Friday November 14 Housing and Economic stories

TOP STORIES:

Banks Giving 1-2% Teaser Rates as Modifications – (www.ml-implode.com) - The re-leveraging of the US home owner has begun. It was just reported on CNBC that part of CITI’s plan was to give temporary teaser rates of 1-2% to ‘help’ borrowers avoid foreclosure. I have reported in the past that other banks are opting for this route because it costs them far less than a permanent modification involving principal reduction. But ultimately, this route will ultimately lead to lost decades in housing.

Another AIG Resort "Junket": Top Execs Caught on Tape - (www.abcnews.com) Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret gathering at a luxury resort in Phoenix last week. Reporters for abc15.com (KNXV) caught the AIG executives on hidden cameras poolside and leaving the spa at the Pointe Hilton Squaw Peak Resort, despite apparent efforts by the company to disguise its involvement. "AIG made significant efforts to disguise the conference, making sure there were no AIG logos or signs anywhere on the property," KNXV reported. (click here to see the full KNXV report) A hotel employee told KNXV reporter Josh Bernstein, "We can't even say the word [AIG]." A company spokesperson, Nick Ashooh, confirmed AIG instructed the hotel to make sure there were no AIG signs or mention of the company by staff. "We're trying to avoid confrontation, keep our profile low," said Ashooh. "Some of our employees have been harassed."

Goldman Urged Bets Against Bonds It Sold - (www.cnbc.com) Yes, these are the crooked companies that the Fed is providing bailout money to. Goldman Sachs, which acted for the state of California in selling bonds, has urged some of its big clients to place investment bets against some of those bonds this year, the Los Angeles Times reported. The paper said that Goldman declined to discuss the details of its trading strategy. Goldman spokesman Michael DuVally told the paper that the firm was no longer giving the trading advice to clients. He declined to elaborate. The newspaper said the company did not inform the office of California Treasurer Bill Lockyer that it was proposing a way for investment clients to profit from California's economic downturn. "It could exaggerate people's worries about our credit," the paper quoted Paul Rosenstiel, head of the public finance division of the treasurer's office, as saying. Goldman is an important underwriter of California municipal securities and over the last five years has earned about $25 million in underwriting fees from California issues, the paper said.

Two Major Hedge Funds to Be Liquidated by Tontine - (www.cnbc.com) Tontine Partners, one of the largest and most successful hedge fund families, is now liquidating two of its major funds, Tontine Capital and Tontine Partners, CNBC has learned. The hedge fund has also filed a number of Schedule 13D forms with the Securities and Exchange Commission to sell major holdings Tontine has in firms such as Exide Technologies [XIDE 3.80 -0.41 (-9.74%) ] , Broadwind Energy [BWEN 7.5 -1.75 (-18.92%) ] and Westmoreland Coal [WLB 6.60 -1.20 (-15.38%) ] . The multi-billion dollar Greenwich, Conn.-based hedge fund, which is headed by Jeffrey Gendell, had posted average annual returns since 1997 of 38 percent. Despite Gendell's track record for strong performance, this year bas been a dififerent story for Tontine. Tontine Capital is down 77.8 percent while Tontine Financial is down 83.3 percent for the year.

A Quiet Windfall For U.S. Banks - (www.washingtonpost.com) The financial world was fixated on Capitol Hill as Congress battled over the Bush administration's request for a $700 billion bailout of the banking industry. In the midst of this late-September drama, the Treasury Department issued a five-sentence notice that attracted almost no public attention. But corporate tax lawyers quickly realized the enormous implications of the document: Administration officials had just given American banks a windfall of as much as $140 billion. The sweeping change to two decades of tax policy escaped the notice of lawmakers for several days, as they remained consumed with the controversial bailout bill. When they found out, some legislators were furious. Some congressional staff members have privately concluded that the notice was illegal. But they have worried that saying so publicly could unravel several recent bank mergers made possible by the change and send the economy into an even deeper tailspin. "Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no," said George K. Yin, the former chief of staff of the Joint Committee on Taxation, the nonpartisan congressional authority on taxes. "They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks."
Fannie Says $100 Billion Pledge From Treasury May Not Be Enough - (www.bloomberg.com) Fannie Mae may need more than the $100 billion in funding pledged by the U.S. Treasury to stay afloat after reporting a record $29 billion loss and confronting more difficulty in issuing and refinancing debt. ``This commitment may not be sufficient to keep us in solvent condition or from being placed into receivership,'' if there are further ``substantial'' losses or if the company is unable to sell unsecured debt, Washington-based Fannie said in a filing today with the U.S. Securities and Exchange Commission. Fannie said it has a limited ability to issue debt maturing past one year, citing market conditions, the lack of an explicit federal guarantee and competition from government-insured bank bonds. Fannie, which along with Freddie Mac was seized by regulators on Sept. 6, slashed the value of its assets by at least $21.4 billion for the third quarter and increased credit loss reserves by 75 percent to $15.6 billion. Freddie is required to file its quarterly earnings by the end of the week.

