Friday December 5 Housing and Economic stories

TOP STORIES:

Insurer Dumps Long-Term-Care Policies - (online.wsj.com) A major insurer has dumped a chunk of its long-term-care policies into an independent trust, putting tens of thousands of policyholders at risk of reduced benefits or big premium increases. Conseco Inc. officials have said the transfer of many of the insurers' long-term care policies to a new state-supervised nonprofit trust, Senior Health Insurance Co. of Pennsylvania, allows it to concentrate on its core businesses. The policies were a drag on the company's earnings because they were underpriced and required continuing capital infusions to meet the long-term needs of policyholders. The trust will pay claims from a pool of funds transferred to it from Conseco, including $175 million in capital. But A.M. Best Co., the insurance-rating firm, warns that the trust may need to raise rates and reduce benefits and has no access to additional capital. If the trust were to become insolvent, some policyholders might ultimately have to rely on the Pennsylvania state guaranty association to pay any claims, up to limits set by state

Chicago Banks on Private Parking – (online.wsj.com) Another city accepting short-term bailout cash to address budget shortfalls at the expense of future generations. The city tentatively accepted a $1.16 billion bid for the rights to manage its parking-meter system, continuing its strategy of privatizing public assets. The city tentatively accepted a $1.16 billion bid Tuesday for the rights to manage its parking-meter system, handing a Morgan Stanley-backed group a concession that continues the city's strategy of privatizing its public assets. Final approval of the deal, which will be decided by a city council vote on Thursday, would establish the first private concession for a publicly owned U.S. parking system, according to Mayor Richard M. Daley. Similar deals over the past three years have seen Chicago pocket nearly $5 billion from leasing the Chicago Skyway, downtown parking garages and Midway Airport. Drivers will pay sharply higher prices to use Chicago's 36,000 parking meters if a privatization deal is approved. Mr. Daley said at a news conference that the fresh funds, to be paid up front for a 75-year concession, will help the city avoid seeking federal government help to balance its budget. "We're creatively working to protect our taxpayers for years to come," he said at a news conference Tuesday.

Investors Begin to Revolt Over Modified Home Loans - (www.cnbc.com) I’m actually surprised it took this long. As more and more banks announced they were getting more and more aggressive on loan modifications, it seemed the investors in these loans were being just a little too silent. We’ve talked a lot about the investor “issue” when it comes to loan mods; that so many subprime loans were pooled and sold into the broader markets, making it difficult to modify the loans. Banks like JP Morgan [JPM 28.53 2.41 (+9.23%) ] and Citigroup’s [C 7.22 0.77 (+11.94%) ] modification programs are focused for the most part on loans that are on their own books and were not sold off. But the massive Countrywide deal with several states attorneys general to do thousands of modifications was bound to hit a snag with investors, and now, according the Wall Street Journal, it has. The paper reports that one such investor in mortgage-backed securities, a Mr. William Frey, is the lead plaintiff in what he hopes will be a class action lawsuit challenging the $8.4 billion Countrywide settlement (Countrywide of course now owned by Bank of America [BAC 14.37 1.52 (+11.83%) ] , which is handling all those modifications). The settlement requires BofA to modify about 400,000 loans, the bulk of which are investor-owned. It all comes down to who should pay for the big bad mortgage mess. BofA claims Countrywide’s agreement with investors allows modifications of defaulted loans, while the lawsuit claims Countrywide has to buy back any loans that it modifies.

They warned us, but US eased loan rules - (www.sfgate.com) The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents. "Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job. Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way. "These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages," David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.

Manhattan Awash in Open Office Space - (www.nytimes.com) Almost 16 million square feet is currently listed as available in large blocks in 68 office buildings in Manhattan, according to Colliers ABR, a commercial brokerage firm. That is nearly double the space available a year ago, both in terms of the number of large office blocks — which in New York usually means 100,000 square feet or more — and in terms of total square feet. Those figures are widely expected to go much higher, said Robert L. Sammons, the managing director of research for Colliers ABR. He said it was difficult to get a handle on exactly how much space financial companies alone might put back onto the Manhattan office market over the next year or so.

States Want $176 Billion Slice of Stimulus - (www.washingtonpost.com) When President-elect Barack Obama arrives at Philadelphia's Independence Hall today to meet with the nation's governors, the main question will be not whether he will deliver fast fiscal relief to the states, but how much? Obama and congressional Democrats have promised that soon after Inauguration Day he will sign an economic stimulus bill that could exceed $500 billion. The governors intend to request about $176 billion of that -- $136 billion for infrastructure projects and $40 billion to bolster Medicaid health programs that serve the poor and disabled. "The slowing economy is resulting in growing unemployment, increased demand for state services and significant declines in state revenues," said Gov. Jim Douglas (R-Vt.), who is vice chairman of the National Governors Association. "It's critical this happen as soon as possible."

