Tuesday November 4 Housing and Economic stories

TOP STORIES:

GOVERNMENTS AROUND WORLD (INCLUDING US) START DISCUSSING PLANS TO TAKE OVER PRIVATE RETIREMENT ACCOUNTS TO FUND THEIR NEEDED BAILOUTS. Their perverse logic is that they must protect private pensions from plundering citizen accounts:
· BBC NEWS Business Argentina to take over pensions - (news.bbc.co.uk) Argentina's President Cristina Fernandez has signed a bill that will nationalise the country's 10 private pension funds. The move will put the government in control of almost $30bn (£18bn) of investments and is aimed at protecting them from the global market turmoil. Shares slumped amid fears of the move's impact and critics accused the government of trying to grab the funds. The bill needs the backing of Congress, where the ruling party has a majority. Ms Fernandez said that Argentina needed to protect those with pensions amid falling stock prices around the world.
· Would Obama, Dems Kill 401(k) Plans? - Capital Commerce (usnews.com) - (www.usnews.com) I hate to use the "S" word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers' retirement accounts (Efharisto, Fausta's Blog). Now, even Uncle Sam isn't that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans. House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, said that since "the savings rate isn't going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."

Donald Trump Bankruptcy Watch. As many of us know, “The Donald” tends to go into bankruptcy about one time per decade usually during a downturn in real estate:
· In Chicago, Trump Hits Headwinds - (online.wsj.com) Donald Trump's tallest construction project ever is facing some tall challenges.Many real-estate developers are under pressure these days as lenders and investors rush to cut their exposure to the market. But Mr. Trump's 92-story Trump International Hotel & Tower in Chicago, which will be the tallest building constructed in the U.S. since the Sears Tower opened in 1973, may be especially vulnerable because it's getting hit by a triple whammy of colliding forces: the credit crunch, the reversal in the housing market and weak retail sales.The shiny glass skyscraper is one of the few that the brash Mr. Trump developed without partners. The situation also puts pressure on one of the project's major lenders, Fortress Investment Group LLC. So far, Mr. Trump has lined up buyers for a bit less than $600 million of condo units and condo-hotel units in a residential market that has virtually seized up. Yet he owes lenders as much as $1 billion when the loans are due, according to public records and several people familiar with the project. He has closed around $200 million in sales so far, with roughly $380 million still in contract. The retail portion of the giant building is for sale, at a time of rising vacancies for retail space in Chicago and one of the worst eras for retailers in years.
· Trump, buyer lower price for Trump Marina sale - (biz.yahoo.com/ap) Sometimes the art of the deal calls for it to be redone. That's what has happened to an agreement between Donald Trump and a former protege of his who's buying the Trump Marina Hotel Casino in Atlantic City. Due to the worsening economy, both sides agreed to reduce the purchase price for the casino-hotel to $270 million, down from the $316 million they set as the price back in May. Trump's company, Trump Entertainment Resorts, can also scrap the whole deal if it doesn't go through by the end of May. New York developer Richard Fields is teaming with singer Jimmy Buffett's business arm to re-brand the casino as "Margaritaville." Despite the lower price, Donald Trump said he's glad the deal is still on. The worsening economy and credit crunch have put many casino projects on hold across the country or forced them to be canceled outright.
· Moody's lowers Trump Entertainment ratings - (biz.yahoo.com/ap) Moody's Investors Service cut its ratings for Trump Entertainment Resort Holdings LP further into junk status on Monday after the New Jersey Casino Control Commission reported steep drops in casino revenue for the month of September. Moody's said September 2008 casino revenue for the Taj Mahal, Trump Plaza, and Trump Marina dropped 10 percent, 22.7 percent, and 24.7 percent, respectively. The ratings service said Atlantic City casino revenue dropped 15.1 percent overall, representing the market's largest ever monthly drop. Moody's lowered Trump's probability of default rating to "Caa2" from "Caa1" and its corporate family rating to "Caa1" from "B3." Its rating on $1.25 billion senior secured notes due 2015 was lowered to "Caa2" from "Caa1," while its speculative grade liquidity rating was cut to "SGL-4" from "SGL-3." The rating outlook is negative. "The downgrade reflects the continued decline in the overall Atlantic City gaming market revenue and the negative impact this will have on (Trump's) already weak credit metrics," Moody's said. Moody's noted that the sale of Trump Marina would help the company's near-term liquidity, particularly if asset sale proceeds are used to repay debt. Trump Entertainment Resort Holdings, an affiliate of Trump Entertainment Resorts Inc., owns and operates the Trump Taj Mahal Casino Resort, Trump Plaza Hotel and Casino and the Trump Marina Hotel Casino in Atlantic City, N.J. Trump shares lost 4 cents, or 5.4 percent, to close at 70 cents, after earlier slipping to an all-time low of 67 cents. The stock has traded between 74 cents and $8.66 during the past 52 weeks, and is down nearly 83 percent since January.
· Financing gone for Trump-named Baja towers - (www.signonsandiego.com) - A principal shareholder in the company developing the project said yesterday that there are still plans to complete the towers. However, after a construction loan of roughly $150 million from a German bank fell through in late summer, a new lender has yet to be found. “With a name like Trump, we figured it was good,” he said. “There were other developments that we could have paid a quarter of that for, but we figured with Trump, you can't go wrong.” Well, I don't get how they drew that conclusion.
· Trump's casinos file for bankruptcy Entertainment & Arts ... - (www.allbusiness.com) This is a story from 2004 to make the point that the guy goes bankrupt several 1-2 times per decade. Donald Trump's casino operations filed for bankruptcy Sunday in a long-expected move that would allow the real estate maverick to restructure the company's debt and overhaul its aging casinos. Trump, the developer who flaunts his brusque business style on "The Apprentice" reality television show, last month clinched a restructuring pact with bondholders that would cut his stake in the company but preserved his role as chairman and chief executive. Under the voluntary bankruptcy filing, Trump Atlantic City Associates, which is 99% owned by Trump Hotels & Casino Resorts Inc., listed $1.3 billion in debt and $1.5 million in assets. It marks the second bankruptcy for Trump's casino empire.

