Sunday December 28 Housing and Economic stories

TOP STORIES:

California faces financial meltdown as debt grows by $1.7m an hour - (business.timesonline.co.uk) The state of California, one of the top ten largest economies in the world, will run out of money by February, causing “financial Armageddon”, according to dire new budget projections. As of yesterday, the state’s debts were mounting at a rate of $1.7 million (£1.1 million) per hour. The de facto insolvency of America’s most populous state — home to such economic engines as Silicon Valley, the Central Valley agricultural region, Hollywood, Napa Valley, the Long Beach ports, and the defence research and production facilities of Los Angeles, San Diego and the Mojave desert — would represent a new scale of catastrophe in a year in which financial markets and economies have imploded globally. Bill Lockyer, the treasurer of California, has cautioned that $5 billion of public works projects, including road and school construction, will have to be canceled because the state’s lenders are worried about an impending Iceland-style bankruptcy. California — which has a GDP of $1.7 trillion — already has the worst credit rating of any of America’s 50 states. “Without a budget solution, state financing of infrastructure projects will stop. It’s as simple, and dire, as that,” Mr Lockyer said this week. California’s biggest problem is the precipitous decline in tax revenues over the past year. The state’s property taxes — the equivalent of Britain’s council taxes — are based on the value of a house when it was first bought, and can then rise by no more than 2 per cent a year. This means that by far the most tax revenues come from new property sales, and these have all but dried up.Tax revenues have also been hit by the global recession. and credit crunch. The deflationary consequences canceling projects and raising taxes are going to be enormous.

SEC sues National Lampoon for stock manipulation - (www.reuters.com) Who say the SEC isn’t doing their job? They are going after the little guys while ignoring $50B ponzi schemes, corrupt banks (Citigroup), etc. The U.S. Securities and Exchange Commission said Daniel Laikin, National Lampoon's chief executive, and a company consultant paid kickbacks of about $68,000 for the purchase of National Lampoon stock in order to inflate the stock price. The SEC also charged two stock promoters in the case. The SEC said that from March through June of this year, Laikin and Dennis Barsky, a consultant to National Lampoon and a significant stockholder, paid kickbacks to stock promoters and a witness secretly cooperating with the government. The alleged purchases were made over a number of days and were designed to give the false impression of a steady demand for the stock, the agency said. The SEC said Laikin and Barsky were trying to push National Lampoon's stock price from under $2 per share to at least $5 per share, to keep the price above the minimum listing requirements of the AMEX, and to put the company in a better position to enter into "strategic partnerships and acquisitions."


So far, Democratic integrity looks no better than Republican politics of the past 8 years:
· Grand Jury Probes Richardson Donor’s New Mexico Financing Fee - (www.bloomberg.com) A federal grand jury is investigating how a company that advised Jefferson County, Alabama, on bond deals that threaten to cause the biggest municipal bankruptcy in U.S. history, did similar work in New Mexico after making contributions to Governor Bill Richardson’s political action committees. The grand jury in Albuquerque is looking into Beverly Hills, California-based CDR Financial Products Inc., which received almost $1.5 million in fees from the New Mexico Finance Authority in 2004 after donating $100,000 to Richardson’s efforts to register Hispanic and American Indian voters and pay for expenses at the Democratic National Convention in 2004, people familiar with the matter said. On Dec. 1, Birmingham, Alabama’s mayor, Larry Langford, was charged by federal prosecutors with soliciting $235,000 in loans, expensive clothes and jewelry from Montgomery, Alabama-based bond underwriter Blount Parrish & Co. Langford, the former president of the Jefferson County Commission, included the firm on bond and derivative deals that netted it about $7.1 million. CDR, which wasn’t named in that indictment, advised Jefferson County on the derivatives. The New Mexico probe comes two years after the FBI searched CDR’s offices as part of a nationwide investigation into whether banks and advisers conspired to overcharge local governments on financing deals. That probe by the New York office of the U.S. Department of Justice’s Antitrust Division is ongoing, and CDR says it is cooperating.
· Source: Ill. gov nixed job for Jackson Jr.'s wife – (news.yahoo.com/s/ap) Shortly after his 2002 election, Gov. Rod Blagojevich toldRep. Jesse Jackson Jr. he didn't appoint the congressman's wife as lottery director because he had refused him a $25,000 campaign donation, a person familiar with the conversation told The Associated Press on Tuesday. "Blagojevich went out of his way to say, 'You know I was considering your wife for the lottery job and the $25,000 you didn't give me? That's why she's not getting the job,'" the person said, speaking on condition of anonymity because of the ongoing federal investigation. Jackson's name has played prominently ever since Blagojevich was arrested last week on corruption charges, including allegations that he tried to sell or trade President-elect Barack Obama's vacant Senate seat for personal gain. Jackson has been identified as one of the candidates Blagojevich was considering for the seat, and a criminal complaint said his supporters were willing to raise $1.5 million for the governor if he picked the congressman. The complaint quotes Blagojevich as saying on federal wiretaps that an associate of the candidate offered to raise money for him if he made the Jackson appointment happen. Jackson spokesman Kenneth Edmonds declined to comment on the account of the exchange shortly after Blagojevich's 2002 election but said the congressman, the son of civil rights activist Jesse Jackson, has approached federal investigators to discuss the governor and others for years.
· Lawmakers Reject Election for Illinois Senate Seat - (online.wsj.com) If Blagojevich Resigns or Is Impeached, Lieutenant Governor Will Make Appointment -- Keeping the Decision in Democrats' Hands. State Democrats slammed the door Tuesday on a special election to fill the U.S. Senate seat vacated by President-elect Barack Obama, reversing earlier calls for a vote and ending a rare sense of statewide bipartisanship that followed Gov. Rod Blagojevich's arrest last week. "We need leadership from majority Democrats in the Legislature; instead, what we are getting is the same old insider political games," Deputy Republican Leader Christine Radogno said. "Frankly, after the past week, most people in Illinois are wondering how much more embarrassment the state must endure. Apparently, legislative Democrats think the state needs more embarrassment." In a news conference Tuesday, Mr. Obama backed away from his earlier call for a special election. "I'm going to let the state Legislature make a determination in terms of how they want to proceed," he said.


