Thursday December 25 Housing and Economic stories

TOP STORIES:

60 Minutes Blows the POA/ALT-A Loan Story - (www.wordpress.com) I happen to be watching CBS’s 60 Minutes tonight (12-14-08) and they had a piece called Mortgage Meltdown: Where’s the Bottom? with Scott Pelley, who did the story, and not a very good job of it. Either he or his writers need to better research their topic before they to such a report. Mr. Pelley failed to note that POA’s qualified borrowers with “teaser” interest rates, and not the actual “payment” interest rates. But that is not what I am griping about. My complaint lay in Pelley’s false assumption that no one but a few sage individuals could see these consequences of poor lending standards coming. All of my experience is in the explosive Orlando, Florida area, so I know a thing or two about exotic mortgage products like the soon to be infamous Pay Option ARM (POA), ticking time-bomb of the mortgage world, and the subprime’s little brother ALT A.

New York state plans soft drink ‘obesity tax’ - (www.ft.com) State tries to cut $13.3bn deficit. New York state could impose an “obesity tax” on high-calorie soft drinks such as non-diet versions of Coke and Pepsi as public concerns over obesity turn potentially fattening foods into a politically acceptable target for taxation. David Paterson, New York’s governor, is to include a proposed tax of around 15 per cent in a draft budget aimed at closing the state’s $13.3bn deficit. He is also expected to call for spending cuts, and for other revenue-raising measures including extra fees on sales of luxuries including furs and boats. Mr Paterson has said he will not raise state income tax.

How I Got Screwed by Bernie Madoff - (www.time.com) - The call came at 6 p.m. on Thursday, December 11th. I had been waiting for it for five years. When it finally arrived it was my wife, Sarah, who answered. What the person said on the other end of the phone was both simple and devastating: we were financially wiped out. Of course, I knew this instantly from the look on my wife's face. Her words to the caller, the person handling our financial matters, grew insistent. "You're joking? This is a joke, right?" We didn't know it yet, but we had been playing in the Bernard Madoff Investment Securities LLC Fantasy Financial League. It began when we sold our home at the peak of the market, collected what was left from an old divorce, found other monies, and then, with a combination of pleasure and trepidation, handed our bag of cash over to someone named Stanley Chais, the Los Angeles network organizer for, as it turned out, a man named Bernard Madoff. Of course, we never heard the name Madoff — which has a peculiarly Dickensian ring now — and had no idea how he achieved such fantastic returns over the last 40 years. All we knew was that my wife's entire family had been in the fund for decades, and lived well on the returns, which ranged from 15% to 22%. It was all very secretive and tough to get into, which looking back was a brilliant strategy to lure suckers. Unlike the usual Ponzi mechanics, they even stopped investments into accounts a few years back, at least in our network. There were the usual warnings prior to investing — we all knew it was a risk, we were told make sure we were diversified, blah-blah — but my God, it had been going strong for so long and with such fantastic returns, we had to get in. The SEC even gave Madoff a clean bill of health several years ago, we now find out. Well, maybe not a clean bill, but they didn't shut him down either. In the topsy-turvy world of investment, we were quietly, richly safe. Until the call.

Why Toyota wants GM to be saved - (money.cnn.com) A GM failure would cause production problems, crush already weak demand and potentially open the door to low-cost competitors. Overseas automakers, most notably Toyota Motor, all endorse some form of federal aid to keep General Motors (GM, Fortune 500), Chrysler LLC and possibly Ford Motor (F, Fortune 500) out of bankruptcy. The Senate killed an effort to get the automakers a stopgap loan last week and now the Bush administration has said it is looking at providing the automakers help from the $700 billion approved to bailout banks and Wall Street firms. "We support measures to help the industry," said Toyota Motor (TM) spokeswoman Mira Sleilati. "We just want a strong, competitive healthy industry." This may seem surprising at first, especially when you consider that much of the opposition to the auto bailout was from senators from Southern states home to auto plants operated by Asian auto companies, such as Alabama and South Carolina. But the Asian automakers insist they never lobbied against such help for the Big Three.

Fitch: Alt-A Mortgages Deteriorating More Rapidly than Expected - (jessescrossroadscafe.blogspot.com) Citing “a rapid deterioration of U.S. Alt-A RMBS performance,” Fitch Ratings again took the hatchet to its previous assumptions for Alt-A mortgages on Monday morning, revising its surveillance methodology and updating loss projections for all U.S. Alt-A RMBS. Fitch said it now expects losses on all Alt-A collateral to far exceed the estimates of its ‘moderate stress’ scenario in its late ratings update earlier this year. “Market developments, ongoing home-price declines and loan performance trends in the Alt-A sector over the prior six months have effectively eliminated the possibility of this stress scenario,” said Fitch in a statement. The rating agency said it now expects average cumulative losses om 2005, 2006 and 2007 vintage Alt-A transactions to hit 2.72, 6.78 and 9.58 percent, respectively, up dramatically from expectations at the agency earlier this year. Fitch cited a “rapid increase in 60+ day delinquencies experienced over the past six months,” despite servicers’ collective efforts to hold off on actual foreclosure sales — likely implying that a halt to foreclosures is having little effect in resolving borrower delinquencies. Between May and October 2008, Fitch said that 60+ day delinquencies for the 2007 vintage increased from 8.80 percent to 14.65 percent; 2006 and 2005 vintages also experienced steep increases rising from 10.30 percent to 14.24 percent and 6.57 percent to 8.79 percent, respectively.

