Tuesday, November 30, 2010

Wednesday December 1 Housing and Economic stories



The Appraisal Racket - (www.slate.com) At the height of the housing bubble, 90 percent of residential real estate appraisers—the people who decide whether the house you made the winning bid on is really worth what you're about to pay—reported feeling pressured, frequently by mortgage brokers, to increase their estimate of the property's true value so that the deal could go through. The value of your house serves as the collateral for your mortgage; it's the only thing the bank has left if you don't pay up. Given this reality, you might think that the crash of the housing market would make it easier for appraisers to do their jobs without interference. But while there have been some big changes in the appraisal business, many appraisers say privately that things have gotten worse, not better. And while the Dodd-Frank financial reform bill, which President Barack Obama signed into law this past summer, made a well-intentioned effort to fix the problem, there's reason to fear that it won't. Appraisers have long been the mopes of the U.S. home loan industry. In other countries, such as Mexico, you have to be an architect or an engineer to make home appraisals; here, you just have to get a license, the requirements for which are not at all onerous. One appraiser says that in international forums, he's seen the Chinese laugh as the U.S. requirements are translated.

Owner of NY's Lipstick Building files bankruptcy - (www.reuters.com) The owner of the Lipstick Building, the Manhattan office tower where Bernard Madoff ran his Ponzi scheme, filed for bankruptcy protection, becoming the latest victim of a downturn in commercial real estate. Metropolitan 885 Third Avenue Leasehold LLC filed its Chapter 11 petition on Tuesday. Royal Bank of Canada (RY.TO), its main lender, sued in June to force a sale of the property following a default on a $210 million loan. Under the prepackaged reorganization, a new entity known as New Lipstick LLC would be created, and pledge its entire ownership stake to the Canadian bank, court records show. Completed in 1986, the 34-story Lipstick Building gets its name from its elliptical shape, which resembles an open lipstick tube, and red granite exterior. It was designed by the architects Philip Johnson and John Burgee, and is one of midtown Manhattan's most recognizable buildings.

California will default on its debt says Chris Whalen - (www.finance.yahoo.com) Municipal bonds have plummeted in recent days, as investors have suddenly focused on huge state and city budget deficits that there's no easy way to fix. Nowhere has this collapse been more visible than California, which faces a massive $25 billion shortfall and red ink for as far as the eye can see. After years in which every looming financial crisis has been met with a government bailout, you might think that the same solution awaits California, as well as all the other states that have huge obligations that they can't afford to meet. But this time that may not happen, says Chris Whalen, a financial industry analyst and Managing Director of Institutional Risk Analytics. In fact, Whalen thinks that California will default on its debt--hammering all the pension funds and other investors who have loaded up on apparently safe state bonds. The state won't immediately default, Whalen says. It will start by issuing the same sort of IOUs that it issued to by itself time during its budget crisis last year. But, eventually, the debts will have to be restructured, and this will result in those who own California's bonds receiving less than 100 cents on the dollar. Why won't California just get a bailout? Because the Republicans now control Congress, Whalen says. And also because, if California gets bailed out, dozens of other states will immediately line up with their hands out. The public is fed up with bailouts, Whalen says--and eventually, the country will be forced to face up to its bad debts and write them off.

Europe Fears That Debt Crisis Is Ready to Spread - (www.nytimes.com) European officials, increasingly concerned that the Continent’s debt crisis will spread, are warning that any new rescue plans may need to cover Portugal as well as Ireland to contain the problem they tried to resolve six months ago. Any such plan would have to be preceded by a formal request for assistance from each country before it would be put in place. And for months now, Ireland has insisted that it has enough funds to keep it going until spring. Portugal says it, too, needs no help and emphasizes that it is in a stronger position than Ireland. While some important details are different, the current situation feels eerily similar to what happened months ago in Greece, where the cost of borrowing rose precipitously. European authorities stepped in with a rescue package, expecting an economic recovery and the creation of new European rescue funds to fend off future panics by bond investors whose money is needed by countries to refinance their debt.

Is the gold bubble about to go manic? - (www.marketwatch.com) NovaGold Resources Inc. (NG 14.65, +0.05, +0.34%), the small mining stock with huge gold deposits in Alaska, is suddenly going vertical. The shares, which were below $10 a couple of weeks ago, rocketed to nearly $15 last week. I’d been wondering when it would move. I highlighted NovaGold here as an investment opportunity back in July. At the time, it was $6.35. I also mentioned the January 2010 $5 call options, which were $2.85 per share. Anyone who bought the stock has already more than doubled his or her money; anyone who bought the options has more than trebled it. It’s great when things go right. One of the downsides of my job is that I am not, of course, permitted to invest in stocks I recommend. So I sincerely hope many of you took a wager on NovaGold and have made some money. Please let me know! I hate to see opportunities wasted.


