Wednesday, November 7, 2012

Thursday November 8 Housing and Economic stories


TOP STORIES:

US sues BofA for $1bn over home loans - (www.ft.com) The US Department of Justice sued Bank of America for more than $1bn on Wednesday, alleging the bank committed civil fraud by selling defective home loans to US government-backed mortgage companies. The lawsuit said that Countrywide, the California-based mortgage originator that BofA bought in 2008, implemented a process called the “Hustle” to deal with loans at high speed without checking their quality. Thousands of loans were then sold to Fannie Mae and Freddie Mac, which guarantee most US mortgages, and later defaulted, the Justice Department’s lawsuit claims. “As described, Countrywide and Bank of America systematically removed every check in favour of its own balance – they cast aside underwriters, eliminated quality controls, incentivised unqualified personnel to cut corners, and concealed the resulting defects,” said Preet Bharara, US attorney for the southern district of New York. “These toxic products were then sold to the government sponsored enterprises as good loans.”

Robin Hood tax gains traction in Europe - (money.cnn.com) Supporters say the controversial move will raise billions of euros, by applying a small tax on transactions in financial markets. Robin Hood may not have roamed Sherwood Forest for hundreds of years, but fans of his "steal from the rich, give to the poor" ethos appear to have made inroads into European tax policy. The European Union's executive body said Tuesday that 10 members of the 27-nation group had agreed to move forward with a Financial Transaction Tax, also known as the Robin Hood tax. Supporters say the controversial move will raise billions of euros for cash-strapped governments by applying a small tax on transactions in financial markets. But critics say imposing the tax will drive investors away and act as a break on economic growth. Nobel Prize wining economist James Tobin first proposed taxing transactions in the foreign exchange market in the 1970s to limit volatility and curb speculation. The idea of taxing financial transactions more broadly really started to gain ground earlier this year, when former French President Nicolas Sarkozy began touting it as a way out of Europe's financial crisis.

Cheap Natural Gas Gives New Hope to the Rust Belt - (online.wsj.com) Three decades after being devastated by the closing of steel mills, this gritty river valley is hoping its revival will come from cheap natural gas. The hope doesn't rest on drilling rigs, but on a multibillion-dollar chemical plant that Royal Dutch Shell RDSB.LN +0.78% PLC is considering building here because of a flood of domestically produced natural gas. Community leaders are touting the plant as the first step toward reviving a manufacturing industry many thought was gone for good. "I never would have expected that as a region we'd have a second chance to be a real leader in American manufacturing," Bill Flanagan of the Allegheny Conference on Community Development, a regional business group, told a crowd of locals who came to hear about the chemical plant. "Suddenly we're back in the game." It isn't just Beaver County reaping the benefits of cheap gas. Plunging prices have turned the U.S. into one of the most profitable places in the world to make chemicals and fertilizer, industries that use gas as both a feedstock and an energy source. And they have slashed costs for makers of energy-intensive products such as aluminum, steel and glass.

Zynga doing layoffs, closing studios; Seattle intact - (www.seattletimes.com) Struggling social games giant Zynga is announcing sweeping layoffs and studio closures but it appears the company's engineering office in Seattle was largely spared. Word of the layoffs surfaced earlier and was confirmed in an internal memo to employees from founder Mark Pincus.  The memo said the company is cutting 5 percent of its full-time workers and closing its studio in Boston. That would be around 160 of its roughly 3,200 positions. Also proposed is the closure of studios in Japan and the United Kingdom. The company is phasing out 13 older games and cutting back investment in The Ville, leading to layoffs at its Austin, Texas, studio. Zynga's Seattle office is relatively safe because it's working on new game genres such as arcade titles, not the older franchises that are being trimmed back. Zynga opened the Seattle office in Pioneer Square last year and now has about 60 employees here. It was planning to expand the office, at least before the company lost some of its momentum. Facebook's earnings report confirmed the slide, disclosing that its revenue from Zynga were down 20 percent.

Eurozone debt hits 90 percent of its economy - (finance.yahoo.com) In spite of years of harsh spending cuts and tax increases, Europe's debt problems are getting worse. Figures from the EU's statistics office Wednesday showed that, at the end of the second quarter, the total government debt of the 17 countries that use the single currency was worth 90 percent of the group's total economic output for the year — the highest level since the euro was launched in 1999. The rise from the previous quarter's debt to gross domestic product ratio of 88.2 percent, and the previous year's equivalent of 87.1 percent, is a result of the eurozone's economic problems — which are making it harder for countries to handle their debts.





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