Tuesday, July 31, 2012

Wednesday August 1 Housing and Economic stories


Cities are considering a housing solution that makes investors furious - (www.businessinsider.com)  In the foreclosure-battered inland stretches of California, local government officials desperate for change are weighing a controversial but inventive way to fix troubled mortgages: Condemn them. Officials from San Bernardino County and two of its cities have formed a local agency to consider the plan. But investors who stand to lose money on their mortgage investments have been quick to register their displeasure. Discussion of the idea is taking place in one of the epicenters of the housing crisis, a working-class region east of Los Angeles where housing prices have plummeted. Last week brought another sharp reminder of the crisis when the 210,000-strong city of San Bernardino, struggling after shrunken home prices walloped local tax revenues, announced it would seek bankruptcy protection.

Analysis: Banks behave badly redux: Is it killing confidence? - (www.reuters.com) It wasn't supposed to be like this. After the worst financial crisis since the Great Depression almost took the global economy over a cliff, tough new regulations and stronger internal controls at the world's major banks were meant to help restore confidence in the financial system. But recent headlines have some top investors and strategists questioning whether there has been any progress at all. The horror stories include the deepening scandal that big banks rigged Libor, the benchmark international lending rate; JPMorgan Chase's (JPM.N) mounting losses from disastrous credit bets and a possible cover-up attempt; and the disappearance of customer funds from Iowa futures broker PFGBest, discovered after its founder tried to commit suicide and left a note outlining a 20-year fraud.

JPMorgan Blaming Marks On Traders Baffles Ex-Employees - (www.bloomberg.com) JPMorgan Chase & Co. (JPM)’s assertion that traders at its London chief investment office may have intentionally mismarked trades, masking losses that total at least $5.8 billion, makes little sense, according to former executives with direct knowledge of the unit’s operation. The bank restated first-quarter results, paring profit by $459 million, in part because an internal review revealed that U.K. traders had priced their books “aggressively,” Mike Cavanagh, head of Treasury & Securities Services, said in a July 13 meeting with analysts. The mispricing made losses on a portfolio of credit derivatives look smaller than they were, and executives concluded that traders may have sought to hide the “full amount of losses,” JPMorgan said in a presentation. JPMorgan requires traders to mark their positions daily so the firm can track their profits, losses and risk. An internal control group double-checks the marks against market prices monthly and at the end of each quarter, said three former executives from the CIO and a senior executive in market risk. The firm uses the control group’s prices, not what individual traders submit, to calculate earnings, making it difficult for one trader or trading desk to rig prices, the people said.

Worst-in-Generation Drought Dims U.S. Farm Economy Hopes - (www.bloomberg.com) A worst-in-a-generation drought from Indiana to Arkansas to California is damaging crops, rural economies, and threatening to drive food prices to record levels. Agriculture, though a small part of the $15.5 trillion U.S. economy, had been one of the most resilient industries in the past three years as the country struggled to recover from the recession. “It might be a $50 billion event for the economy as it blends into everything over the next four quarters,” said Michael Swanson, agricultural economist at Wells Fargo & Co. (WFC) in Minneapolis, the largest commercial agriculture lender. “Instead of retreating from record highs, food prices will advance.” The U.S. Department of Agriculture declared July 11 that more than 1,000 counties in 26 states are natural-disaster areas, the biggest such declaration ever. The designation makes farmers and ranchers in affected counties -- about a third of those in the entire country -- eligible for low-interest loans to help manage the drought, wildfires or other disasters.

German Court Won’t Rule on Bailout for 8 Weeks in Delay for Fund - (www.bloomberg.com) Germany’s top court will take more than eight weeks to decide whether to suspend the euro-area’s permanent bailout fund, leaving Europe’s anti-crisis coffer less than half full to respond to the debt crisis. The Federal Constitutional Court in Karlsruhe will issue a ruling on bids to halt Germany’s participation in the European Stability Mechanism and the fiscal pact on Sept. 12, it said today in an e-mailed statement. That’s more than two months after it held a hearing on the measures.  “The court has held a comprehensive hearing on the issue and will now take the time it needs to reach a decision,” German government spokesman Steffen Seibert told reporters in Berlin today. Finance Minister Wolfgang Schaeuble warned the hearing last week that a delay in activating the ESM “could lead to a significant worsening” of the crisis.