Best Buy offers employee buyouts as profit falls 77% - (www.latmes.com) Best Buy Co. offered voluntary severance packages to virtually all its 4,000 corporate employees Tuesday as the nation's largest consumer electronics chain announced its third-quarter profit skidded 77%.

IRS to lower hurdle for distressed home sales, refinancing - (www.latimes.com) The agency offers to be more lenient with homeowners facing liens on their property for delinquent taxes. >>

Calpers To Report Losses of 103% on its Residential Investments - (Mish at globaleconomicanalysis.blogspot.com) CalPERS, the California Public Employees' Retirement System announced a new milestone in pension plan incompetence today by admitting losses in Risky, Ill-Timed Land Deals. At the height of the property bubble, California's giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it's one of the biggest owners of undeveloped residential land in America. Partly because of these investments, California Public Employees' Retirement System is struggling to avoid one of its worst annual declines since its 1932 inception. Calpers has lost almost a quarter of its assets since July 1, the start of the current fiscal year.
The problems come at a time of uncertainty for the nation's largest public pension fund, which has been without its top two executives for nearly half a year. Calpers is poised to appoint a new chief executive as early as this week, people familiar with the matter said.Calpers is now warning California's cities, towns and schools that they may have to cough up more money to cover the retirement and other benefits the fund provides for 1.6 million state workers. Some towns are already cutting municipal services, and at least one is partly blaming the Calpers fees. Calpers in recent weeks said it expects to report paper losses of 103% on its residential investments in the fiscal year ended June 30. That's because Calpers invested not only its own money, but billions of dollars of borrowed money that must be repaid even if the investment fails. In some deals, as much as 80% of the money invested by Calpers was borrowed. ... Rest by Subscription

KB Home Ex-Official Pleads Guilty to Obstruction - (online.wsj.com) KB Home's former head of human resources agreed to plead guilty to conspiring to obstruct justice in connection with a backdating scandal that came to light at the home builder in 2006.

Illinois Pays Four Times Average on $1.4 Billion Note - (www.bloomberg.com) Illinois sold $1.4 billion of short- term notes to catch up on unpaid bills, paying as much as four times higher in yield than top-rated municipal borrowers as the state seeks to close a budget deficit amid political turmoil. Yields ranged from 3.5 percent on notes due in April 2009 to 4 percent on securities set to mature in June. Top-rated six- month municipal notes are yielding an average 0.96 percent, according to a Bloomberg index. JPMorgan Chase & Co. was the winning bidder for notes of all three maturities. Illinois confronts a projected $2 billion budget shortfall this fiscal year while Governor Rod Blagojevich faces possible impeachment after federal corruption charges. Investors demanded higher yields after Moody’s Investors Service assigned its second-highest short-term rating of MIG 2 to the notes yesterday, citing the state’s “stressed” cash position and “dramatic” increases in accounts payable.