Dodd: Robo-signing the tip of the iceberg - (www.marketwatch.com)

Consequences of Mortgage Irregularities for Financial Stability... in Plain English - (www.minyanville.com)

Sarkozy Under Pressure as France Feels Irish Heat - (www.bloomberg.com)

Is Europe Coming Apart Faster Than Anticipated? - (gonzalolira.blogspot.com)

Choose a label for yourself - (www.political masturbation) - (www.theadvocates.org)

It's Back! H.R. 3808 Interstate Recognition of Notarization Act of 2010 - (www.4closurefraud.org)

Foreclosure Renewal: A New Housing Mess? - (www.zacks.com)

S&P predicts more house price declines through 2011 - (www.housingwire.com)

House Prices Will Keep Falling - (www.cnbc.com)

Southern California housing market weakens in October - (www.latimes.com)

Legal maneuver can help when lenders refuse to pay dues - (www.articles.latimes.com)

Commercial Real Estate: Slow-Mo Cliff-Dive Gathers Speed - (Charles Hugh Smith of www.oftwominds.com)

Monday, November 29, 2010

Tuesday November 30 Housing and Economic stories



Judge stops state's plan to claim $80 million
- (www.njherald.com) A federal judge has put a temporary stop to New Jersey’s plan to generate up to $80 million from unused gift cards, calling cards and money orders. As part of the state budget, lawmakers passed a bill allowing the state to claim proceeds of gift cards if customers don’t use them within two years. The state would claim funds from inactive travelers’ checks and money orders after three years. The judge’s restraining order keeps the law from being enforced until a hearing can be held. The law was set to go into effect earlier this week, but several companies challenged the constitutionality of it, including the American Express Travel Related Services Co., the New Jersey Retail Merchants Association, the New Jersey Food Council and American Express Prepaid Card Management Corp. Gov. Chris Christie will have to come up with $80 million elsewhere if the law is struck down. Treasury spokesman Bill Quinn said the administration was reviewing the ruling. Quinn said no estimate was available on how much money the state would miss out on while the court has the law on hold. Assemblyman Paul Moriarty applauded the ruling, saying that the law was akin to a tax increase. “The sole reason for this law is to generate revenue for the state’s coffers at the direct expense of consumers and businesses in New Jersey,” said Moriarty, D-Turnersville. Moriarty has introduced a measure to exempt calling cards from the law “to ensure this horrendous law doesn’t adversely affect those who rely on telephone cards,” such as soldiers.

Michigan Town’s Bankruptcy Bid a Harbinger, Governor-Elect Says - (www.bloomberg.com) Michigan Governor-elect Rick Snyder said a Detroit suburb’s effort to enter bankruptcy is an “early indicator” of the depth of financial trouble faced by hundreds of communities in the state. There are “wealthy communities that are not in that different a position” from Hamtramck, said Snyder, a Republican who is a former computer-company executive. “They simply haven’t had the day of reckoning arrive yet that is liable to happen in the next two or three years, with the way property tax revenues are going,” Snyder said yesterday in an interview at the Republican Governors Association meeting in San Diego. Hamtramck, a former Polish-American enclave that adjoins Detroit, sought the approval of Michigan treasury officials last week to file for Chapter 9 bankruptcy, the Detroit Free Press reported. The city warned that a tax dispute with Detroit means that it faces a deficit of at least $3 million and will run out of money by Jan. 31, the newspaper said. Chapter 9 bankruptcywould let the city extend debt maturities, reduce principal or interest or to refinance, according to the Administrative Office of U.S. Courts. Democratic Governor Jennifer Granholm said Nov. 17 that bankruptcy is a poor option for the city and proposed state loans or a bond authorization to keep it afloat. Hamtramck officials plan to seek a meeting with Michigan’s treasurer to press the idea, the Bond Buyer reported yesterday.