Iceland: The country that became a hedge fund - (www.fortune.com) On a gloomy morning in early August, more than a month before Wall Street and the world's financial system seized up, a senior aide to Iceland's Prime Minister paid a visit to the Russian embassy in Reykjavík to make a controversial request: Bail us out. Iceland had one of the richest economies in Europe, but it had a problem. Its three main private sector banks had become so large that their assets amounted to more than ten times the gross domestic product of the country - and there were signs that they might run into trouble. Iceland had asked its traditional allies for help, but to its consternation, its pleas to the U.S. Federal Reserve, the Bank of England, and the European Central Bank went unheeded. Instead, the answer was always, "Ask the International Monetary Fund" - a drastic step Iceland didn't want to take.


OTHER STORIES:

A user's guide to the financial crisis - (blog.macleans.ca)
It's official: U.S. in recession since December 2007 - (money.cnn.com)
Starting Now: America's Second Great Depression - (www.moneyandmarkets.com)
Layoffs High and Headed Higher in Silicon Valley - (online.barrons.com)
Chinese leader says China losing competitive edge - (news.yahoo.com)
Mortgage rates fall, but many borrowers will have trouble qualifying - (www.latimes.com)
Low interest rates and federal insurance may bankrupt America - (optionarmageddon.ml-implode.com)
Bay Area sees deals on houses for under $100,000 - (www.sfgate.com)
Don't buy real estate in Fremont or the Bay Area right now! - (sfbay.craigslist.org)
How much does the Average American Make? - (www.mybudget360.com)
Five-figure bonuses stun plant workers - (msnbc.msn.com)

Oil Falls More Than $100 From July Record on U.S. Recession - (www.bloomberg.com)
Treasuries Advance as Inflation Concern Fades, Fed May Buy Debt - (www.bloomberg.com)
U.S. Stocks Advance, Rebounding From Worst Drop Since October - (www.bloomberg.com)
BofA and Merrill Job Cuts Could Now Reach 30,000 - (www.cnbc.com) Bank of America could end up cutting 30,000 jobs as it moves to absorb Merrill Lynch, three times as many as previously estimated, sources told CNBC
Bank Bailout Larger Than Any Other Government Program, Ever - (216.157.72.247)
Feds ignored clear meltdown warnings - (msnbc.msn.com)

What no one wants to admit: debtors were not forced to borrow - (www.russiatoday.com)
Don't spend big on Christmas this year if you can't afford to - (www.idahostatesman.com)
US credit card industry may cut $2 trillion in credit - (economictimes.indiatimes.com)
Canadian prices falling; U.S.-style collapse could cost taxpayers plenty - (blog.macleans.ca)
Housing Update - How Far To The Bottom? - (Mish at globaleconomicanalysis.blogspot.com)

Delinquent Mortgages Set to Nearly Double in 2009 - (online.wsj.com)
Fund Investors Sue Countrywide Over Loan Modifications - (www.nytimes.com)
Hedge fund investors demanding more control - (www.nypost.com)
J.P. Morgan's Once-Hot Highbridge Goes Cold - (online.wsj.com)
China Property Slump Threatens Global Economy as Growth Slows - (www.bloomberg.com)
Australia Extends Biggest Rate-Cut Round Since 1991 - (www.bloomberg.com)
Chinese yuan falls sharply ahead of US talks - (news.yahoo.com/s/afp)
Metrovacesa Owner in Talks to Cede Control to Banks - (www.bloomberg.com)
Asian policy makers step up efforts to lift demand - (www.iht.com)

London house prices in free-fall: Prime property in London is down 14.1 per cent. – (www.telegraph.co.uk)
Car sales in Spain plunge 50 percent in November from last year - (www.chicagotribune.com)
Fed Extends Three Emergency Loan Programs to April - (www.bloomberg.com)
Economic Signs Point to Longer, Deeper Recession - (www.washingtonpost.com)
Recession in U.S. May Be Just Beginning as Job Losses Mount - (www.bloomberg.com)
U.S. November Auto Sales Plunge 37% on Recession, Pleas for Aid - (www.bloomberg.com)
States Paint Grim Picture, Ask for Help - (online.wsj.com)
Officials Vow to Act Amid Forecasts of Long Recession - (www.nytimes.com)
‘Bernanke-san’ Signals Policy Shift, Evoking Japan Comparison - (www.bloomberg.com)

Gasoline is cheap, but we're still saving it - (www.latimes.com)
G.M. Asks for $18 Billion as It Tries to Avoid Collapse - (www.nytimes.com)
Automakers Assemble Make-or-Break Case - (www.washingtonpost.com)
Goldman faces $2 billion loss: report - (www.reuters.com)
Big Three automakers try again for a bailout - (www.latimes.com)