Monday, July 30, 2012

Tuesday July 31 Housing and Economic stories


Every Money Professional Knew Libor Was A Scam – (www.businessinsider.com) They've known it for 30 years.  The only thing interesting about this story is that it’s 30++ years old.People have been sandbagging Libor quotes since the concept of Libor was originated.  I don’t believe that there is a money pro on either the buy or sell side over the past thirty years who didn’t understand that the Libor Fixing was “fixed”. If they claim to be “shocked” today, they are either lying or stupid. The same goes for every central banker and treasury official that knows the way to the bathroom.  As far as any consumers who took out a Libor based loan are concerned; they have no claim at all. If Libor hadn’t been “fixed” all these years they would have paid substantially more on those loans. Libor has always been jimmied down, not up. The world has been looking for an excuse to hang some bankers (and a few regulators). Liborgate looks like it could be the opportunity for the bloodletting. I’m convinced that this is the wrong issue to bring out the nooses.

Social Security Hole Overwhelms Taxes, Cuts - (www.bloomberg.com)
Now that health care is off the front burner, it’s time to fix Social Security. Social Security’s trustees say the system needs only “modest changes.” In fact, the system is desperately broke. The proof is buried deep in the trustees’ own 2012 report in a complex table, numbered IV.B6. The system’s actuaries prepare the report’s tables. But what the trustees make of them is up to the trustees. Clearly this year, as in others, the trustees ignored table IV.B6. How else could they have come up with their blase statement that Congress should address Social Security’s finances “in a timely way”? Table IV.B6 is a long-run balance sheet for Social Security. It shows that the system’s $88.9 trillion in liabilities exceed its $68.4 trillion in assets by $20.5 trillion. The liabilities are the present value of the system’s projected benefit payments, whereas the assets are the system’s $2.7 trillion trust fund plus $65.7 trillion in projected taxes, also valued in the present. The $20.5 trillion fiscal gap separating Social Security’s liabilities and assets -- its unfunded liability -- is enormous; it is 1.4 times U.S. gross domestic product and 34 times annual Social Security taxes.

The Worst Banking Scandal Yet? - (www.bloomberg.com) The scandal over the manipulation of Libor has the potential to become one of the most costly and consequential in the history of banking. If the financial institutions involved want to prevent it from overwhelming their businesses and damaging the broader economy, they’ll have to act fast. Investigators in the U.S., CanadaEurope and Asia are piecing together a breathtaking portrait of avarice and deceit. To hide their institutions’ problems during the financial crisis, or often to boost their traders’ profits, bankers knowingly submitted false data for the calculation of the London Interbank Offered Rate, a benchmark interest rate that influences the value of hundreds of trillions of dollars in financial contracts around the world, including floating-rate mortgages, corporate loans and interest-rate swaps. The roughly $450 million in fines paid by Barclays Plc, the first bank to fess up, is only the beginning. Regulators can and should hit more banks with large fines to prevent a repeat. More important, criminal charges for the first time could threaten a significant number of bankers and traders with jail terms for their actions during the financial crisis -- a much needed comeuppance that could help reset the industry’s moral compass.

Insight: The curious case of Iowa broker's Romanian property empire - (www.reuters.com) Russell Wasendorf Sr., the founder of failed Iowa brokerage PFGBest, had risky investments a long way from the Midwest markets where he built his name. More than a decade before he allegedly began hiding more than $200 million of misappropriated client money in a scheme that unraveled this week, Wasendorf joined three other Chicago traders as founding investors in one of Romania's largest real estate development groups, Avrig 35 Group, which was valued at more than $1 billion at its height in 2007. But since 2007 the paper value of his holdings has crashed from around $150 million to less than $45 million, as Avrig has written down investments. As Avrig's complex web of dozens of firms struggles to trade its way out of difficulties, Alexander Hergan, Wasendorf's Romanian-born business partner and a former options trader and founding member of the Chicago Board of Options Exchange (CBOE), hopes the drama in Iowa doesn't upset the firm's recovery.

