Saturday November 15 Housing and Economic stories

TOP STORIES:

Daily Kos: Bush ties automaker bailout to Columbia - (www.dailykos.com) On Tuesday, the White House disputed any suggestion that President Bush had demanded support for a free-trade agreement in return for his backing of a stimulus package that would aid auto makers. “They did speak about a range of issues, both domestic and international, and they did spend some time talking about the economy,” said the president’s spokeswoman, Dana Perino. “But in no way did President Bush suggest that there was a quid pro quo when it came to the Colombia free trade agreement or the other free trade agreements.”

Background on The Colombia Free Trade Agreement. What would it do? The FTA's grant of duty-free U.S. access for flowers and certain other commercial-scale agri-export crops will certainly put pressure on Colombia to expand agribusiness plantations for such exports. These plantations have been a disaster for the regular farmer. Indeed, under pressure in the 1990s from international lending organizations, Colombia implemented a program of "economic openness," which unleashed a tide of traditional cereals, rice and oats pouring into the country. As a result, 1.1 million hectares of cultivated land were lost. Arenas says that 300,000 farmers, then, turned to cultivating coca. "So, now, with FTA, they want to lower every tariff to zero which will devastate every farmer and make them grow coca," says Arenas. Foreign investor rights--a typical pro-corporate, so-called "free trade," measure--would tighten the grip that large corporations have on the country's natural resources and launch a large-scale plundering of those resources such as timber and minerals. Without a government willing to nationalize such resources or, at the very least, make sure that the benefits of the commercial exploitation are widely spread, you can be sure that huge riches will flow to a handful of people, while most of the population is left with pennies. The upshot: the so-called "free trade" deal would likely displace hundreds of thousands of poor rural Colombians from their lands, sending them into far deeper economic despair--and forcing many of them to work for the very groups that violently displaced them from their lands. The Ministry of Agriculture and Rural Affairs conducted a study of the effects of the 1990s economic "liberalization" and concluded that such a move led to a 35 per cent drop in employment. You can be sure that the proposed so-called "free trade" deal will wreak similar havoc. As Public Citizen notes: "Increased Drug Production is Linked to Past NAFTA-style Agricultural Trade Policies on Which the Peru and Colombia FTAs are Based: We do not need to rely on experts' opinions regarding how the proposed FTAs will lead to increases in drug production. Unfortunately, there is a factual record demonstrating the phenomena. After NAFTA drove down commodity prices in Mexico and eventually 1.3 million Mexican campesinos were driven out of the business of growing corn and beans, many Mexican farmers turned to illegal drugs to compensate for lost income. The U.S. Customs and Border Protection Office reports that in NAFTA's first decade, marijuana seizures doubled at the U.S.-Mexico border." Let's not forget the drug companies. Pharmaceutical companies will get exclusive patent rights, getting 20-year monopoly rights to market drugs in Colombia--the very kind of provisions that have driven up drug prices in the U.S. Generic drugs will effectively be banned for ten years--putting tremendous economic pressure on the health care system in Colombia. Put simply, the deal would benefit business and political interests tied to the paramilitary forces. If you have any doubts about the links between the government and these right-wing paramilitary forces, check this out. In November 2006, two powerful senators and two members of Congress--allies of President Uribe - resigned because of evidence they had conspired with paramilitary groups. The Uribe government was rocked this past Monday when its foreign minister resigned:

U.S. unveils mortgage plan - (money.cnn.com) Is this mortgage plan #3 or #4? Should we call this one hope forever for homeowners (versus Hope Now). Effort focuses on Fannie, Freddie - sets standards for private sector. No direct financial help from U.S. The Bush administration on Tuesday unveiled a new program to modify mortgages and stabilize the battered real estate market, but the plan stops short of providing direct government financial help to at-risk homeowners. The plan centers on Fannie Mae and Freddie Mac, which between them own or back about 31 million mortgages worth a combined $5 trillion. The federal government took over the firms in September due to mounting losses on their portfolios of mortgages. Homeowners 90 or more days late in their mortgage payments, owe at least 90% of their home's current value, live in the home on which the mortgage was taken and have not filed for bankruptcy are eligible. Their mortgage payments would be adjusted through lower interest rates or longer repayment schedules with the goal of bringing payments below 38% of monthly household income.

No. 2 mall operator warns of bankruptcy - (money.cnn.com) General Growth Properties blames weak retail sales and a credit market freeze. General Growth Properties Inc., the No. 2 mall operator in the United States, has warned that an ongoing slump in retail sales, combined with the credit market lockdown, has pushed the company to the brink of bankruptcy. Chicago-based General Growth Properties (GGP) said in an SEC filing late Monday that it has $900 million of property secured debt and $58 million of corporate debt that's coming up for renewal by Dec. 1. It also faces another $3.07 billion in debt that matures in 2009. But "given the continued weakness of the retail and credit markets," the mall operator fears it may not be able to refinance its loans at lower rates to meet its short-term cash needs. General Growth Properties (GGP) shares tumbled 66% to 46 cents in Tuesday trading on the New York Stock Exchange.

