Tuesday July 22 Housing and Economic stories

Top Stories:

BofA Back Peddles on Countrywide Debt - Could Spell Trouble for Other Banks - (www.ml-implode.com) – It didn’t take to long after the acquisition of Countrywide to complete before Bank of America changed their tune on backing Countrywide debt. It seems that BofA never intended to make good on Countrywide’s debt, only take what it wanted, which includes the servicing, servicing platform and select retail locations throughout the nation in areas where they may not have coverage. The cost to insure the debt of Countrywide Financial Corp’s home loan unit rose on Monday after Bank of America Corp’s chief financial officer said the bank doesn’t intend to guarantee Countrywide’s debt. Joe Price said on a conference call that “all I can say at this point is we don’t intend to guarantee the public debt.” He added that he understands the ramifications of not paying at maturity. Bank of America acquired Countrywide on July 1. In a filing earlier this month Bank of America provided no guarantees on the debt, though analysts said a new organizational structure indicated the bank is likely to repay Countrywide bondholders at maturity. The cost to insure the debt of Countrywide Home Loans rose to 235 basis points, or $235,000 per year for five years to insure $10 million in debt, from 220 basis points, according Phoenix Partners Group. Bank of America’s credit default swaps are trading at 112 basis points, according to Phoenix.

Stupidity of Fannie-Freddie Buyout - (www.youtube.com) Good video of Senator Bunning questioning the wisdom of Fannie-Freddie bailout. All of a sudden, everyone is sounding like Ron Paul, but several of these guys should have been chiming in years ago. Better late than never.

Riots in Pakistan As Market Tumbles - (www.marketwatch.com) Benchmark down for 15th straight session; loses 27.5% this year so far. Popular anger over tumbling equity prices erupted in Pakistan on Thursday, underscoring the difficulties regulators face in attempting to prop up falling markets as turbulence in many of the world's financial markets continues unabated. The turmoil in Pakistan comes at a time when several emerging markets are considering market stabilization measures, while regulators in the United States are moving to limit short selling and speculation in the oil market. Regulators in China have signaled their intention to stabilize the local market, which became the worst performer among global markets this week. India has suspended futures trading in several commodities. In Pakistan on Thursday, more than 200 protestors attacked the Karachi Stock Exchange, the country's main equity market, and demanded a temporary closure of the market to curb further drops in share prices, the BBC reported

Regulators raid Wachovia Securities - (www.idahostatesman.com) Note: Wachovia is one of the unprotected financial firms being thrown to the wolves by the Fed and the SEC!! See SEC Restricts Shorting 19 Financial Stocks for more information on the protected financial firms!! Securities regulators from several U.S. states on Thursday raided the St. Louis headquarters of Wachovia Securities, seeking documents and records on the firm's sales practices. Missouri Secretary of State Robin Carnahan's office said the "special inspection" at the Wachovia Securities, the former A.G. Edwards, concerned the collapse of the $330 billion auction rate securities market.

Update: Wachovia's Wholesale Shutdown Confirmed - (www.ml-implode.com) – Another good find by www.ML-Implode.com. We also have this, from an internal notice, emailed to employees this afternoon by David Pope, Head of Mortgage and Retail Credit Employees: "Based on our decision to focus on building relationship banking customers, we have decided to discontinue doing business through our Wholesale channel after July 25. This will be the final day to accept applications.

Introducing...The $100 Billion Bank Note – (www.cnn.com) - The US isn’t anywhere near this level of inflation, but at the current rate, we will be creation $1000 notes. Zimbabwe's troubled central bank introduced $100 billion banknotes Saturday in a desperate bid to ease the recurrent cash shortages plaguing the inflation-ravaged economy. The bills officially come into circulation Monday, although they were on the foreign currency dealers market Saturday. As high as they are, though, the bills still aren't enough to buy a loaf of bread. They can buy only four oranges. The new note is equal to just one U.S. dollar.

Uncomfortable Answers to Questions on the Economy - (www.nytimes.com) - You have heard that Fannie and Freddie, their gentle names notwithstanding, may cripple the financial system without a large infusion of taxpayer money. You have gleaned that jobs are disappearing, housing prices are plummeting, and paychecks are effectively shrinking as food and energy prices soar. You have noted the disturbing talk of crisis hovering over Wall Street. Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead.

