Thursday December 4 Housing and Economic stories

TOP STORIES:

Schwarzenegger Calls Fiscal Emergency in California - (www.bloomberg.com) California Governor Arnold Schwarzenegger, saying his state is going broke, declared a fiscal emergency and ordered the incoming class of lawmakers into a special session to fix a widening $11 billion deficit. Schwarzenegger, a 61-year-old Republican, wants lawmakers to raise taxes and cut spending to narrow the gap that is projected to swell to $28 billion over the next 18 months. He invoked powers granted him in 2004 to declare a fiscal emergency, which gives the Legislature 45 days to plug the shortfall. If they fail to find a solution in that time, they are barred from doing any other legislative work until they do. “Without immediate action, our state is heading for fiscal disaster,” Schwarzenegger told reporters today in Los Angeles. “I’ve had to make tough choices that I wish I didn’t have to make, and I know this is a terrible time to raise taxes, but it’s also a terrible time to make cuts to very important programs. But in an emergency like this, we have to take quick action to avoid even worse problems, even if they include decisions that we don’t like.”

States Seek Aid as Budget Gaps May Hit $200 Billion - (www.bloomberg.com) U.S. states’ budget shortfalls may be as much as $200 billion this year and next, Pennsylvania Governor Ed Rendell said, as officials press the federal government to boost construction spending and aid cash-strapped states. A day before governors are set to meet with President-elect Barack Obama, Rendell, a Democrat who chairs the National Governors Association, said about $136 billion in construction projects are ready to begin if the federal government provides money under an economic stimulus plan. States also need help with health-care, food-stamp and unemployment-insurance programs that swell during times of recession, Rendell told reporters in Washington. “Without federal help, we’ll just have to make further cuts or raise taxes,” he said.

FHA Cash Cushion Has Fallen by 39% - (online.wsj.com) Yes, hopefully this agency will fail as all options for the corrupt politicians start faltering. The latest annual audit of the Federal Housing Administration shows a steep drop in the capital cushion the U.S. agency holds against losses from mortgage defaults. As lenders shy away from risk, the number of loans insured by the agency has soared in recent months, fueling concerns it may be taking on too much risk. The audit, prepared by Integrated Financial Engineering Inc. of Rockville, Md., estimated the economic value of the FHA's insurance fund was $12.9 billion as of Sept. 30, down 39% from a year

Volvo and Saab ask Sweden for aid - (www.ft.com) General Motors and Ford Motor have approached Sweden’s government about financial aid for their lossmaking Saab and Volvo brands. GM and Ford want to bolster the two marques’ finances in anticipation of selling them as the Detroit carmakers grapple with a cash crunch that threatens their survival.

Junk-Bond Market Has Closed the Door - (online.wsj.com) U.S. companies were locked out of the junk-bond market in November, putting half of American corporations at risk of being unable to raise cash. The current environment is causing market participants to harken back to 1991, when the collapse of Drexel Burnham Lambert sent the junk, or high-yield, bond market into a tailspin. About 50% of U.S. companies have below-investment-grade credit ratings, making the $750 billion junk-bond market a vital source of financing for car makers, airlines, retailers, utilities, restaurant chains and media companies. The shutdown already has sent U.S. car makers, desperate for cash, to Washington for emergency loans.

Houseowners say no help from lenders - (www.contracostatimes.com) Numerous homeowners who have beseeched lenders for help with restructuring burdensome mortgages that far exceed the value of their houses say they have encountered plenty of roadblocks and found little assistance from financial companies. Customers of Countrywide, Wachovia and other lenders describe the firms as uncooperative, ineffective and rude. Borrowers say they must navigate a maze of phone banks. They say lenders won't offer good deals. Representatives of the lenders respond they have helped thousands of customers and plan to intensify programs to assist consumers. The complaints raise questions about the effectiveness of broader efforts by the government and lenders to ward off foreclosures. "Countrywide says it wants to help people restructure? That's baloney," said Dawn Aguiar, who bought her Fremont home for $587,000 in 2005. "They have not been helpful at all." She financed the purchase with $586,000 in Countrywide loans.
Homes in her neighborhood sell for $450,000 to $500,000. Her house is "under water" — worth less than the loan.