Zombie Condos That Ate New York - (www.urbandigs.com) As those who read my piece "Running Off The Cliff" know, the changes made to the 421a tax abatement program resulted in a perverse rush by developers to begin construction on new condo projects in New York City in the face of a declining Wall Street economy. It's an amazing testament to the distortion of behavior that subsidy programs can have. The chart from that piece was so striking I am reprinting it here (but slightly gussied up). Note that building permits for single family homes and 2-4 family homes peaked in 2006, lagging the US overall - as New York typically does - but falling off precipitously and quite rationally since. However, as a result of so many developers trying to "get into the ground" to secure their 421a tax abatements, the number of permits for buildings with more than 6 units continued to rise in 2008 (with YTD numbers through August actually ahead of full year 2007 numbers), despite market signals that it probably wasn't a great time to reach for new heights in condo building. I thank Christine for her recent piece "New Dev Buyers: "What Are You Going to Give Me?" about condo developers finally getting down and dirty with deals. As I mentioned in my prior piece, in order to retain their tax-advantaged status, these buildings must be built without "undue delay" and I noted that city planning specified that "We would deem completion within 36 months from commencement as a guideline for construction being completed without undue delay." So despite the struggles of projects in later phases of development, we can expect delivery of several thousand condo units starting around December of next year - 18 months would be a typical construction period for a project that's not too elaborate - with deliveries being completed before June 2011. Of course, developers will be out marketing these projects well before they are completed, causing further competition for those units in buildings now being completed that continue to linger on the market. Now, perhaps, the unkindest cut for developers has come. According to a recent Real Deal article, lenders are becoming wary of making mortgage loans to those buying condominiums in buildings where fewer than 51% of the units have already been sold.

Fed Defies Transparency Aim in Refusal to Disclose - (www.bloomberg.com) The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral. Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return. ``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.'' Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

Deutsche Bank views GM shares as worthless - (www.marketwatch.com) Deutsche Bank downgraded General Motors Corp. ( GM 2.92, -0.45, -13.3%) to sell from hold, with a price target of $0, saying the car maker may not be able to fund its U.S. operations beyond December without government intervention. Deutsche Bank said it believes the U.S. government will be compelled to intervene through a capital infusion or loan. "Without government assistance, we believe that GM's collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers, and sectors of the U.S. economy," the broker said. Even if GM avoids bankruptcy, equity shareholders are unlikely to get anything back, it added.

Landlord told to pay tenants millions for security deposits - (www.sfgate.com) An Oakland jury says a landlord must pay $5.5 million in punitive damages for cheating tenants out of their security deposits by fabricating claims of damage to their living quarters. The Alameda County Superior Court jury decided Tuesday that landlord Richard Thomas had defrauded tenants out of $183,000 in security deposits between 1999 and 2007, and followed up Wednesday by awarding 30 times that amount in punitive damages. Tenants' lawyer Laura Stevens acknowledged that the punitive award will have to be reduced because of U.S. Supreme Court rulings that have limited those damages to 10 times the amount of compensation in most cases. But she said the verdict allows Thomas' former tenants to recoup their losses, and possibly to recover additional sums as penalties. After Judge Steven Brick lowers the punitive damages, Stevens said, she will ask him to award those sums to nonprofit housing agencies rather than the former tenants.

Chinese job losses prompt exodus - (www.news.bbc.co.uk) Tens of thousands of migrant workers are leaving the southern Chinese city of Guangzhou after losing their jobs, railway officials say. The increase to 130,000 passengers leaving the city's main station daily is being blamed on the credit crunch. Guangzhou is one of China's largest manufacturing hubs, but many companies who export products have collapsed. Chinese officials are worried that a sudden increase in unemployment could lead to social unrest. The most badly hit export companies are toy, shoe, and furniture manufacturers. There are already reports of demonstrations and social unrest in the provinces of Zhejiang and Guangdong.



OTHER STORIES:

A Town Drowns in Debt as Home Values Plunge - (www.nytimes.com) Almost 90 percent of homeowners in Mountain House, Calif., owe more on their mortgages than their houses are worth.
Here for the holidays: Layoffs - (money.cnn.com)
GM: Stock sinks to 65-year low - (money.cnn.com)
Pelosi supports auto industry aid - source - (money.cnn.com)
Citi to modify $20 billion in home loans - (money.cnn.com)
Toll Bros.: More housing support needed - (money.cnn.com)
Macao vows to rescue casinos - (www.ft.com) Las Vegas Sands halts project. Macao will not allow casinos in the world’s largest gambling market to go bust, according to the territory’s chief executive.
“If necessary, the government will take over,” Edmund Ho said on Tuesday. “We will not allow any casinos to shut down.”
Billionaire set to unveil new Sands financing - (www.ft.com) Billionaire Sheldon Adelson is expected to unveil a financing package as early as this week to help prop up Las Vegas Sands, his cash-strapped gaming empire, according to people familiar with the situation. The auditor of the casino operator said last week that it had doubts about the company’s ability to continue as a going concern.

Oil price slides below $60 - (www.ft.com) 20-month low amid growing economic fears.
GM to suspend production at Korean plants - (www.ft.com) Stems from slowing demand

The rising cost of the bailout - (www.bailoutsleuth.com)

Visualizing Uncle Sam's Debt As Credit Cards - (blog.mint.com)
Fannie Mae Loses $29 Billion on Write-Downs - (www.nytimes.com)
Houseowner denial: My house is gaining value - (msnbc.msn.com)
More downward motion for house prices in 2009? - (latimesblogs.latimes.com)
Seattle area faces bleak real estate forecast - (seattlepi.nwsource.com)

Goldman forecasting biggest rise in joblessness since WWII - (www.marketwatch.com)
Reversal of banking regulations led to crisis - (www.seekingalpha.com)
US bank group says industry doesn't need more rules - (www.reuters.com)
Retailers Report a Sales Collapse - (www.nytimes.com)
Why we need a bailout - (www.dilbert.com)