Spain Threatens Deficit-Troubled Regions, Offers Help - (www.bloomberg.com) Spain’s government threatened to take control of budgets in regions that fail to meet austerity targets, while offering financing to help them avoid default as the nation battles to restore investor confidence. Regions projected to miss deficit goals this year were given a week to take action or risk intervention, Budget Minister Cristobal Montoro said in Madrid late yesterday after meeting regional finance chiefs. Local officials, including some from the ruling People’s Party, resisted his demands. “This proposal has more show than go,” said Michael Derks, chief strategist at FxPro Group Ltd. in London. “Spain isn’t in any position to take on more obligations and this isn’t going to repair the credibility of regional governments that have been shut out of markets for a considerable time.”

Sunday, July 29, 2012

Monday July 30 Housing and Economic stories


Peregrine Customers’ Claims Priced at 25 Cents on Dollar  - (www.bloomberg.com) Customers’ claims on Peregrine Financial Group Inc., whose founder is accused by regulators of misappropriating more than $200 million, may fetch less than a quarter of their value in the wake of the firm’s bankruptcy, a trader said. Quotes of 22 cents on the dollar to 25 cents were given today to half a dozen Peregrine customers who called CRT Capital Group LLC, which buys and sells distressed debt, said Joseph Sarachek, managing director of claims trading. By comparison, U.S. commodity customers of bankrupt MF Global (MFGLQ) Inc. have always been able to sell their claims in the high 70s, he said. Peregrine filed for bankruptcy July 10 after the U.S. Commodity Futures Trading Commission sued the brokerage alleging the firm and its founder, Russell Wasendorf Sr., “used customer funds for purposes other than those intended by its customers, and consequently, have misappropriated these funds.” False reports on customer funds were also filed with the CFTC, it said. “This is much messier than MF Global because it appears there is fraud involved, based on the CFTC complaint,” Sarachek said.

Foreclosures are on the rise again in Las Vegas - (www.vegasinc.com) After months of steady decline, foreclosure activity picked up last month in Las Vegas. Las Vegas moved from No. 15 to No. 13 on RealtyTrac's list of large metro areas with the highest foreclosure rates. It’s not yet known if the June numbers signal a trend. Stricter paperwork requirements have made it harder for banks to foreclose on homes in Nevada, and local real estate agents are watching foreclosure filings to see if banks move to repossess a bigger chunk of backlogged homes. ''Lenders and servicers are slowly but surely catching up with the backlog of delinquent loans that under normal circumstances would have started the foreclosure process last year,'' RealtyTrac CEO Brandon Moore said in a statement. ''The increases in foreclosure starts in the first half of the year will likely translate into more short sales and bank repossessions in the second half of the year and into next year.''

Disaster Declared in 26 U.S. States as Drought Sears Midwest - (www.bloomberg.com) More than 1,000 counties in 26 states are being named natural-disaster areas, the biggest such declaration ever by the U.S. Department of Agriculture, as drought grips the Midwest. The declaration makes farmers and ranchers in 1,016 counties -- about a third of those in the entire country -- eligible for low-interest loans to help them weather the drought, wildfires and other disasters, Agriculture Secretary Tom Vilsack said today. The USDA is also changing procedures to allow disaster claims to be processed more quickly and reducing the penalty ranchers are assessed for allowing livestock to graze on land set aside for conservation. “Agriculture remains a bright spot in our nation’s economy,” Vilsack said. “We need to be cognizant of the fact that drought and weather conditions have severely impacted farmers around the country.” The declaration is effective as of tomorrow.

Italy stats office threatens to stop issuing data  - (www.reuters.com)  Italy's national statistics body ISTAT threatened on Thursday to cease issuing data on the economy, saying it had been crippled by government spending cuts aimed at reducing national debt and righting public finances. The euro zone's third biggest economy, whose statistics are closely watched as the country's huge state debts put it at the center of the bloc's financial crisis, would face stiff European Union fines if the flow of data is cut off, ISTAT President Enrico Giovannini was quoted as saying.

KRUGMAN: The Government Has To Do More Deficit Spending To Avoid A Full-On Depression - (www.businessinsider.com) In order to avoid a full-on depression, the U.S. government needs to ignore the size of the deficit and start spending to stimulate the economy, Nobel Prize-winning economist Paul Krugman tells us. "Somebody has to spend more than their income, and, for the time being, that has to be the government," says Krugman. But what about the deficit, that so many people are concerned about? After all, Krugman was something of a deficit hawk during the Bush administration. He notes two things: One is that the deficit spending under Bush was totally wasteful, and that that should have been time to pay down debts. But he also says he's learned from watching the US and Japan that it's much harder for a country to have a debt crisis than he previously appreciated.

