Saturday December 27 Housing and Economic stories

TOP STORIES:

Houseownership Without Equity: What's It Worth? - (www.truthout.org) It costs roughly $3,000 a year to insure a kid through the State Children's Health Insurance Program (SCHIP). Head Start costs around $7,500 per student. The Women, Infants and Children (WIC) nutrition program checks in at about $750 a head. These numbers are worth keeping in mind in the context of plans for helping homeowners facing foreclosure. All three programs are arguably great success stories, improving the health care of lower-income children, increasing educational opportunities and providing good nutrition at the start of life. All three programs could also be expanded to serve more people if the funding were available. These programs will likely be expanded as priorities of the new administration and also as part of a stimulus package in which almost any type of spending will help to boost the economy. Nonetheless, it will almost certainly be the case that the programs will still not be large enough to fully meet the demand for their services. In this context, it is worth asking how much taxpayers should be willing to spend to keep a homeowner in a home in which they have zero equity. Unless we discuss this question in a serious way, then we are speaking nonsense when we talk about plans to deal with the foreclosure crisis. The reality is that almost all of the millions of families facing foreclosure have zero equity left in their homes. That is why they face foreclosure. If they still had equity in their house, they would borrow against it and meet their mortgage payments.

Let the Banks Fail: Why a Few of the Financial Giants Should Crash - (www.alternet.org) So far, much of Washington’s ad hoc, ham-fisted response to the economic crisis has been based on the dictum that the financial institutions must be prevented from taking their losses. That should come as no surprise. Big finance’s lobbyists have been all over the "bailout" (it should be bailouts, plural) from the very start, Wall Street pumped piles of cash into the elections — AIG, recipient of tens of billions in taxpayer largesse, ponied up $750,000 for both the Democratic and Republican conventions — and the whole thing’s been designed by "free-market" ideologues who came to Washington directly from Wall Street. But the hard reality is that the institutions that created this mess have to take their losses — no doubt huge losses in many cases — if we're to have any chance of avoiding a deep recession that drags on for years. Some will be wiped out in the process, but propping up firms that have massive -- and not entirely known -- quantities of so-called toxic securities on their books only delays the inevitable day of reckoning.

A Second Mortgage Disaster On The Horizon - (www.cbsnews.com) When it comes to bailouts of American business, Barney Frank and the Congress may be just getting started. Nearly two trillion tax dollars have been shoveled into the hole that Wall Street dug and people wonder where the bottom is. As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you're beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what's coming. One of the best guides to the danger ahead is Whitney Tilson. He's an investment fund manager who has made such a name for himself recently that investors, who manage about $10 billion, gathered to hear him last week. Tilson saw, a year ago, that sub-prime mortgages were just the start. "We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we're probably about halfway through the unwinding and bursting of the bubble," Tilson explains. "It may seem like all the carnage out there, we must be almost finished. But there's still a lot of pain to come in terms of write-downs and losses that have yet to be recognized."

Israeli firms among losers in Madoff investment scam - (www.haaretz.com) The huge $50 billion fraud allegedly perpetrated by Bernard Madoff, possibly the largest in history, has reached Israel, too. Among those invested in Madoff's funds and Ponzi scheme are an impressive list of Israeli insurance companies: Harel, Clal and the Phoenix. Estimates of the insurance firms exposure are NIS 40 million for Harel, tens of millions of shekels for the Phoenix and approximately NIS 12 million for Clal. The Technion also has lost money from its own exposure to Madoff and his scheme. It invested funds it raised from donations with Madoff and may have lost NIS 25 million. Madoff, 70, was the former chairman of the Nasdaq, and treasurer of the board of trustees at Yeshiva University and chairman of the university's business school; he managed investment funds with over $17 billion in assets.

Hungry lobbyists look to Obama's stimulus package for a handout - (www.star-telegram.com) Since President-elect Barack Obama laid out plans for the largest injection of federal spending into the economy since the New Deal, just about everyone has started angling for a piece of the action. With estimates of the package, which will be considered by the new Congress starting in January, topping out at anywhere between $500 billion and $1 trillion, ailing sectors such as home builders and sellers, airlines, railroads — and, yes, the auto industry — view the stimulus as a means to get healthy again. That includes the air-conditioning industry, America’s libraries and even catfish farmers. All of them, and many more, have deployed lobbyists on Capitol Hill in hopes of benefiting from the spending spree. "The ever-increasing cost of the yet-to-be-seen stimulus is like chum in the water for lobbyists circling to snap up some taxpayer cash for their clients," said Steve Ellis of Taxpayers for Common Sense, a watchdog group.

