Sunday, December 14, 2014

Monday December 15 Housing and Economic stories


D.C. police plan for future seizure proceeds years in advance in city budget documents – (www.washingtonpost.com)  D.C. police have made plans for millions of dollars in anticipated proceeds from future civil seizures of cash and property, even though federal guidelines say “agencies may not commit” to such spending in advance, documents show. The city’s proposed budget and financial plan for fiscal 2015 includes about $2.7 million for the District police department’s “special purpose fund” through 2018. The fund covers payments for informants and rewards. The financial details emerged Wednesday, when the D.C. Council’s judiciary committee unanimously voted to forward a bill that would overhaul asset forfeiture laws in the nation’s capital. The bill would raise the threshold of proof required for a forfeiture, bolster the rights of individuals whose property has been taken and require that proceeds from seizures under federal law go into the city general fund, rather than directly to the police department. The full council is set to vote on the bill Tuesday. Council member Tommy Wells, chairman of the Committee on the Judiciary and Public Safety, said police should not have a financial incentive to make seizures. He said the bill addresses problems that are common across the country. “All across the nation, law enforcement agencies are directly benefiting from forfeiture,” said Wells (D-Ward 6), who is leading the effort to reform asset forfeiture in the District. “In those places, forfeiture proceeds go directly to the law enforcement entity, creating at best the appearance of a conflict of interest, and at worst, an unchecked incentive for slush funds.”

Tense year end for distressed energy debt - (www.ft.com) Investing on Wall Street this year has provided many surprises — some with a painful sting. At the start of 2014, few expected a third straight year of double digit gains for the S&P 500 and sharply lower long-term Treasury yields. As for oil prices, the collapse from above $100 a barrel to their lowest levels in five years was unforeseen.  The surprising drop in crude oil illustrates the entrenched complacency that has existed across markets for several years. Much of this has come from aggressive central bank action that encouraged investors to downplay risk and reach for returns. Sharply lower energy prices serve as a warning that eventually even the most ebullient markets turn, or experience what is known as a “Minsky Moment”. The economist Hyman Minsky highlighted how at some point financial engineering and leveraged bets based on the idea that asset prices will continue ascending usually reaches a peak and then unravels.

Junk Fervor Cools as Oil Rout Upends Energy Debt: Credit Markets - (www.bloomberg.com) The plunge in oil prices is sapping demand in the $1.3 trillion U.S. junk-bond market, pushing yields to the highest in more than a year and leaving energy companies struggling to attract financing. Speculative-grade companies have sold $4.52 billion of securities in the first four trading days of December, the slowest start for the month since 2011. Gas producer Atlas Energy Group and EnTrans International LLC, a maker of equipment used in fracking, have postponed loan and bond offerings as crude oil prices fell to a five-year low and yields on high-risk, high-yield bonds rose to 6.75 percent, the highest since October 2013. “If you have to finance in this environment you are in real trouble if you don’t have the absolute best assets,” Bill Zox, a money manager at Columbus, Ohio-based Diamond Hill Investment Group, which oversees $15 billion, said by telephone. “Energy prices have been driving the high-yield market, and investors are still discounting the rapid changes in this new environment.”

Feds to Employers: You Can’t Dump Sick Workers Onto Obamacare – (www.businessweek.com) loophole touted as a way for employers to wiggle out of the Affordable Care Act’s insurance mandate has been closed. What happened? Officials got wind that some employers planned to bypass the mandate by giving their workers bonuses, asking them to decline company-sponsored insurance and sending them to the Obamacare marketplaces to buy subsidized policies. Nudging sick workers, in particular, onto the exchanges could save employers’ health plans money and shift the cost onto publicly subsidized plans. The Labor Department published new guidelines in November to explicitly forbid that practice. Why did employers think they could get out of a federal mandate?  “Brokers were running around selling this idea that employers could give everybody a raise and say, ‘Go, get the tax credit, knock yourselves out,’ and they wouldn’t pay a penalty. Go figure—the IRS got wise to that,” says Keith McMurdy, a partner in the employee benefit division at Fox Rothschild, a law firm in New York City.

Japan's In Deeper Trouble Than We Thought - (www.businessinsider.com)  Japan's economic contraction in July-September was deeper than initially expected on declines in capital expenditure, according to revised data on Monday that backs Prime Minister Shinzo Abe's recent decision to delay a second sales tax hike. The data indicated that the hit from April's sales tax hike turned out to be bigger than expected. Abe, who has called a snap poll for Sunday, hopes voters will agree that his stimulus policies and a decision to delay a second sales tax hike next year will revive a sputtering economy. The revision to an annualized 1.9 percent contraction, more than a preliminary 1.6 percent fall, confirmed the world's third-largest economy had slipped into recession with only a modest rebound expected in the current quarter. It compared with a median forecast for a 0.5 percent contraction.





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