Thursday, July 26, 2012

Friday July 27 Housing and Economic stories


Current debt crisis is merely a warm-up act - (www.ft.com) It is sometimes possible to believe that suffering is worthwhile, a way of paying for past sins. In this light, the age of austerity in which we supposedly live has a sort of redemptive quality. Grit our teeth and we’ll come out the other side, purified and ready for robust economic recovery. However, after five years, we are in a worse place than when we started. One would have thought that the recent deleveraging caused debt ratios to collapse. Yet, after the financial maelstrom of the past five years, debt ballooned to a weighted average of 417 per cent of gross domestic product from 381 per cent in June 2007 in the 11 economies most under the market microscope. Strikingly, in each of Canada, Germany, Greece, France, Ireland, Italy, Japan, Spain, Portugal, the UK and the US, the ratio of total (public and private) debt to gross domestic product is now higher than it was in 2007…. First, as deleveraging has not even started yet, the crisis of the world economy has not begun either. All the perceived unpleasantness of the past few years is merely a warm-up act for the greater crisis still to come. The need to get debt levels down is as pronounced as ever in the eurozone, particularly in southern Europe, but also in the US and Japan.

Iowa broker PFGBest collapses after hiding millions - (www.reuters.com) The U.S. futures industry reeled on Tuesday as Iowa-based broker PFGBest collapsed after regulators accused it of misappropriating customer funds for more than two years, dealing a new blow to trader trust just months after MF Global's demise. The Commodity Futures Trading Commission (CFTC), which along with industry regulators had given a clean bill of health to dozens of brokers following spot checks in January, alleged that the firm's regulated Peregrine Financial Group (PFG) unit and its owner had defrauded customers and lied to regulators in order to hide a shortfall that now exceeds $200 million. "The whereabouts of the funds is currently unknown," the CFTC said in a complaint against PFG and its founder and chairman, Russell R. Wasendorf Sr., whose suicide attempt on Monday morning outside the firm's Cedar Falls, Iowa, offices appears to have precipitated the crisis.

San Bernardino seeks bankruptcy protection - (www.latimes.com) San Bernardino, facing the possibility of missing payroll, becomes California's third city in weeks to authorize a bankruptcy filing. San Bernardino on Tuesday became the third California city in less than a month to seek bankruptcy protection, with officials saying the financial situation had become so dire that it could not cover payroll through the summer. The unexpected vote came at the suggestion of the interim city manager, who said the city faces a $46-million deficit and depleted coffers. "We have an immediate cash flow issue," Andrea Miller told the mayor and seven-member City Council. Mayor Patrick Morris called the decision, passed on a 4-2 vote, a "stain" on the city. But he said the only other option was "draconian cuts" to all city services, including the police and fire departments. "It means the bills will be paid," said a dejected Morris, who is not a voting member of the council.

Pension deficits deepen in corporate Britain and U.S. - (www.reuters.com)  Chronically weak stock markets and record low bond yields have pushed company pension deficits in the United States and Britain sharply higher, adding to the burden of retirees living longer than ever before, reports said on Tuesday. In the United States the aggregate deficit of S&P 1500 companies grew $59 billion in the first half of the year to $543 billion, consultancy Mercer said. Corporate America is sitting on total liabilities of $2.09 trillion against total assets of $1.55 trillion, Mercer added. The picture is no less bleak in Britain, where the combined deficit of FTSE 100 companies more than doubled over the past year to 41 billion pounds ($64 billion), actuarial firm Lane, Clark & Peacock (LCP) said in a separate report.

Italy faces another year of recession as capital drains - (www.washingtonpost.com) Italy will be stuck in recession for at least another year and is facing some of the same developing problems that have pushed other European countries to request outside aid, the International Monetary Fund reported Tuesday in its latest review of the country’s economy. The fund painted a muddled picture of the euro zone’s third-largest economy. The government is enacting major changes to improve growth and is getting public deficits under control. Yet investors are pulling money from the country, banks are at risk from rising numbers of bad loans and the economy continues to contract.