Bank of America Stock Could Fall to $9: Analyst - (www.cnbc.com) This stock has gone down hard in recent months and is trading around $13 now. Could they be the next Citigroup??? Bank of America was rated "underperform" by Friedman, Billings, Ramsey Group analyst Paul Miller in a note, citing the bank's "thin tangible common equity" as a chief concern. The stock could fall as low as $9, the analyst said. Bank of America's shares closed at $14.1 on Monday, down 5.5 percent. The stock has tumbled 66 percent so far this year. Bank of America's equity ratio is too low, Miller wrote, leading him to expect that the bank will have to raise a "substantial" amount of capital, diluting existing shareholders. "We recommend that investors stay away from the stock until this initial raise is complete," Miller wrote in the note.




OTHER STORIES:

Detroit papers drop home delivery to 3 days a week - (news.yahoo.com/s/ap) Beset by falling revenue, Detroit's newspapers announced Tuesday that they plan to offer only three days of home delivery and will push their online editions instead, making the city the largest in the nation to have its daily papers undergo such a makeover.
Obama says economic ammunition running low - (news.yahoo.com/s/ap) President-elect Barack Obama says the Federal Reserve is "running out of the traditional ammunition" to deal with a recession.
TNT discovered at famed Paris department store - (news.yahoo.com/s/ap) Police acting on a warning Tuesday found a bundle of dynamite inside a Paris department store at the height of the Christmas season, and a group demanding that France withdraw from Afghanistan claimed responsibility.

Loan Modification Push Will Affect Securitized Mortgages: Fitch - (www.housingwire.com) - Loan modifications will grow to 15 percent of 2005-2007 vintage securitized mortgages over the next twelve months from virtually none, according to a report released Tuesday morning by analysts at Fitch Ratings. The agency said it has received a number of inquiries on proposed changes to transaction documents that expand the servicer’s ability to do modifications, a sea-change in how investors are looking to manage mortgage-related investments
Corruption in the Bailout Plan - (www.bankimplode.com) - Video about Kash and Paulson’s bullsh!t
BankUnited Victim of Fake Press Release - (www. thetruthaboutmortgage.com) - As if things couldn’t get any worse for BankUnited, its stock trading at a mere 32 cents, its regulator demanding it raise a hefty amount of capital, and now this. The Coral Gables, Florida-based bank and mortgage lender was the victim of what they say was a fake press release, involving a handful of companies claiming to be working with BankUnited on loan modifications
US houses lose $2 trillion in value during 2008 - (money.cnn.com)
House prices will crash further 15% in England next year - (www.telegraph.co.uk)
60 Minutes Blows the ALT-A Loan Story - (yourmortgageoryourlife.wordpress.com)
AIG Sells $39.3 Billion in Assets to NY Fed's Fund - (www.cnbc.com)
Pfizer's 40 Year Run Of Hiking Dividend Ends - (www.cnbc.com)
Auto Bailout Anger: Everyone Should Just Chill Out - (www.cnbc.com)
Evidence that the Fed Caused the Housing Boom - (www.mises.org)
Fannie Mae to Let Renters Stay in Foreclosed Properties - (www.washingtonpost.com)
Anatomy of a bank failure: When the liquidators come calling - (www.charleston.net)
FDIC chief sees housing pain into 2010 - (www.usatoday.com) 2025: What to expect - (www.mg.co.za)
Buffett: People Thought I Was Running Ponzi Scheme - (www.cnbc.com)
Goldman Posts $2.1 Billion Loss, But Shares Rise - (www.cnbc.com)
Consumer Prices Take Another Record Plunge - (www.cnbc.com)
Holiday Shoppers Remain Tightfisted- (www.cnbc.com)

Fidelity National Unveils Ultimatum on LandAmerica Deal - (www.housingwire.com) - Fidelity’s message was essentially: If the acquisition is not approved quickly, Fidelity’s deal is off and LandAmerica’s reinsurance protection goes away entirely. That certainly puts pressure on the players to act before the holidays — and it puts pressure on LandAmerica, which can do little other than wait and see how the next week plays out."
Housing Starts in U.S. Fell 18.9% to 625,000 Pace - (www.ml-implode.com) - "Construction starts on housing fell 18.9 percent last month to an annual rate of 625,000 that was the lowest since the governme...
Alan Greenspan's collapsing reputation - (www.ml-implode.com)
Bush Administration Gets Close to Auto Bailout Deal - (www.cnbc.com)
Ford Executive: No Short-Term Liquidity Problem - (www.cnbc.com)