Ethanol maker VeraSun files for bankruptcy protection - (www.bloomberg.com) VeraSun Energy Corp., the second-largest U.S. ethanol producer, filed for bankruptcy protection after making bad hedging bets on corn, a raw material used to make the fuel. The petition for Chapter 11 bankruptcy in Wilmington, Del., listed both assets and debt of more than $1 billion. The Sioux Falls, S.D.-based producer and seller of ethanol, which was formed in 2001, has 16 production facilities in eight states and an annual capacity of about 1.64 billion gallons of ethanol, according to its website. VeraSun temporarily shut down its plant in Linden, Ind., on Tuesday without giving a reason. The company's shares have plunged 89% since Sept. 16, a day before it said it might report a third-quarter net loss of as much as $103 million because of failed hedging bets. The bankruptcy is "a pretty big deal for the industry," Pavel Molchanov, an analyst at Raymond James & Associates in Houston, said before the filing was made public

Wells 30 year fixed jumbo rate is now 10.061% - (www.wellsfargo.com)

In England, ruing the decision to put money in Iceland banks - (www.latimes.com) Dozens of local authorities parked nearly $1.5 billion in Icelandic accounts, which were promoted in Britain as high-yielding, but safe. Now the money may be gone. Individuals suffer too. Since medieval times, this quaint market town has been a wellspring of financial acumen. Merchants grew rich trading saffron crocuses, the flower whose stigma yielded deep yellow dyes for the textile industry and gave the town its name. Brewers prospered from the rising demand for beer. In the 19th century, an eminent local family helped establish one of the behemoths of British finance, Barclays Bank. So some public embarrassment is understandable as officials here find themselves staring at a black hole where about $3.5 million of taxpayer money used to be. The sum was invested in an Icelandic bank, in an attempt by the local government, the Uttlesford District Council, to secure a toehold in the high-return world of international financial markets. But last month, barely a week before the deposit was due to mature with a healthy chunk of interest, the Icelandic government took over the bank as the entire country teetered on the brink of bankruptcy because of the worldwide financial meltdown. Uttlesford abruptly found itself unable to get its cash back. "It was a move away from our normal practice," John Mitchell, the council's chief executive, said of the offshore venture, adding ruefully: "It all went painfully wrong." Uttlesford is just one of dozens of local authorities in Britain that have parked money, nearly $1.5 billion in total, in Icelandic bank accounts, which were aggressively promoted in this country as high-yielding, but safe, investments. Well-known charities, nonprofit groups and institutions such as Oxford University and a cancer hospital in northern England put their funds in Icelandic banks. So did millions of individual Britons, who opened their accounts over the Internet and happily watched their balances grow, at least online. The British government's own watchdog agency for public spending confessed to having $16 million tied up in Iceland, whose banking industry was so heavily leveraged that some called the country one giant Viking hedge fund.

Schwarzenegger to press Legislature to bolster unemployment fund - (www.latimes.com) The governor puts the nearly depleted fund on the agenda for a special session he intends to call next week. Gov. Arnold Schwarzenegger moved Friday to bolster the financial health of California's nearly broke fund that pays unemployment benefits to the state's jobless. The governor added the state's unemployment insurance fund to a growing to-do list for fixing California's faltering finances that he hopes lawmakers will tackle when he calls a special session of the Legislature next week. With joblessness at a 12-year high and the economy falling into a recession, the 73-year-old Depression-era program soon will be in the red. The insurance fund, which is financed by taxes paid by employers, is projected to post a $1-billion deficit by the end of March. If lawmakers and the governor don't come up with a solution, the fund will be in the hole by $2.4 billion at the end of 2009 and $4.9 billion at the end of 2010, according to a new forecast from the California Employment Development Department. The latest estimate is half again as bad as what the EDD projected as recently as May.

