Monday September 1 Housing and Economic stories

Top Stories:

Georgia Bank Becomes 10th to Fail in US – (www.cnbc.com) Sheila Bair and the sneaky FDIC close another bank on Friday evening after financial news reporting becomes sparse. True to their normal game-plan, the FDIC shuts down another bank on Friday evening.

Ed McMahon -- S.O.L. Again - (www.tmz.com) - We've confirmed the guy who went into escrow to buy Ed McMahon's house has pulled out of the deal. We're told the buyer never came up with any cash ... which means the whole thing sounds phony. The escrow was opened without a deposit, but the buyer never put his money where his mouth was. So that leaves Ed with no place to live if the house does go into foreclosure ... which again leads to the doorstep of Donald Trump. Trump has said he'd step in again and buy the house and lease it back to Ed for life. Our sources say Donald has offered a low ball offer already, but that's it. We're told Trump has had discussions with Ed's realtor, Alex Davis, since the deal fell apart last Thursday. Will Donald save the day or is this a publicity stunt? We know the stumbling block with Trump is price -- he hasn't offered what Ed wants/needs to get the monkeys off his back.

Baghdad Bonds Safer Than KeyCorp and National City - (Mish at globaleconomicanalysis.blogspot.com) Iraq's bonds are delivering the biggest returns in emerging markets as oil export revenue bolsters government finances and violence declines. The country's $2.7 billion of 5.8 percent bonds due 2028 gained 45 percent since August 2007, according to Merrill Lynch & Co. indexes. Investors demand 4.84 percentage points more in yield to own the debt instead of Treasuries, down from 7.26 percentage points a year ago. The spread is narrower than for notes of Ohio banks National City Corp. and KeyCorp, suggesting Baghdad may be safer for bond investors than Cleveland.

Lehman Brothers Quick Fix Cash Injection TBA - (www.worldpress.com) - News from London today places Lehman Brothers in talks with Foreign Government backed Investment Funds in a desperate attempt to secure a quick-fix Capital Injection, this on the heels of the announcement that Lehman was implementing at least 1500 Layoffs.

Pakistan Sets Floor on Stock Prices - (Mish at globaleconomicanalysis.blogspot.com) Those looking for absurd government manipulation can find it here: Pakistan Sets Floor on Stock Prices to Stop Plunge. Pakistan set a floor for stock prices on the benchmark exchange, moving to halt a plunge that has wiped out $36.9 billion of market value since April. Securities can trade within their daily limit of 5 percent "but not below the floor-price level" of yesterday's close, the exchange said on its Web site, without giving details. The exchange is working to restore confidence after President Pervez Musharraf quit on Aug. 18 to avoid impeachment, and ruling alliance members nominated rivals for the presidency. Investors stoned the exchange last month after it removed a 1 percent daily limit on price declines.

Saving up for a down payment on a home is the new reality - (www.heraldtribune.com) Hey, what a concept. The investment and lending banks must be brilliant for coming up with this idea!! One reason the down payment is so important is that it is the single most important factor affecting loss to the lender. The down payment is a buffer against lender loss in the event of a foreclosure. For example, if foreclosure costs are 20 percent of value and property value does not change, a 20 percent down payment fully protects a foreclosing lender against loss, but a 10 percent down payment provides only partial protection. Perhaps even more important, borrowers who get into payment difficulties but have equity in their properties usually will sell to avoid foreclosure. By selling, they realize the equity themselves, whereas if they allow the property to go to foreclosure, the equity will be partially or wholly depleted by foreclosure costs. Their selling avoids the foreclosure. There is still another reason why lenders attach so much importance to the down payment. Borrowers who have been able to save the funds for a down payment are less likely to get into payment troubles later on. Saving for a down payment requires budgetary discipline; repaying a mortgage also requires budgetary discipline, and the one carries over to the other. Of course, this assumes that the down payment is saved, not borrowed. Underwriters look for evidence that the funds committed to down payment are the borrower's own.