The Sad Road to Socialism - (www.financialsense.com) Good piece by John Loeffler. The moral argument that we can finally solve poverty, pain, sickness, and hunger with “free” money seems just to good to be true. It usually is but it sells to the public. To fund these allegedly moral programs, the assets of the gentle citizens must be quietly taxed in the name of the public good. Only a few wise and isolated voices warn that this baby dragon they have just hatched will grow up to be a fire-breathing monster. But not to fear, the wise voices are generally shouted down by the gentle politicians, who fiercely demonize protestors as selfish “whabbledygots” blocking the road to the perfect society. After all, how could something so noble do anything bad to the country? At first the rich are the only ones asked to pay more of their “fair share.” In the U.S. income tax originally only affected upper-bracket individuals. In this early stage, few complain and everyone seems happy, except for those nagging voices still warning of dire consequences ahead; the ones the gentle legislators wish would just shut up. Other than that they have little to fear because the gentle legislators appear to be heroes placing our feet firmly on the road to utopia. Soon they promise all the have-nots will have and those who do have, will have just a little less. After all, as we said, it’s just their “fair share.” Ah but time rumbles onward, and the number of people dependent upon these programs swells along with the number of “free” government programs. Free things do sell, and that’s what politicians want to do: sell their programs.
As the programs swell, they become unwieldy, requiring large bloated bureaucracies to administer them to ward off the inevitable fraud and corruption, consuming an ever greater part of the tax booty and servicing less to the originally intended recipients. In order to control the chaos of a large group of people cueing up to get something for nothing, large volumes of laws and regulations have to be written to control who gets what and where and when and who the givers and who the takers are. Now, the bureaucrats who administer these programs are also dependent on them for their livelihoods. This entrenches the program and assures its progression to Stage Two.

Homeowners ‘March’ Against Foreclosure - (www.mediachannel.org) - America’s largest and most militant homeownership organization, NACA, The Neighborhood Assistance Corporation hired out the grand hotel for five days, and brought 460 staffers from 38 offices to Washington for a five day event to demonstrate that their approach to stopping foreclosures is superior to everything that is being done elsewhere or proposed in Congress. They reference “the dream” too, 45 years ago activists wanted to claim it. Today, they fight to save it. NACA believes that making mortgages affordable is the only way to stabilize at-risk homeowners. They call on banks to restructure mortgages, lower interest rates and replace adjustable mortgages and ARMS with low fixed rates for the long term.

Here are government plans to put us back in the middle ages. Under the following proposals, some citizens could pay ~70% of earned income to Fed & State government. This is worse than the middle ages, and almost approaching slavery:
Obama Plans a Massive Hike in Social Security Taxes - Capital ... - (www.usnews.com) OBAMA’S DEFINITION OF A MILLIONAIRE AND BILLIONAIRE ARE THOSE MAKING $250k OR MORE. Per a speech by Obama in Columbus Ohio: Right now, the Social Security payroll tax is capped. That means most middle-class families pay this tax on every dime they make, while millionaires and billionaires are only paying it on a very small percentage of their income. That's why I think the best way forward is to adjust the cap on the payroll tax so that people like me pay a little bit more and people in need are protected. That way we can extend the promise of Social Security without shifting the burden onto seniors. And we should exempt anyone making under $250,000 from this increase so that the change doesn't burden middle-class Americans. This means that 97 percent of Americans will see absolutely no change in their taxes under my plan—97 percent.

Middle Ages Levels of Taxation for US Citizens Living in High Tax States under Barack Obama's Tax Plan – (www.heritage.com) – ******* Middle Ages Alert ****** Under Barack Obama, high earners living in high tax states like CA, NY, MD, etc. may be paying 70% of their income to Federal or State governments. This does not include property taxes, sales taxes or other fees. Under this plan, what is the incentive to work???? Plans to tax high earners at this high tax rate will reduce all incentive to work, start businesses, and will be de-motivational. It is pure socialism and puts the US in the top 5-6 countries of combined income taxes. Here is a breakdown of the 70% number:
- Top two tax rates would be increased to 36% and 39.6%
Social Security payroll tax cap would be lifted for high income individuals. There would be no cap so individuals will pay a pure 15.65% to Social Security and may likely never see this money
- Proposals for State Income tax rate increases in CA from 9.3% to 11% for “wealthy” individuals. CA is using the term wealthy very liberally. These are not millionaires or billionaires. These are people making in the lower quarter of six-figure earners which isn’t that much based on housing, gas, and food prices.
- Combined, you are looking at 67% tax rate to pay the freaking idiots in our federal government and state government.

