Thursday January 1 Housing and Economic stories

TOP STORIES:

Goldman Sachs' Tax Rate Drops to 1% - (www.bloomberg.com) Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007. The company’s effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits. Goldman Sachs, which today reported its first quarterly loss since going public in 1999, lowered its rate with more tax credits as a percentage of earnings and because of “changes in geographic earnings mix,” the company said. The rate decline looks “a little extreme,” said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC. “I was definitely taken aback,” Willens said. “Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.” U.S. Representative Lloyd Doggett, a Texas Democrat who serves on the tax-writing House Ways and Means Committee, said steps by Goldman Sachs and other banks shifting income to countries with lower taxes is cause for concern.

Correct prediction that CalPERS was lying back in July - (wcvarones.blogspot.com) Interesting story from July that CalPERS was lying on their yearly statement through June 30 2008. CalPERS reports 2008 performance numbers: While the value of Calpers' stock portfolio fell nearly 11 percent, its private equity holdings gained 19.6 percent for the 12 months through March 31 and its inflation-linked assets returned 22.9 percent over nine months. Global fixed-income assets returned 7.7 percent for the year and real estate gained 8.1 percent for the 12 months through March 31. What a coincidence. While things that have easily observable market prices (i.e. stocks) went down, everything that is valued subjectively went up! Private equity? It does great during a credit crunch when stocks are crashing! Just ask noted private equity players Blackstone Group or Babcock & Brown. And real estate? Well, whose real estate portfolio is not up at least 8% this year? Nice numbers, CalPERS! Especially considering your investment in toxic waste CDOs at the beginning of the mortgage crisis, and your $1 billion dollar investment in the now-bankrupt LandSource at the peak of the real estate bubble.

Deutsche Bank decides not to repay €1bn bond - (www.ft.com) Deutsche Bank jolted bond and equity investors on Wednesday when it became the first big bank to say it would not repay €1bn ($1.4bn) of a particular kind of bond as expected in January. The move raised fears about Deutsche’s capital strength and signalled a much higher likelihood that other banks would follow the example in not repaying so-called hybrid-capital bonds. This could, in turn, erode the market for hybrid capital deals, which are supposed to occupy a kind of grey area between debt and equity. These instruments have been hugely important in squeezing extra funding into bank balance sheets – and in propping them up since the financial crisis exploded. The bonds are typically repaid at the first opportunity after an initial period when redemptions are not allowed. If an issuer does not redeem then, they must pay a higher penalty coupon rate. Deutsche Bank decided it was more cost-effective to pay this penalty rate rather than replace the funding in current difficult market conditions, which have made finance more expensive.

Palm Beach pawn shop becomes a bit of a sensation amid Madoff scandal - (www.chicagotribune.com) Pawnbroker Levi Touger tells reporters wanting to see the Lamborghini a Bernie Madoff victim hawked for quick cash that they needn't bother stopping by. He doesn't have it. And, by the way, it was a Ferrari. Touger's Royal Pawn & Jewelry has made loans to some of the well-heeled Palm Beach investors caught in Madoff's alleged $50 billion scam, turning his business into a bit of a media sensation as television crews inquire about filming the big-ticket booty. He says reports have overstated the items people were pawning, but not the income bracket of some of his more recent clients. "People call me and say, 'Levi, if I need you, what could I get?'," he said.

Citadel Shuts Down Its Special Situations Group - (www.nytimes.com) Another day brings more news of the downsizing taking place at the Citadel Investment Group, Kenneth C. Griffin’s giant hedge fund firm. Citadel, based in Chicago, shut down its special situations group last week after its strategy racked up big losses for the firm. People close to the group said that at one point several years ago its strategy covered as much as 15 percent of Citadel’s total assets under management, but it had recently been pared down to about 3 percent of the firm’s overall portfolio as several investments turned sour. Through November, the special situations portfolio had sustained losses of about 61 percent, according to a person briefed on the matter. News of the shutdown was first reported by David Faber of CNBC. A spokeswoman for Citadel declined to comment.

'Orderly' Bankruptcy Is One Option for US Auto Bailout - (www.cnbc.com) The Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the ailing US auto industry.