Bulgaria's real estate boom stumbles as demand slumps - (news.yahoo.com/s/afp) Bulgaria's real estate boom is turning to bust as its key British and Irish property buyers are now discouraged by financial difficulties at home and the ugly concrete views outside their windows. According to a study by the Bulgarian Properties real estate agency, which works exclusively with foreign clients, holiday property sales in Black Sea and mountain resorts dropped 40 percent in the first half of 2008 compared to 2007. "The withdrawal of British and Irish buyers from the Bulgarian market was prompted by the financial crisis in their countries but also by the bad infrastructure and the excess of concrete here," said Dobromir Ganev of the Property Association in Varna on the Black Sea. Many areas of great beauty have been scarred, as elsewhere, by sprawling developments built for a quick speculative gain while the money flowed in. Between 20 and 30 percent of newly-built apartments on the coast have no chance of finding a buyer over the next two years, said Ganev.

Foreclosure Relief: HUD Better Aim Carefully Firing Those Funding Shots - (www.nytimes.com) - Across the United States, neighborhoods are littered with an estimated 900,000 vacant homes, the result of foreclosures, bank repossessions and abandonment. And with defaults rising nationwide, the number is expected to grow well into next year. Such blight is contagious. Empty houses pose fire and health hazards, attract crime and prolong the housing slump by depressing the value of nearby homes and adding to the nation’s already bloated unsold inventory. No one is immune. Even if your neighborhood looks fine — and you are financially secure — foreclosures in your metropolitan area mean less property tax revenue and, as the downturn deepens, less state sales tax revenue. The federal government is only limping to the rescue. The Department of Housing and Urban Development is expected to release a plan next month for funneling nearly $4 billion to states and cities, mainly to buy and redevelop foreclosed homes. The sum is far too small to have a broad impact. Properly targeted, it could stanch the decline in some of the neediest areas, and ideally, begin to revive them by attracting private investment. Success stories could serve as examples for other communities, when, as is likely, a future Congress has to provide more relief.

ECB Plots Clampdown - (online.wsj.com) The European Central Bank is considering tightening lending standards amid concerns it has become a dumping ground for troubled securities, a move that could squeeze some struggling banks. As soon as Thursday, when its governing council meets, the ECB could announce plans to toughen rules on the collateral it will accept in exchange for billions of euros in loans that have kept much of the banking sector afloat. Policy makers are worried that banks have been taking advantage of the ECB's lending facilities, in part by packaging risky mortgages into securities specifically designed to be parked as collateral ..

British economy facing 'worst downturn in 60 years': Darling - (news.yahoo.com/s/afp) The British finance minister has warned the country is facing "arguably the worst" economic downturn in 60 years and says it will be "more profound and long-lasting" than people had expected. Chancellor of the Exchequer Alistair Darling also admits in an interview with Saturday's Guardian newspaper that he had no idea how serious the credit crunch would become. Darling warns that the economic conditions faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". He adds: "And I think it's going to be more profound and long-lasting than people thought."

Closing the dustbin lid - (www.economist.com) There are signs of an increased dependence on ECB funding in some markets. The supply of central-bank cash in Ireland and Spain has more than doubled in the past year, both in size and as a share of the euro-area total (see chart). Ireland’s huge share is bloated by lending to non-Irish banks located in Dublin. Fitch, a credit-rating agency, said in May that standards for newly minted mortgage-backed securities in Spain had slipped since the credit crunch started. Despite this, such securities are appraised at close to their face value. Because trading in ABS is so limited, there is no reliable market benchmark. Another concern is that affiliates of foreign banks are using the ECB as a source of funds for lending outside the euro area. Macquarie, a Sydney-based investment bank (see article), was recently able to secure an ECB loan through a euro-area affiliate, putting up a security backed by Australian car loans. The ECB has been discussing for several months how to tighten the rules to prevent such abuses, without disrupting its cash lifeline to banks. One idea is to increase the “haircuts” it subtracts from the market value of collateral, in order to protect against a decline in asset prices (the bigger the haircut, the smaller the amount that can be borrowed). Haircuts vary from less than 1% for the safest and most liquid government bonds to 18% for some long-dated asset-backed securities. Increasing the haircuts for some securities would offer extra protection against the risk that initial valuations of collateral are too generous.