Mayor Proposes Eliminating City Pensions - (www.voiceofsandiego.com) As time runs down in San Diego Mayor Jerry Sanders' tenure, his proposals to solve the city's financial crisis are becoming more drastic. This summer, he embraced a tax hike. Friday, he proposed 401(k)-style retirement accounts for most new city employees, and in turn, eliminating their pensions. Staring him and everyone else in the face is a $70 million-plus ongoing deficit, one that neither a tax increase or a pension elimination will fix. The tax hike won't work because voters said no. The pension elimination, which also needs voter approval, won't save any money for years and wouldn't go on a ballot until next year at the earliest. Sanders has two more years to solve the financial problem he was elected to fix. Friday, he recommitted to the task. "I won't pass the structural deficit on to the next mayor," Sanders said. As he tries to fulfill that pledge, Sanders' proposals include the familiar: All the reforms tied to the Proposition D tax hike. They include the major: Consolidating departments and potentially privatizing the city's airports and golf courses. And they include the minor: Ending free trash pickup for 18,000 homes on privately owned streets and using more energy-efficient bulbs in street lights.

Unions Yield on Two-Tier Wage Scales to Preserve Jobs - (www.nytimes.com) Organized labor appears to be losing an important battle in the Great Recession. Even at manufacturing companies that are profitable, union workers are reluctantly agreeing to tiered contracts that create two levels of pay. In years past, two-tiered systems were used to drive down costs in hard times, but mainly at companies already in trouble. And those arrangements, at the insistence of the unions, were designed, in most cases, to expire in a few years. Now, the managers of some marquee companies are aiming to make this concession permanent. If they are successful, their contracts could become blueprints for other companies in other cities, extending a wage system that would be a startling retreat for labor.

US banks face $100bn Basel III shortfall - (www.ft.com) The top 35 US banks will be short of between $100bn and $150bn in equity capital after the new Basel III global bank regulations are imposed, with 90 per cent of the shortfall concentrated in the biggest six banks, according to Barclays Capital. The BarCap study assumes the banks will need to hold top quality capital equal to 8 per cent of their total assets, adjusted for risk. This 8 per cent tier one capital ratio, a key measure of bank strength, provides a one point cushion against falling below the effective global minimum of 7 per cent set in September by the Basel Committee on Banking Supervision. The Basel III reforms will hit banks in two ways – by gradually tightening the definition of what counts as tier one capital; and by forcing banks to increase the risk adjustment for big swathes of their businesses. Banks can respond by increasing their capital through retained earnings or equity issuance or they can cut their risk-weighted assets through sell-offs and by cutting back on risky business lines.


U.S. nearing end of major insider-trading probe - (www.washingtonpost.com)

California Sells Build America Bonds at Yields Above Corporates - (www.bloomberg.com)

U.S. Said to Probe Possible Insider-Trading Networks, WSJ Says - (www.bloomberg.com)

Pay of Latin American bankers soars - (www.ft.com)

U.S. in Vast Insider Trading Probe - (online.wsj.com)

Junk-Bond Boom Takes a Timeout - (online.wsj.com)

Europe Welcomes Irish Request for Assistance - (www.bloomberg.com)

Ireland Seeks Rescue for Banks as EU Struggles to Stem Contagion - (www.bloomberg.com)

Ireland $164B rescue in works: UK Sunday Times - (www.marketwatch.com)

Focus of Concern Shifts to Irish Banks - (www.nytimes.com)

Irish Talks Intensify as Banks Lose Deposits, Cowen Campaigns - (www.bloomberg.com)

China’s twilight economy boosts inflation - (www.bloomberg.com)

Importing Coal, China Burns It as Others Stop - (www.nytimes.com)

Price rises put Beijing on alert- (www.ft.com)

Ireland paves the way for bail-out - (www.ft.com)

Brazilian aircraft builder Embraer diversifies for down market - (www.washingtonpost.com)

Beware return of QE2 and animal spirits - (www.ft.com)

States Raise Payroll Taxes to Repay Loans - (online.wsj.com)

Calif. jobless rate unchanged at 12.4 pct in Oct. - (www.businessweek.com/ap)

Home BancShares Buys Florida Lender as 3 More U.S. Banks Fail - (www.bloomberg.com)

Trying to Put a Price on Bank Errors - (www.nytimes.com)

Sunday, November 28, 2010

Monday November 29 Housing and Economic stories



Ireland's young flee abroad as economic meltdown looms - (www.guardian.co.uk) Many young people are seeking to emigrate rather than face a life of hardship as the republic lurches towards financial collapse. Student Niamh Buffini works hard and plays hard. As Ireland's No 1 taekwondo martial arts practitioner – she is rated 12th in the world – her ambitions include winning Olympic gold for Ireland. But by the end of this month her future will have been decided by forces not just beyond her control but seemingly those of her government also. Ireland is on the cusp of insolvency. Some economists argue that it already is. Buffini will soon learn if her fees at the Institute of Technology in Tallaght, south Dublin, have climbed beyond her means. Her father is a self-employed builder, which has recently become a euphemism for "unemployed". "My class size will have dropped by 50% by next year," Buffini said. "Even lecturers took part in the recent student protests over fees because society here is going to be left with very few educated people. My best friends have already left – they're doing bar work in Spain and Australia." Last week was not a good week for Ireland. Speculation about a European Union-backed bailout pushed its borrowing costs to unprecedented heights.