Builder Confidence at Record Low in December - (www.housingwire.com) - Builder confidence in the market for new single-family homes held at a record low in December amid deepening economic turmoil and massive reductions, according to the monthly National Association of Home Builders. The December NAHB/Wells Fargo Housing Market Index (HMI), released monday, held at November’s all-time low reading of 9."

Some tidbits about the SEIU (Service Employees International Union), most of it showing corruption:
· Blagojevich Planned to Issue Order Benefiting Labor Union - (online.wsj.com) Illinois Gov. Rod Blagojevich was preparing to issue an executive order prior to his arrest last week that would have allowed union organizing of home-care workers that could have benefited a labor union with close ties to the governor. The existence of this executive order, though never signed, illustrates the close ties between the embattled governor and the powerful Service Employees International Union, the nation's fastest growing labor organization. Last week, Gov. Blagojevich was arrested on federal corruption charges, including that his office suggested a deal in which he would be given a job with an SEIU-affiliated group in exchange for naming a labor-friendly senator to fill the vacancy left by President-elect Barack Obama. The executive order would have enabled the SEIU or another union to organize about 1,200 workers in the state who care for developmentally disabled people in their homes and would have augmented one signed by the governor in 2004, said Michelle Ringuette, an SEIU spokeswoman. The prior order opened the way for the SEIU to target a far larger number of home health-care workers. Such workers traditionally are not covered by federal labor law, though a number of states have enacted laws in recent years allowing unions to organize them. Ms. Ringuette said the SEIU was aware of the executive order but did not know what role, if any, the union played in developing it. She said other unions would have been able to organize the workers as well. But a rival union said it was unaware of the order, while SEIU staffers and outside experts say the SEIU had already begun actively seeking the support of workers.

· SEIU Union-founded nonprofit spent zero on its charitable purpose in two years - (www.latimes.com) Tyrone Freeman, then head of the SEIU’s largest California local, helped start the Long Term Care Housing Corp. in 2004. He is under investigation by the federal government. The charity was founded by a scandal-ridden Los Angeles chapter of the Service Employees International Union. Its stated aim was to provide housing to low-income workers. A nonprofit organization founded by California's largest union local reported spending nothing on its charitable purpose -- to develop housing for low-income workers -- during at least two of the four years it has been operating, federal records show. The charity, launched by a scandal-ridden Los Angeles chapter of the Service Employees International Union, had total expenses of about $165,000 for 2005 and 2006, and all of the money went to consulting fees, insurance costs and other overhead, according to its Internal Revenue Service filings. Records show no recent aid to two charities from union golf event. Charity watchdogs say that nonprofits should never have zero program expenses in two successive years and that well-performing charities direct at least 70% of their annual spending to their charitable purpose. "Of the 5,000-plus charities we've looked at, I don't think we've ever seen one that didn't spend anything on its charitable programs," said Sandra Miniutti, vice president of Charity Navigator, an online rating service. Last year, the nonprofit reported spending $513,000 in connection with a Compton housing development, and $59,200 in consulting fees for its charitable programs, which together accounted for about 88% of its total outlays. The primary mission of the charity -- the Long Term Care Housing Corp. -- is to provide affordable homes for the local's members, most of whom earn about $9 an hour caring for the elderly and infirm. But SEIU officials declined to discuss the charity, saying it is a separate legal entity from the union, even though its board is dominated by officials from the local. The charity is located at the local's headquarters.

· California lawmakers get plenty of suggestions for closing budget gap - (www.sacbee.com) If there's one thing legislators don't have to worry about in their never-ending struggle with the state budget – and there may be only one thing – it's suffering from a lack of advice. In the past two weeks alone: • The Service Employees International Union, which represents 700,000 California workers, began airing TV commercials that at least implicitly call for tax increases to fill a looming budget gap of about $40 billion over the next 19 months. The union wants tax increases on the wealthy and a federal bailout to solve the deficit.



OTHER STORIES:

ECB looks at radical lending plans - (www.ft.com) Bank could act as ‘clearing house’ to boost interbank lending

Housing Starts vs. New Home Sales - (www.ml-implode.com) - "The question has come up again about comparing housing starts and new home sales."
Madoff Madness Fallout - (www.ml-implode.com) - "Corruption, fraud, and greed are rampant in every bull market. When the bear strikes that corruption and fraud are exposed."
Backwardation That Shook The World - (www.ml-implode.com) - I warn the world again that the futures market would not go to backwardation in gold if the house of paper money were not on fir...
Fannie Mae Lets Renters Stay Despite Foreclosures - (www.ml-implode.com)
Executive pay limits may prove toothless - (www.ml-implode.com)
Home values seen losing over $2 trillion during 2008 - (www.ml-implode.com)

Madoff creditors braced for write off - (www.telegraph.co.uk)
Banks and other institutions are preparing to write off every penny tied up in the alleged fraud at Bernard Madoff's investment fund.
The $50bn hedge fund audited by a one man band and a secretary - (www.telegraph.co.uk)
IMF president warns governments must do more - (www.telegraph.co.uk) The International Monetary Fund has warned that unless governments step up efforts to combat the downturn, the beginning of a global recovery in late 2009 could be at risk.
US considers $40bn car industry funding - (www.telegraph.co.uk) The US government is considering handing its ailing domestic car industry up to $40bn (£26bn) in funding.

Obama names energy team, vows new tack - (money.cnn.com)
After rate cuts: The Fed's new ball game - (money.cnn.com)
3 days that changed Wall Street forever - (money.cnn.com)
Serwer: Madoff investors burned by SEC, too - (money.cnn.com)
Bankruptcy filings rise 30% this year - (money.cnn.com)
Jamie Dimon: No bonuses for you! - (money.cnn.com)