Democrats present plan to tax California's wealthy – (www.latimes.com) Denise Moreno is a complete moronic idiot. Here is her perspective: They noted that raising the tax paid by high earners from the current top rate of 9.3% of income to as much as 11% is exactly what the state did during the budget crisis of the mid-1990s, when Pete Wilson was governor. “These are really just rolling back tax cuts that have been made,” said Senate Budget Committee Chairwoman Denise Moreno Ducheny (D-San Diego).

Pelosi: Veterans' Bill Has Hidden Provision for Citizens Trying to Ex-Patriate to Get Taxed as if they were Liquidating all Assets. - (www.reuters.com) In hidden provision deep within the new Veteran’s Bill, the US government is trying to prevent US citizens from protecting their assets. Similar to when California tried to tax citizens for leaving the state due to high taxes, the Federal government is trying to do the same:
- The bill strengthens current law to ensure that high net-worth taxpayers cannot renounce their U.S. citizenship or terminate their U.S. residence in order to avoid U.S. taxes.
The bill would require that individuals that renounce their citizenship or terminate their long-term residency recognize income as if they had sold all of their assets on the date of expatriation. Such individuals will be required to pay taxes on income to the extent it exceeds $600,000.

So what are companies and individuals doing in California? They are leaving the state. There are many of these stories, and I will list more in the future:
Business - AAA call centers in California to close - (www.sacbee.com) - California State Automobile Association will close its California call centers - including its 500-employee Elk Grove facility - earlier than expected and send the jobs out of state, citing the cost to do business in California. AAA's Elk Grove site on West Taron Drive will close by the end of 2010, said spokeswoman Cynthia Harris. Last October, AAA officials had said they planned to close the facility by 2011. AAA's Livermore facility will close on Sept. 1. Its Irvine center will close in March 2009. In all, about 900 people work at the three centers. "It costs more to do business in California than other states," she continued, adding that increased demand for AAA's services and AAA's expanded geographic reach were also factors.

Businesses leaving California - (www.r21.org) About 40 percent said their companies have an explicit policy to move jobs elsewhere in the United States, with Texas cited as the most frequent destination. Not counting those companies that must stay in California, such as retailers or health care providers, the proportion of businesses that said their policy is to move jobs rose to 55 percent. Another group of executives, just under 20 percent of those interviewed, said their policy is to avoid adding jobs in California, except when absolutely necessary. Businesses are clamping down on California job growth because of high costs and a burdensome regulatory environment, Bain concluded. The cost of doing business in California is about 30 percent higher than in the average Western state, largely because of higher wages and benefits, according to the study. Bain also attempted to measure the cost, uncertainty and complexity of California's environmental, labor and other regulations. It constructed what it called a regulatory hassle index that took into account such factors as compliance costs, the threat of lawsuits and delays in obtaining permits that hamper operations. The index showed that "California is far worse than any other state in the union, by a very significant margin," said Jeff Melton, a partner in Bain's San Francisco office.



Other Stories:

Lori Mozilo defends the indefensible: Her brother - (www.ml-implode.com) - ``No doubt Angelo makes a handy target for a Congress that desperately wants a good side show to take the public's attention awa...
Thousands of Mortgage Originators Had Criminal Background - (www.ml-implode.com) - " Between 2000 and 2007, 5,306 people with criminal backgrounds became loan originators in Florida, according to an investigat...
Who will bite this bullet? - (www.ml-implode.com)
Imminent Implosion: Wachovia Wholesale - (www.ml-implode.com)
A Top Obama Fund-Raiser Had Ties to Failed Bank - (www.ml-implode.com)
Julie, Fannie, and Freddie - (www.ml-implode.com)
Paulson `Very Optimistic' on Freddie, Fannie Rescue - (www.ml-implode.com)
It's the Stupid Economy - (www.ml-implode.com)
Freddie Mac May Slow Purchases of Mortgages, Bonds - (www.ml-implode.com)
Introducing Our Latest Addition to Bloggers' Corner: The Mortgage WhistleBlower - (www.ml-implode.com)
Kempner doubling-down on MBA’s future? - (www.ml-implode.com)
Pyramid of Greed - (www.ml-implode.com)