Iceland, Mired in Debt, Blames Britain for Woes - (www.nytimes.com) Britain has provoked anger by using an antiterrorism law to freeze British assets in a failing Icelandic bank. No one disputes that Iceland’s economic troubles are largely the country’s own fault. But there may be more to the story, at least in the view of Iceland’s government, its citizens and even some outsiders. As grave as their situation already was, they say, Britain — their old friend, NATO ally and trading partner — made it immeasurably worse. Skip to next paragraphThe troubles between the countries began three weeks ago when Britain took the extraordinary step of using its 2001 antiterrorism laws to freeze the British assets of a failing Icelandic bank. That appeared to brand Iceland a terrorist state. “I must admit that I was absolutely appalled,” the Icelandic foreign minister, Ingibjorg Solrun Gisladottir, said in an interview, describing her horror at opening the British treasury department’s home page at the time and finding Iceland on a list of terrorist entities with Al Qaeda, Sudan and North Korea, among others. In a volatile economic climate, in which appearance matters almost as much as reality, being associated with terrorism is not a good thing. “The immediate effect was to trigger an almost complete freeze on any banking transactions between Iceland and abroad,” said Jon Danielsson, an economist at the London School of Economics. “When you’re labeled a terrorist, nobody does business with you.”

Where Housing Crashed Hardest - (www.nytimes.com) Good picture collage from Merced, CA. In Merced, Calif., thousands of foreclosed homes are on the market, and three out of four sales are foreclosures. In Merced, Calif., several partly built homes sit in a development called Riverstone, their wooden frames bleaching in the sun. A sidewalk leads to nowhere in one development in Merced, a city of 80,000. The experience of Merced, which flew higher and crashed harder than nearly anywhere else, suggests that recovery from the national real estate debacle will be painful and protracted. Mayor Wooten at the stagnant pool of a foreclosed home she listed. The foreclosed owner paid $532,000 for the house, which sold for $225,000. In the three years since housing peaked in Merced, the median sales price has fallen by 50 percent. Moraga, built by Lakemont Homes, was supposed to include 500 luxury homes ranging up to 3,500 square feet in size, with amenities like basketball courts, butler pantries and double ovens. All that is missing are many of the houses. Only about 24 were built.



OTHER STORIES:

Boston Steps In as Foreclosures Pound Neighborhood - (www.nytimes.com) In the hardscrabble Dorchester neighborhood, Boston has begun to buy foreclosed homes in an effort to redevelop them and stanch the area’s decline.
Remember to vote AGAINST any rep or senator who voted for bank bailout! - (www.constituentresponse.com)
Email the Treasury Department - (watchingmarcitz.wordpress.com)
Banks to Pay Dividends to the Rich Using Taxpayer Cash - (www.washingtonpost.com)
Taxpayer's bailout cash can be poured into virtually anything - (msnbc.msn.com)
Fed now handing US cash to Brazil, Mexico, South Korea, Singapore - (Mish at globaleconomicanalysis.blogspot.com)
U.S. to unveil effort to help idiot borrowers - (msnbc.msn.com)
Mortgage Justice Is Blind - (www.nytimes.com)
If borrowers RE-DEFAULT on modified mortgages... - (money.cnn.com)
Making houses LESS affordable is perverse yet obvious - (business.theage.com.au)
House Price Reality Check - (www.seekingalpha.com)
House prices plunge 14% at all-time record rate - (www.dailymail.co.uk)
Banks Value Your Mortgage, Not Your House - (www.minyanville.com)
Massive Market Volatility is not a Good Thing! - (www.mybudget360.com)
Desperate times, desperate people - (articles.moneycentral.msn.com)
Halloween is going to suck this year - (jonnyob.blogspot.com)

October a cruel month for markets - (www.ft.com)
China Manufacturing Contracts as Crisis Trims Exports - (www.bloomberg.com)
India Unexpectedly Cut Interest Rates to Spur Growth - (www.bloomberg.com)
For Asia, Crisis Takes a Different Turn: Not as Deep as '97, but Likely Longer - (online.wsj.com)
Skyscrapers portend doom - (www.ft.com)
Gloom Spreads in EU's Economies - (online.wsj.com)

Rating agencies face EU shake-up - (www.ft.com)
Specter of Deflation Lurks as Global Demand Drops - (www.nytimes.com)
Massive Effort to Save Mortgages - (online.wsj.com)
Bernanke Endorses Some U.S. Backing of Home Loans - (www.washingtonpost.com)
Budgets Squeezed, Some Families Bypass Organics - (www.nytimes.com)

Banks Alter Loan Terms to Head Off Foreclosures - (www.nytimes.com)
The wheels come off - (www.ft.com)
Woes that felled S.F. law firms shake industry - (www.sfgate.com)
A Month-long Walk on the Wildest Side of the Stock Market - (www.nytimes.com)