Wednesday, July 25, 2012

Thursday July 26 Housing and Economic stories


Crop Insurance Set to Expand Despite Growing Fraud Worries - CNBC - (www.cnbc.com) Farming can be a tough business. The work is hard, the hours are long, and the profits unpredictable at best.  But Robert Warren had a secret weapon: crop insurance. It helped make the man who describes himself as “just a dumb farmer” into a multi-millionaire, with properties in North Carolina, South Carolina and Tennessee. It turned out that Warren made his millions by abusing the taxpayer-backed federal crop insurance program for years, collecting more than $9 million in bogus claims. He pleaded guilty to two conspiracy counts in 2005 after authorities found he had directed his workers to scatter ice cubes and mothballs in one of his tomato fields in Cocke County, Tenn., then sent in the pictures to show his plants were damaged by a “hailstorm.” That claim alone netted Warren more than $80,000, according to court documents. Warren’s wife, two employees, an insurance agent and a claims adjuster also pleaded guilty. “The defendants’ involvement with the (crop insurance) program was conceived and born in fraud,” wrote Assistant United States Attorney Richard Lee Edwards in Warren’s 2005 sentencing memorandum. “(T)hese defendants simply sat around the kitchen table and created the production history figures which they submitted to the insurance company and the USDA.”

FHA mortgage delinquencies skyrocket more than 25% - (www.ochousingnews.com) The mortgage market appears to finally be stabilizing — as long as you ignore loans backed by the Federal Housing Administration. Increasingly, FHA-insured loans are falling into foreclosure or serious delinquency, moving in the opposite direction of loans guaranteed by Fannie Mae and Freddie Mac or those held by banks, which are all showing signs of improvement. Does anyone really believe bank-held mortgages delinquency rates are down 39%? Based on the charts of shadow inventory, the number of 90-day delinquent loans hasn’t declined much at all over the last year. We know the banks have not been foreclosing in earnest, and they have billions in non-performing HELOCs and second mortgages on their books. I don’t see how they could have reduced their delinquency rates that much. Perhaps the include the loan modifications which temporarily cure the loans.  And taxpayers could ultimately be on the hook for FHA’s growing number of troubled mortgages. The agency’s finances are already on shaky ground, and additional losses from loans going sour could prompt the need for a federal bailout, experts said. “We can’t escape this one,” said Joseph Gyourko, a real estate professor at the University of Pennsylvania’s Wharton School. “This is an arm of the U.S. government.” The share of government-guaranteed loans, a majority of which are backed by FHA, that were 90 days or more delinquent soared nearly 27% during the year ending March 31. Foreclosures jumped nearly 17%, according to a report published recently by federal regulators.

Spain borrowing rate hits bailout danger zone of 7 pct - (www.washingtonpost.com) Spain’s struggling banks and the country’s punishing borrowing costs will be the main subject of discussions at this week’s meetings in Brussels of Europe’s finance ministers. Representatives from the 17 countries that use the euro are to meet later on Monday to discuss the terms of a €100 billion ($124 billion) lifeline from other members of the 17-country eurozone for Spain’s banking industry. The discussions are all the more pressing as Spain’s borrowing costs rose to dangerously high levels Monday. The interest rate, or yield, on the country’s 10-year bonds hit 7 percent, a level that market-watchers consider is unaffordable for a country to raise money on the bond markets in the long term and the point at which Greece, Ireland and Portugal all sought an international bailout. Stocks on Madrid’s benchmark share index fell 0.7 percent.

2013 perfect storm may surpass 2008 crisis: Roubini - (www.economonitor.com) Video… Nouriel Roubini discusses “greedy” bankers, the euro-zone crisis and risks facing the global economy in 2013. He speaks in Aix-en-Provence, France, with Bloomberg Television’s Caroline Connan.