Worker Assets Shrink at Fannie and Freddie - (www.ml-implode.com) "Fannie Mae’s workers had $116 million in the employee stock ownership plan at the end of 2006. Today, it’s more like $17.5 million. Ouch."

Central California Housing Crash - (www.youtube.com)


Other Stories:

Treasury minister who thought housing crash was joke - (blogs.ft.com)
U.S., Europe, Japan Devised Plan to Prop Up Dollar, Nikkei Says - (www.bloomberg.com)
Uh-Oh - Housing Index Falls Another 15.9% - (www.seekingalpha.com)
Get Physical - (www.ml-implode.com) - "There is a lot of academic debate going on about whether silver prices are being manipulated, among Mish, Jason Hommel below, a...
FHA(In)Secure - (www.ml-implode.com) - "So while the FHA refinanced 324,184 loans so far this year, that doesn’t necessarily mean that the program stopped a wave of wo...
Mortgage Fraud Is on the Rise, Infecting the GSEs - (www.ml-implode.com)
Foreign Central Banks and Agency Debt: 2000 to Present - (www.ml-implode.com)
June Case-Shiller Housing Numbers - (www.seekingalpha.com)
July Housing Numbers Overly Optimistic - (www.seekingalpha.com)
Bank Implosion: Integrity Bank - (www.ml-implode.com)
What are CAMELS ratings? Is My Bank Okay? - (www.ml-implode.com)
FHA regaining market share - (www.ml-implode.com)
Homebuyers turn screws on desperate sellers - (www.ml-implode.com)
Bond fund titan seeks $5bn for mortgage-backed debts - (www.ml-implode.com)
Something Wicked This Way Comes - (www.ml-implode.com)

Foreign money spigot turned off for US consumers - (www.atimes.com)
Lagging Incomes Signal U.S. Economy Weaker Than GDP Suggests - (www.bloomberg.com)
Credit crunch: 'Just the end of the beginning' - (www.independent.co.uk)
Don't try to buck the housing market - (www.independent.co.uk)
The Popsicle Index - (www.solari.com)
Conspiracy Theory Psychology - (Mish at globaleconomicanalysis.blogspot.com)

European Economic Confidence Drops, Inflation Eases - (www.bloomberg.com)
Borrowing Costs Increase Sharply For Russian Firms - (online.wsj.com)
Taking its toll - (www.economist.com)
London Luxury-Home Prices Post First Drop Since 2003 - (www.bloomberg.com)
Japan unveils $18 billion stimulus package - (www.ap.com)
Real Estate Lender Is 10th Bank to Fail This Year - (www.ap.com)
U.S. Junk Bond Sales Slump to Lowest in Decade as Defaults Rise - (www.bloomberg.com)
Bank of China Reduces Fannie, Freddie Debt Holdings - (www.bloomberg.com)
Bank of China flees Fannie-Freddie - (www.ft.com)
When sorrows come - (www.economist.com)
Oil-Rig Insurers Brace for Test as Tropical Storm Bears Down - (www.bloomberg.com)

Mr. Lampert, Fire Thyself - (online.wsj.com)
Expecting more U.S. bank failures, FDIC expands Dallas office - (www.dallasnews.com)
Consumer Spending in U.S. Slowed in July as Prices Rose Most in 17 Years - (www.bloomberg.com)
Freezer sales climb as food prices soar - (www.sfgate.com)
GM Offers Early Retirement to 9,000 Salaried Workers - (www.bloomberg.com)
The Fannie & Freddie Question - (online.wsj.com)
Lehman Has Plan for Real-Estate Loans - (online.wsj.com)
Fannie Mae and Freddie Mac: A Damage Report - (www.businessweek.com)
Higher-end retailers fare a bit better - (www.chicagotribune.com)
Steelmakers Develop New Iron Recipes - (online.wsj.com)
Amgen to end rebates for anemia drug Aranesp - (www.latimes.com)
99 Cents Only retail chain may face price hike - (www.latimes.com)
Hurricane Gustav Strengthens, Accelerates, Heads for Cuba, Gulf - (www.bloomberg.com)