Financiers Flee 15 Broad Street - (www.nytimes.com) When the 42-story J.P. Morgan building at 15 Broad Street was converted to condominiums in 2004, in a development known as Downtown by Philippe Starck, it was an instant success, with prices quickly rising. Since then, it spawned many imitators in the Financial District. Now, with the economy uncertain, even 15 Broad Street, with its panoply of amenities, including a bowling alley, a basketball court, a swimming pool, a yoga studio and a stylish terrace overlooking the New York Stock Exchange, may not be immune to the market downturn, as many owners, from investors to hedge-fund kingpins, head for the door, The New York Times Josh Barbanel writes. As of last week, 36 apartments were for sale in the building, more than 10 percent of the 326 apartments. In October, only two apartment sales there were filed with the city, but 13 apartments went on the market, according to listings on Streeteasy.com. Two-thirds of the apartments listed before last month had lowered prices. According to property records, all three apartments were bought by Adam Sender, the founder of Exis Capital, a hedge fund, in June 2007 for a total price of just over $8 million. Mr. Sender is known for an extensive art collection, which he valued last year at more than $100 million, and his role as a star witness in the wiretapping and racketeering trial of Anthony Pellicano, the Hollywood private detective. It is not clear whether Mr. Sender bought the apartments to live in or as an investment. On a $5 million mortgage, it appears that Mr. Sender has paid about $400,000 in interest and maintenance so far. Last year, after several years of ups and downs for his fund, Mr. Sender was quoted as saying that his art collection was his biggest single asset. But Exis Capital has told investors that it is up nearly 10 percent so far this year, despite the general downturn. The average stock fund, by comparison, is down 22 percent, according to estimates from Hedge Fund Research. In April, Mr. Sender testified that he had paid Mr. Pellicano more than $500,000 to investigate a movie producer with whom he had invested $1.1 million. Mr. Sender said that Mr. Pellicano had offered to have the producer killed, but that he had declined the offer.

Fitch Ratings lowers credit outlooks on 6 emerging economies amid financial crunch - (www.startribune.com) Fitch Ratings on Monday lowered the sovereign credit rating outlooks for six emerging market economies to reflect higher risks to creditworthiness stemming from the global financial crisis and economic slowdown. The outlooks on the long-term foreign currency ratings for South Korea, Mexico, Russia and South Africa, were revised down to "negative" from "stable," Fitch, one of the three major international credit ratings agencies, said in a release. A negative outlook means there is a greater chance of the actual credit rating being downgraded. Outlooks on Chile and Malaysia, meanwhile, were lowered to "stable" from "positive," the agency said.



OTHER STORIES:

Pelosi Adds Pressure For Auto Maker Bailout - (www.cnbc.com)
Bankrupt GM Would Be Bad - (www.cnbc.com)
US Expands Program to Modify Troubled Mortgages - (www.cnbc.com)
Citigroup Steps Up Efforts to Refinance Mortgages - (www.cnbc.com)
GM Likely to Survive, Bonds a 'Buy': JPMorgan - (www.cnbc.com)
Big Three Bailout: Market Watchers Weigh In - (www.cnbc.com)
Goldman Sachs: Has Firm Lost Its Midas Touch? - (www.cnbc.com)

Fed Approves AmEx as Bank Holding Company - (www.cnbc.com)
Google 'Crushed,' but Why Is Wall Street Piling On? - (www.cnbc.com)
Toll Brothers Says Cancellations Rose Sharply - (www.cnbc.com)
Merrill CEO: Economic Environment Recalls 1929 - (www.cnbc.com)

Realtors Ask Feds for Reduction in Owner-Occupancy Ratio – (www. mortgagenewsdaily.com) The National Association of Realtors® (NAR) recently called on the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Administration (FHFA) to reduce the owner-occupied ratio requirement for condominium complexes."
Circuit City files for bankruptcy - (www.reuters.com)
AIG Gets Expanded Bailout, Posts $24.5 Billion Loss - (www.bloomberg.com)
Nortel sets sweeping cost cuts, posts big loss - (www.reuters.com)
A.I.G. May Get More in Bailout - (www.nytimes.com)
HSBC Sets Aside Additional $4.3 Billion for U.S. Loan Losses - (www.bloomberg.com)

Travelers enjoying lower airfares - (www.latimes.com)
USG to cut 20% of salaried workforce - (www.chicagotribune.com)
DHL parent may cut 13,000 jobs in U.S. - (www.latimes.com)
U.S. Stocks Retreat as Earnings Concern Overshadows Stimulus - (www.bloomberg.com)
Gold Rises on Speculation China Stimulus Plan Will Boost Demand - (www.bloomberg.com)
Crude Oil Rises More Than $1 as China Unveils Stimulus Program - (www.bloomberg.com)
A Frightful Month for Hedge Funds - (www.nytimes.com)
Gendell, Scholes Are Losers as Hedge Funds Drop for Fifth Month - (www.bloomberg.com)

Japanese Machinery Orders Slide 10.4%, Matching Record Decline - (www.bloomberg.com)
Pakistan's Inflation Jumps to 25%; Near 30-Year High - (www.bloomberg.com)