together to destroy the housing sector. The noxious mixture of ineptitude by the Federal Reserve Board in reacting to the financial crisis, combined with the refusal by the Fed and the Treasury under Secretary Timothy Geithner to restructure the largest banks, and new legal and regulatory limits on housing finance, has created a perfect storm for homeowners, consumers and politicians alike. The funny part is that neither Chairman Frank nor President Barack Obama get the fact that they have engineered their own political destruction.

Celebs with the worst money problems - (money.cnn.com) It's almost too easy to come up with a list of celebrities who have money problems. It seems that the more money celebrities have, the more problems they're likely to have with it. WalletPop compiled a list of the 10 celebrities with the worst money problems. Most are from incidents in 2010, although some had such large debts from the past that they couldn't be ignored. We may have missed a few, so search the Internet for your favorites and let us know in the comments section who else should make the list. Here is one example….

Jay-Z: $50 million: The rapper must be thankful he signed that $150 million music deal with concert promoter Live Nation. That money should come in handy as he tries to cover his $50 million loss on two Manhattan hotel projects that he bought in 2007, but has been unable to turn into J Hotels. Some reports have him spending $65 million on the property. Whatever the amount, it's been a losing proposition for Jay-Z. The housing market crashed, something even Jay-Z, born Shawn Carter, couldn't fix with the Midas touch he has had on his other businesses.


Higher taxes for the rich - how much will they pay? - (money.cnn.com)

The rich are suckers, too - (money.cnn.com)

Home builder mood sours - (www.news.yahoo.com)

Treasury Fixing Home-Finance Juggles Limitless Bailout, Economy - (www.bloomberg.com)

Manufacturing in New York Expands Less Than Forecast - (www.bloomberg.com)

Another Threat to Economy: Boomers Cutting Back - (online.wsj.com)

Growth Prospects Dim in U.S. After Retail Sales, Trade Reports - (www.bloomberg.com)

Federal Reserve Official Sees Chance of a New Boom-and-Bust Cycle - (www.nytimes.com)

Economists Want Policy Makers to Back Off Now - (online.wsj.com)

Higher airfares thwart vacation travelers - (www.usatoday.com)

Fed’s Effort to Bolster U.S. Recovery Fails to Calm Investors - (www.bloomberg.com)

American Airlines adds another fee! - (money.cnn.com)

Why I took Social Security early - (money.cnn.com)

Why your senator can't Skype - (money.cnn.com)

Hedge Fund Vet Druckenmiller Retiring After 30 Years - (www.cnbc.com)

Goodbye Iraq: Last US Combat Brigade Heads Home - (www.cnbc.com)

Stocks rally for second day in a row - (money.cnn.com)

Johnson & Johnson CEO plans quality shake up - (money.cnn.com)

How to Play the GM IPO and the Auto Industry - (www.cnbc.com)

Why Success Is Much Harder Now for Hedge Funds - (www.cnbc.com)

Why the U.S. may not be the next Japan - The Buzz - (money.cnn.com)

SEC sues New Jersey for fraud - (money.cnn.com)