Ron Paul will have Congressional Federal Reserve oversight - (money.cnn.com) Ben Bernanke has had his hands full since his first day on the job as Federal Reserve chairman nearly five years ago. It's about to get even tougher. His harshest critic on Capitol Hill, Rep. Ron Paul of Texas, is about to become one of his overseers. With the Republicans coming to power, Paul, who would like to abolish the Fed and the nation's current monetary system, will become the chairman of the House Subcommittee on Domestic Monetary Policy. If you've never heard of the committee before, you're not alone. But Paul promises you'll be hearing a lot more from it. "It's basically been a committee that's dealt with commemorative coins. I'm going to deal with monetary policy," he said.

What Are The Elites Holding Over Us? - (www.lewrockwell.com) What is it that the elites hold over the average American citizen? Answer: financial literacy. The elite class in America knows the language of finance, banking, currency and economics. Because American schools leave students financially illiterate, even after graduating from college, they cannot properly manage their money and must rely upon the often self-interested misdirection of financial advisors, stock brokers, and bankers. For example, most financial counselors recently advised their clients against withdrawal of funds from their 401(k) tax-deferred accounts, given that there are penalties for early withdrawal. The result: most 401(k) accounts lost 30% or more of their money. Now withdraw your money from those tax-deferred accounts, taking a 10–20% penalty, and you have sliced your retirement fund in half.

Taking Aim at the Mortgage Debt Subsidy - (www.nytimes.com) By proposing to curtail the tax deduction for mortgage interest, the president’s deficit commission is sounding an alarm. The home mortgage deduction is one of the most widely used and expensive tax subsidies. More than 35 million Americans claim it, and the federal government estimates it will cost the Treasury $131 billion in forgone revenue in 2012. Its size, popularity and link to the emotionally charged American notion of homeownership has made it so politically sacrosanct that there are serious doubts whether Congress will even entertain the idea. But by raising the specter of ending one of the most cherished tax breaks, the commission is trying to jar the public into recognizing the magnitude of the nation’s budget deficit and some of the drastic steps that might be needed to close it. Because the mortgage interest is one of a limited number of tax breaks available to middle-income Americans, the commission’s proposal has also rekindled a debate about how much of the pain of deficit reduction should be borne by the middle class.

Jim Grant on a possible return to the gold standard - (www.nytimes.com) BY disclosing a plan to conjure $600 billion to support the sagging economy, the Federal Reserve affirmed the interesting fact that dollars can be conjured. In the digital age, you don’t even need a printing press. This was on Nov. 3. A general uproar ensued, with the dollar exchange rate weakening and the price of gold surging. And when, last Monday, the president of the World Bank suggested, almost diffidently, that there might be a place for gold in today’s international monetary arrangements, you could hear a pin drop. Let the economists gasp: The classical gold standard, the one that was in place from 1880 to 1914, is what the world needs now. In its utility, economy and elegance, there has never been a monetary system like it. It was simplicity itself. National currencies were backed by gold. If you didn’t like the currency you could exchange it for shiny coins (money was “sound” if it rang when dropped on a counter). Borders were open and money was footloose. It went where it was treated well. In gold-standard countries, government budgets were mainly balanced. Central banks had the single public function of exchanging gold for paper or paper for gold. The public decided which it wanted.


With good jobs going away, middle class downsizes - (www.mcclatchydc.com)

Canada's coming housing bust - (www.money.cnn.com)

Australia's "Negative Gearing" Exposed -- from June - (www.unconventionaleconomist.com)

America's real mortgage rates - (finance.fortune.cnn.com)

Gold Prices Get Slaughtered, Settle Lower - (www.finance.yahoo.com)

Who Will Stand Up to the Superrich? - (www.nytimes.com)

Projections remain grim for future U.S. foreclosures - (news.xinhuanet.com)

Victims and Martyrs of the Housing Bubble - (www.irvinehousingblog.com)

All the banksters are chillin', cuz we robbed your punk asses for $700 billion - (www.dailybail.com)

The Tidal Forces Ripping Europe Apart - (www.gonzalolira.blogspot.com)

Fed's ability to influence market may be over - (www.msnbc.msn.com)

Fed official sounds buyout bubble alarm - (www.news.yahoo.com)

Japan's and China's quantitative easing examples - (www.doctorhousingbubble.com)