KB Toys Files Bankruptcy With Plan to Close Stores – (www.bloomberg.com) KB Toys Inc., the 86-year-old toy retailer, filed for bankruptcy with plans to close its stores, citing a “sudden drop” in sales in the past two months. The Chapter 11 filing comes three years after KB Toys ended a previous bankruptcy by closing almost half of its 1,200 stores. The chain has shut hundreds more since amid increased competition from Wal-Mart Stores Inc., Toys “R” Us Inc. and Target Corp., which together control about two-thirds of the U.S. toy market, according to industry analyst Sean McGowan.

Australia-Backed Bank Bonds ‘Crowd’ State Debt, Prices Plunge - (www.bloomberg.com) Australian state bonds slid this week as banks sold A$11 billion ($7.4 billion) of debt backed by Prime Minister Kevin Rudd’s funding guarantee, “dislocating” markets and pushing the premium investors demand to hold New South Wales securities over sovereign to the highest since the 1990s. The spread on five-year New South Wales bonds over sovereign borrowings of similar maturity swelled to 150 basis points today, from an average of 31 points in the past 10 years, after Commonwealth Bank of Australia Ltd. auctioned A$2.2 billion of government-backed debt on Dec. 10. National Australia Bank Ltd. and Suncorp-Metway Ltd. sold similar domestic debt yesterday and three other banks carried out offerings in U.S. dollars. Rudd’s guarantee has driven up state government yields without achieving its goal of bringing down banks’ funding costs, JPMorgan Chase & Co. said in a note to clients.




OTHER STORIES:

A List a Landlord Doesn’t Want to Be On – (www.latimes.com) A report finds $107 billion worth of income-producing properties nationwide are already or potentially in financial trouble.
Commercial property fears deepen - (www.ft.com)
Detroit papers set to announce major changes - (finance.yahoo.com) Newspapers are desperately seeking new business models that will help them survive dwindling readership and a deep advertising slump exacerbated by the recession. The latest are the Detroit Free Press and The Detroit News, which said Monday they will announce "a sweeping set of strategic and innovative changes" on Tuesday. The Detroit Media Partnership, which runs the business operations of the papers, said the changes are "designed to better meet advertiser and reader needs in an era in which digital delivery is revolutionizing how people get information." Detroit would be the largest metro area to undergo a major media makeover. The Christian Science Monitor next year will become the first national newspaper to drop its daily print edition and focus on publishing online. The changes at the Detroit papers include "a focus on more robust and more engaging digital delivery methods, and support the continued publication of two daily newspapers in Detroit," the partnership said in a statement Monday evening. Bassett said the Free Press is the 20th-largest daily in the country, with a circulation of 298,243; double on Sunday. The News, which does not publish on Sunday, had circulation of 178,280 at the end of September.
Madoff’s Records ‘Utterly Unreliable,’ Says SIPC Head - (www.bloomberg.com)
Ultra-low US rates undermine repo market - (www.ft.com)
Yale endowment drops 25 pct amid financial turmoil - (biz.yahoo.com/ap)
Median home price tumbles to 6½-year low - (www.signonsandiego.com)
Europe banks face $19 billion Q4 write-down - (www.reuters.com)
Saudi Arabia Cuts Key Interest Rate Half a Point - (www.bloomberg.com)

Boeing Protests $1.09 Billion Satellite Award Won by Lockheed - (www.bloomberg.com) Boeing seems to have found a new Method of Operation. Every time they lose a bid, they file a protest, complain to their politicians, and create panic that they will have to lay off employees. Then they get the decision overturned, then they miss their deadlines again but buy an extension. Boeing Co., the second-biggest U.S. defense contractor, is protesting larger rival Lockheed Martin Corp.'s win of a $1.09 billion contract to build weather satellites for the National Aeronautics and Space Administration. Boeing filed a protest with the Government Accountability Office stating the company offered a "superior proposal" based on the evaluation criteria, spokeswoman Diana Ball said in an e- mailed statement today. Lockheed Martin beat separate bids by Boeing and Northrop Grumman Corp. on Dec. 2 to build two spacecraft, with options for two additional satellites. First launch of the new satellites, which are used for weather forecasting and environmental, space and solar science, is scheduled for 2015, NASA said at the time of the award. The new spacecraft will supply about 50 times more weather and climate data than the current fleet, according to NASA.
Citigroup's Financial 'Supermarket' Model is Dead - (www.cnbc.com)
Steve Jobs' Macworld Exit: Politics, Not Health - (www.cnbc.com)
Buffett: People Thought I Was Running Ponzi Scheme - (www.cnbc.com)
Cramer: The Redemption of Ben Bernanke - (www.cnbc.com)
Morgan Stanley Earnings Preview: On the Mend? - (www.cnbc.com)
GE to Eliminate Quarterly Earnings Guidance - (www.cnbc.com)