TOP
STORIES:
What
Percent of California’s State AND Local Budgets are Employee Compensa -
(www.unionwatch.org) Earlier this week UnionWatch posted an
analysis that estimated about two-thirds of California’s state budget covers
state employee compensation expenses. This was in response to a widely quoted
estimate that the number was only about 12%. Due to the huge disparity in these
claims, and the implications having the correct number may have on the debate
over public employee compensation, we decided to dig a little deeper. For
expert information, we talked with two individuals at the California
Office of Legislative Analyst, Jason Sisney, the Director of State
Finance, and Nick Schroeder, Public Employment and Fiscal Oversight. Both of
them confirmed that state government employees compensation consumes about 12%
of the state general fund budget. But the devil is in the details.
Why
Real Estate Everywhere Will Eventually Drop Over 50% - (www.seekingalpha.com) During 2005-2006, we
experienced a housing bubble in the United States which was accompanied by
valuations in many regions trading at more than twice their normal historic
levels. Today, we have similar housing bubbles in many countries with prices
that are at twice or thrice their typical valuations relative to rents,
incomes, and most other standard-of-living benchmarks. An important question is
what will happen with neighborhoods which are experiencing highly elevated
housing prices. There are numerous theories, with some analysts suggesting that
prices will simply move sideways for a decade or more until inflation and an
increasing population eventually causes valuations to return to normal without
having to actually decline. Others have projected dramatic collapses for real
estate. Obviously this is a significant question, since the last global
recession was largely caused by the demise of the U.S. housing bubble and its
impact on mortgage-backed securities which led to the bankruptcy of Lehman
Brothers and ultimately a global credit crisis.
Pension
Plans Increasingly Underfunded at Largest Companies - (www.nytimes.com) AFTER years of poor
investment returns, the pension funds of the United States’ largest companies
are further behind than they have ever been. The companies in the Standard
& Poor’s 500 collectively reported that at the end of their most recent
fiscal years, their pension plans had obligations of $1.68 trillion and assets
of just $1.32 trillion. The difference of $355 billion was the largest ever,
S.& P. said in a report. Of the 500 companies, 338 have defined-benefit
pension plans, and only 18 are fully funded. Seven companies reported that
their plans were underfunded by more than $10 billion, with the largest
negative figure, $21.6 billion, reported by General Electric.
Crackdown
proposed on tax-dodge sellers - (www.ft.com)
Sales people promoting
abusive tax dodges will be forced to hand over client lists, under proposals
aimed at cracking down on those who “artificially and aggressively” reduce
their tax bills. The Treasury is also considering extending the financial
services mis-selling rules to penalise advisers who market schemes that clearly
do not work, as part of new measures aimed at prising open schemes and warning
taxpayers of the
risks of aggressive avoidance. The
crackdown is being floated in a consultation paper launched on
Monday aimed at “lifting the lid” on avoidance schemes. The initiative,
promised in the Budget, comes in the wake of a public outcry last month over
reports of tax planning by celebrities such
as Jimmy Carr, a comedian.
HELOC
abusers and lenders face day of recast reckoning - (www.ochousingnews.com) … During the initial years of
home equity credit lines, borrowers must pay only interest. Borrowers can also
pay down principal if they wish, but many homeowners, short on cash, haven’t
done so. At Wells Fargo, for example, in the quarter ended March 31, some 44
percent of the bank’s home equity borrowers paid only the minimum amount due. Being
required to pay only the interest on these loans has made them easier for
troubled borrowers to carry. But these easy terms are about to get tougher.
What’s known as the initial draw period for home equity lines of credit is
coming to an end for many borrowers. Soon, they will have to pay principal as
well. That is the definition of a recast. The problem with these loans isn’t
resetting to a different interest rate. With today’s record low rates, that
would not be a problem. The issue is recasting to fully amortizing payments,
and that will increase the repayment burden on all borrowers. This will be
devastating to the Ponzis because in our weak economy and conservative lending
environment, they don’t have other sources of borrowing to cover the payments.
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