In Lost Opportunity of 1932, Are There Lessons for Today? - (www.nytimes.com) By the summer of 1932, the Great Depression was three years old with no end in sight. The Hoover administration, like Republicans today, was adamant that economic stimulus was wrongheaded, that the big problem was business confidence, which would be restored by keeping the budget under control, and that under no circumstances should the Federal Reserve adopt policies that would ignite inflation.  However, it was painfully clear to farmers and business people that deflation – falling prices – was the root of the economy’s problem. Between 1929 and 1932, the consumer price index fell 20 percent and prices for many commodities had fallen much more. As a consequence, producers could not make a profit, which led them to lay off workers. As workers lost income, they reduced their purchases, which intensified the downward pressure on prices. By early 1932, a growing number of prominent economists were openly advocating “reflation” – just enough inflation to get the price level back to where it was in 1929.

Tuesday, July 24, 2012

Wednesday July 25 Housing and Economic stories


SCRANTON RUNS OUT OF MONEY, Cuts All City Salaries To Minimum Wage - (www.businessinsider.com) Scranton, Pennsylvania's, the state's sixth-most-populous city (population of 76,089 in 2010 census), is down to its last $5,000 and has no way to pay salaries. The mayor wants an immediate tax hike of 29% and 78% over three years. In every sense of the word, Scranton is bankrupt. NPR reports Scranton's Public Workers Now Paid Minimum Wage. The city of Scranton, Pa., sent out paychecks to its employees Friday, like it does every two weeks. But this time the checks were much smaller than usual. Mayor Chris Doherty has reduced everyone's pay — including his own — to the state's minimum wage: $7.25 an hour. Doherty says his city has run out of money.

MBIA Drops as Regulator Balks on Note Payment: New York Mover - (www.bloomberg.com) MBIA Inc. fell the most in 11 months after the bond insurer said a regulator hasn’t decided whether to allow a unit that backed soured mortgage debt to make an interest payment on notes. The insurer dropped as much as 12 percent to $9.35 before climbing back to $9.48 as of 10:39 a.m. in New York. The shares have declined 18 percent this year. Payments on the 14 percent surplus notes maturing in 2033 are scheduled for July 16, MBIA said today in a regulatory filing. No cash is due from the company’s MBIA Insurance Corp. unit if the New York State Department of Financial Services doesn’t approve of the step, the Armonk, New York-based insurer said. Kevin Brown, an MBIA spokesman, declined to comment further.

Libor Woes Threaten to Turn Companies Off Syndicated Loans - (www.bloomberg.com) The scandal surrounding the London interbank offered rate is threatening to undermine confidence in syndicated loans and hasten companies’ flight to bonds. “What corporate treasurers are concerned about is the damage this Libor problem will do to market confidence,” said John Grout, the policy and technical director at the Association of Corporate Treasurers in London, which has about 4,500 members. “If people lose trust in banks and Libor, which is indexed to a huge amount of debt and derivatives instruments, market liquidity could be reduced and borrowing costs could rise for corporates.” Corporate loans typically pay interest pegged to Libor or its equivalents in other currencies, and the rate-rigging scandal is spreading uncertainty about whether the benchmarks reflect lenders’ true cost of funding. At least a dozen banks are being investigated for manipulating Libor, prompting Barclays Plc (BARC) Chief Executive Officer Robert Diamond to quit last week after the U.K.’s second-biggest lender was fined a record $451 million.

Investment Bankers Face Termination As Europe Fees Fall - (www.bloomberg.com) Investment bankers in Europe are girding for a second wave of job cuts in less than a year after the euro area’s debt crisis drove fees from mergers and securities underwriting to a nine-year low. Credit Suisse Group AG  and UBS AG, Switzerland’s biggest lenders, face the most pressure to boost efficiency as that country runs ahead of others in introducing tougher capital and liquidity rules to curtail risk-taking, making some businesses unviable. The banks’ securities units had the highest costs as a proportion of revenue among a group of the 12 largest firms in Europe and the U.S. last year, Morgan Stanley analysts Hubert Lam and Huw van Steenis wrote in a May 24 note. While the situation may be most acute at Credit Suisse and UBS, similar dynamics are at work at other firms as the debt crisis drags on, capital requirements ratchet higher and economic growth grinds to a halt.