Obnoxious displays of wealth on TV a turn-off for many - (www.latimes.com) One great thing is coming out of the credit crisis: Viewers affected by the drama on Wall Street 'don't want to watch rich people whine' -- so networks are cutting back on shows that might offend. Television ratings reflect that trend. ABC announced last week that it wasn't ordering new episodes for "Dirty Sexy Money," a show about a wealthy and unscrupulous New York family. In mid-November, only about 3.6 million viewers tuned in to watch NBC's "Lipstick Jungle," a show about three high-powered New Yorkers, which is almost half the number who tuned in when the show began. And Bravo's "First Class All the Way," a show about extremely rich people going on very posh vacations, was watched by 319,000 people in its premiere episode. Hollywood publication Variety, which reviewed the show, chided Bravo for being "tone-deaf -- pushing $1,000-a-night hotels and caviar dreams to a nation in the throes of 401(k) nightmares." "People don't want to watch rich people whine," said Rick Kushman, television columnist for the Sacramento Bee. In "Lipstick Jungle," for example, a character played by Brooke Shields wars with a former nanny who threatens to write a tell-all book. "A normal person would be like, 'Are you kidding me?' " Kushman said.

Panic In China Over Jobs, Economy, Cotton - (Mish at globaleconomicanalysis.blogspot.com) Factory workers surround a damaged police car during a protest outside Kai Da toy factory in Dongguan, China. The People's Bank of China cut interest rates by more than 1pc point as the economy crumbles and millions of jobs are predicted to go ahead of Christmas. The PBOC reduced its main borrowing rate by 1.08pc points to 5.58pc, the biggest one-off cut since the Asian Financial Crisis in 1997. Yin Weimin, China's Social Security minister, has revealed that employment is the Communist Party's number one concern in the downturn and said the "situation is critical". Unemployment is expected to rise from 4pc to 4.5pc by the end of the year and anecdotal reports have suggested that 3m people have already been fired in the industrial province of Zhejiang alone. Two major provinces, Shandong and Hubei, have already responded by banning companies from firing staff without permission from the government.

Blame Wall Street's Phantom Bonds for the Credit Crisis - (www.newgeography.com) The “credit crisis” is largely a Wall Street disaster of its own making. From the sale of stocks and bonds that are never delivered, to the purchase of default insurance worth more than the buyer’s assets, we no longer have investment strategies, but rather investment schemes. As long as everyone was making money, no one complained. But like any Ponzi Scheme, eventually the pyramid begins to collapse. For the last couple of months trillions of dollars worth of US Treasury bonds have been sold but undelivered. Trades that go unsettled have become an event so common that the industry has an acronym for it: FTD, or fail to deliver. What’s the result? For the federal government, it’s an unnecessarily high rate of interest to finance the national debt. For states, it’s a massive loss of potential tax revenue. And for the bond buyers, brokerage houses, and banks, it’s yet another crash-and-burn to come.


OTHER STORIES:

New U.S. mortgage crisis looms - (www.reportonbusiness.com)
Mortgage Rates Drop! It Does Not Mean What it Used to - (mrmortgage.ml-implode.com)

U.S. Consumer Loan Aid Will Trickle Only So Far - (www.nytimes.com)
Avoiding the fear and shame of foreclosure - (www.cnn.com)
As mortgages went bad, executives cashed out - (www.latimes.com)
Recession Realities: Why The Worst is Yet to Come - (www.cqpolitics.com)
Worried about a depression? How about a 100-year bear market? - (www.marketwatch.com)
Consumers embrace 'house for the holidays' - (www.marketwatch.com)

Nouriel Roubini on Obama's Economic Team - (www.newsweek.com)
Anatomy of a Meltdown: Ben Bernanke and the financial crisis - (www.newyorker.com)
All Fall Down - (www.nytimes.com)
San Diego House Prices Slide to 34 Percent Below Peak - (www.voiceofsandiego.org)
Sales Breakdown in San Diego - (www.voiceofsandiego.org)

Currencies fail to hold firm in the crisis - (www.ft.com)
Payback time for the financiers - (www.ft.com)
OPEC Agrees to Delay Output Decision to Mid-December - (www.bloomberg.com)
Yen Advances Fourth Month Against Euro as Carry Trades Unwind - (www.bloomberg.com)
U.K. takes over Royal Bank of Scotland - (www.iht.com)
Economic crisis deepens in Europe, Asia - (news.yahoo.com/s/afp)
Fears That a Weakened British Pound May Grow Weaker - (www.nytimes.com)
Still waiting for a bailout from last night's black jack losses - (new.goldmau.com)
Seattle house values decline again - (seattlepi.nwsource.com)
Follow the $7.4 Trillion - (www.bloomberg.com)
At this rate, the government will need a bailout, too - (www.marketwatch.com)
British downturn's generational divide - (www.latimes.com)