Corporate Media Blackout As War, Impeachment Looms - (www.opednews.com)Glenn Greenwald: Rendering Public Opinion Irrelevant - (www.salon.com)US Gives Iran Two Weeks...Or Else - (news.bbc.co.uk)
Hemlines Plunge. Can Recession Be Far Behind? - (www.telegraph.co.uk)Global Economy at Point of Maximum Danger - (www.telegraph.co.uk)Death of the Free Internet is Imminent - (www.globalresearch.ca)

Bay Area median price dives; sales near record low - (www.dqnews.com)
SoCal house prices drop nearly 30 percent in June - (www.signonsandiego.com)
Housing prices haven't hit bottom yet - (www.mcclatchydc.com)
House prices could fall for two years: Citigroup - (www.reuters.com)
Housing Won't Recover Until At Least 2011 - (www.observer.com)
Feds can't fix Fannie and Freddie - (articles.moneycentral.msn.com)
Fannie Mae and Freddie Mac: End of illusions - (www.economist.com)
Freddie CEO gets a bundle in 2007 - (www.washingtontimes.com)
Just How Terrible Is Housing as an Asset Class? - (www.seekingalpha.com)
Boom and bust: It's the American way - (www.latimes.com)
Uncomfortable Answers to Questions on the Economy - (www.nytimes.com)
Given a Shovel, Americans Dig Deeper Into Debt - (www.nytimes.com)
Bill Moyers on closing barn door after horse is gone - (www.pbs.org)
The house that IndyMac built - (www.reportonbusiness.com)
Bush vs. Bernanke on the Economy - (www.liveleak.com)
Banks responsible for the loss of trust - (www.latimes.com)
Borrowers and Bankers: A Great Divide - (www.nytimes.com)
Bankers vs Taxpayers - (davies.lohudblogs.com)

U.S. Company Bond Risk Rises as American Express Profit Drops - (www.bloomberg.com)
Gold, Silver Gain as Energy Costs Boost Inflation Hedge Demand - (www.bloomberg.com)
Economic growth may be feeble in the 2nd half, many economists believe - (www.chicagotribune.com)
Businesses Feel Pinch Of Tighter Lending - (online.wsj.com)
U.S. Expansion May Be First in 60 Years Without Income Recovery - (www.bloomberg.com)
Poor Economy Slows Women in Workplace - (www.nytimes.com)

Freddie Mac May Slow Mortgage Buys to Prop Up Capital - (www.bloomberg.com)
Widespread earnings woes reflect consumer fears - (www.reuters.com)
Firms See Few Snags With Short Limits - (online.wsj.com)
New Regulator in Rescue Plan Spurs Debate - (www.nytimes.com)
Critical financial problems spreading - (www.ft.com)
Sales of Southern California companies drop sharply - (www.latimes.com)

American Express Profit Falls on Higher Defaults - (www.bloomberg.com)
Businesses Pinched by Tighter Lending - (online.wsj.com)
Texas Instruments Disappoints And Predicts Weak 3rd Quarter - (www.nytimes.com)
Bank of America Earnings Drop Less Than Analysts' Estimates - (www.bloomberg.com)
Home health care industry ailing under the pressure of high gas prices - (www.chicagotribune.com)
Troubled economy has Texans recalling banking collapse of the '80s - (www.dallasnews.com)

Mideast Facing Choice Between Crops and Water - (www.nytimes.com)
Europe's Banks Facing Extra EU120 Billion in Losses - (www.bloomberg.com)
British bank HBOS fails to raise five billion euros - (news.yahoo.com/s/afp)
British economic 'horror movie' to continue: think-tank - (news.yahoo.com/s/afp)
Bank lending lies at heart of UK recession risk - (www.telegraph.co.uk)
Icelandic CDS costs surge again - (www.ft.com)