CHANOS: China's Credit Situation Is Worse Than Greece And Spain - (www.businessinsider.com) http://imagec18.247realmedia.com/RealMedia/ads/Creatives/default/empty.gif In an interview with Opalesque TV, Jim Chanos gave his thoughts on short selling and also added his outlook on the China macro and micro situation. Chanos sees many short opportunities in Chinese companies for a number of reasons, including a terrible credit situation. Below are some of the transcribed quotes from his interview, with the video embedded at the bottom of the page. On China: "A lot of people get the wrong impression, we are not macro people and I've stressed that we are stock people. But we came at China for exactly that reason. In the summer of 2009 we were looking at mining stocks, and we were trying to figure out why it was that in the teeth of a global recession, in mid-'09, that mining companies were reporting pretty close to record profits."

Monday, July 23, 2012

Tuesday July 24 Housing and Economic stories


Commercial Mortgages Show How Bad It Got - (www.nytimes.com) Just five years ago, the commercial real estate market was thriving. The delinquency rate on mortgage loans was at a record low, and the volume of new mortgages being sold to investors was at a record high. Now the first of the mortgages that were securitized in 2007 have started to come due, and it is becoming clear just how bad many of the loans were. The time when investors were most eager to buy turns out to have been the worst time to do so. Commercial mortgages — unlike residential ones — are seldom issued for periods of longer than 10 years, and often for as little as five. Many require no principal repayments during that period but call for the entire amount to be repaid in a balloon payment at the end of the loan. So it can be at maturity when the bad news arrives. “Only 28 percent of the loans from 2007 due to mature in 2012 managed to pay off in full,” said Manus Clancy, the senior managing director at Trepp L.L.C., which monitors the commercial mortgage market.

Countrywide used VIP program to sway Congress: report - (www.reuters.com) Old news, but main street press is finally catching on to this. Ironic that Dodd is one of the VIP politicians benefiting from this. Of course Dodd is one of the authors/sponsors of Dodd-Frank bill.

A VIP mortgage program run by now-defunct Countrywide Financial Corp was used to influence lawmakers with the aim of killing legislation that could hurt the company's profits, a congressional report released on Thursday said. The report from the House of Representatives' Oversight and Government Reform Committee provided new details about the program, which offered discount loans to "VIPs," and it named dozens of congressional staffers that benefited. The company, which was once the biggest U.S. mortgage lender, granted hundreds of loans between 1991 and 2008 through the VIP program, the report said.

Spain Crisis Forces $7B in Cuts on Hospitals - (www.bloomberg.com) For some cancer patients, Spain’s debt crisis means living on borrowed medicine. Virgen de la Luz hospital in the rural province of Cuenca turned away two women with lung and breast cancer in May after Roche Holding AG (ROG) stopped supplying tumor fighter Herceptin, according to documents obtained by Bloomberg News. The women got the drug after a 24-hour wait thanks to a hastily-brokered deal to borrow it from another clinic. To rescue Cuenca and the rest of Spain’s health system, which sank into debt alongside the regional governments that operate it, the state arranged an infusion of guaranteed loans and demanded 7 billion euros ($8.8 billion) in cost cuts. Yet doctors and patients warn the prescription for cutbacks may cause more pain than the budgetary malaise it was meant to cure.

Dynegy Inc files for bankruptcy; will merge with unit - (www.reuters.com) Power producer Dynegy Inc (DYN.N), the parent company of Dynegy Holdings, filed for bankruptcy protection on Friday morning as part of its settlement agreement with creditors and said it will merge with its unit. Last month, a bankruptcy court approved the company's settlement with creditors under which Dynegy and Dynegy Holdings would be combined, with creditors holding a 99 percent equity stake in the combined company. The settlement resolved a dispute among creditors over whether Dynegy had acted properly last September in taking $1.25 billion of coal-powered plant assets from Dynegy Holdings.

Why Central Bankers Can't Arrest Slowdown - (www.cnbc.com) The rate cuts from three major economies on Thursday may have dominated headlines, but it did little to inspire confidence in global stock markets, which fell as investors took the move to mean the world economy remains in trouble. For many market watchers, it’s becoming apparent that there’s little global policymakers can do to arrest what some describe as a global “synchronized slowdown.” The European Central Bank and the People’s Bank of China both slashed interest rates, the former to a record low, amid signs that economies in these regions are still weakening. The Bank of England, whose rates are already at an all-time low 0.5 percent, said it would buy 50 billion pounds ($78 billion) of assets with newly printed money to help the economy out of recession.