GMAC Still Short of Capital to Become a Bank - (www.cnbc.com) Financing company GMAC said in a regulatory filing Thursday that about $16.9 billion, or 58 percent, worth of its notes have been tendered as part of a plan to swap $38 billion of debt and amass enough regulatory capital to become a bank holding company. The total includes notes tendered through the end of Wednesday. That's about $300 million more than the $16.6 billion worth of notes tendered at end of day Tuesday, according to a filing with the Securities and Exchange Commission. In addition, GMAC's Residential Capital mortgage business has tendered $3.5 billion, or 38 percent, of its notes, the company said. In order to become a bank holding company, and eligible for a slice of the federal government's $700 billion bank rescue plan, GMAC must show that it has at least $30 billion in regulatory capital. The company has said it needs about 75 percent participation on the offers in order to meet that requirement. GMAC warned last week that failure to convert to a bank holding company would have a "material adverse effect" on its business. And some analysts have speculated that without the federal financial help, the company could be forced to file for bankruptcy protection or shut down the ResCap division, which has accounted for the bulk of its recent losses.

FDIC rules will ban new banks - (www.blacklistednews.com) The Federal Deposit Insurance Corp. may be implementing what is effectively a ban on new banks in metro Atlanta and other distressed areas nationwide, as the financial industry’s and broader economy’s deterioration accelerates. The FDIC, the nation’s bank deposit guarantor, has increased scrutiny of new banks applying for deposit insurance in select areas of the Southeast and other regions, including Western states, industry insiders said. The new reviews, insiders said, make approval difficult in practice, if not impossible. “It is a de facto ban,” said Stephen Johnson, CEO of Alpharetta-based consultant T. Stephen Johnson & Associates Inc. “I’ve never seen a time this difficult to get a charter.” Johnson is a longtime bank organizer and consultant in Atlanta, raising $500 million for various bank investments during his two-decade career.

Ukraine Hryvnia Drops 15% in 2 Days; Half of Loans May Default - (www.bloomberg.com) Ukraine’s hryvnia pared a record two-day plunge after the central bank said a rate above 9 per dollar was “unacceptable.” The currency fell 1.7 percent to 9.1000 per dollar by 6:28 p.m. in Kiev. It pared an earlier 18 percent two-day drop to a record 9.78 after the central bank sold reserves to support the currency. Petro Poroshenko, head of the central bank council, said at a press conference a weak hryvnia is a threat to the economy. “The central bank did say they would intervene at 8.95 today so it looks like they went ahead with it,” said Dmitry Gourov, an economist focusing on Ukraine at UniCredit SpA in Vienna. “The question is how big is their war chest, and given the limited amount of reserves they have to spend, there’s not much room left.” President Viktor Yushchenko earlier tried to stem the drop, saying Ukraine will buy hryvnia and calling for licenses to be revoked for lenders found speculating against the currency. The central bank said it will raise its benchmark refinancing rate from 12 percent to an unspecified level. Ukraine is attempting to arrest a deepening crisis since the International Monetary Fund provided a $16.4 billion bailout last month as the falling currency increases the cost of more than half of loans from domestic lenders that are in dollars, according to central bank data. The ex-Soviet nation, with $105 billion of corporate and state debt, has the third-highest credit risk worldwide after Ecuador, which defaulted last week, and Argentina, based on the cost of credit-default swaps.




OTHER STORIES:

Calpers To Report Losses of 103% on its Residential Investments - (Mish)
Forecast: A Long, Cold Winter - (online.barrons.com)
HUD Chief Calls Aid on Mortgages A Failure - (www.washingtonpost.com)
55% of SoCal house sales were foreclosures - (lansner.freedomblogging.com)
Record decline in SoCal house prices - (themessthatgreenspanmade.blogspot.com)
Foreclosures push So Cal house prices down 35 percent - (www.pasadenastarnews.com)
Half of OC's house boom gain now gone - (lansner.freedomblogging.com)
Fed now lending money for 0% interest - (www.newsday.com)
Banks Show No Signs of Easing Credit in Step With Feds Rates - (www.bloomberg.com)

Bonds Stagnate on Mind-Numbing Housing Data - (blogs.wsj.com)
SEC plans to investigate ties to Madoff's niece - (www.marketwatch.com)
The Great Unraveling - (www.nytimes.com)
A New DIS-Belief System Is Born - (extremely negative) - (ashizashiz.blogspot.com)
Repost -- context for following: - (www.tampabay.com)
The Sunny Kim Power Training Series - (www.youtube.com)

TARP Now Likely to Be Used for Housing, Stimulus - (www.cnbc.com) The second half of the $700 billion Wall Street bailout fund is likely to go toward foreclosure relief—and possibly economic stimulus.
Oil Plunges to Settle Below $37 as Demand Slows - (www.cnbc.com)
Obama Stimulus Plan Could Reach $850 Billion - (www.cnbc.com)
Schapiro Picked for SEC Post - (www.cnbc.com)
Jobless Claims Ease - (www.cnbc.com)
Homeowners Are Rushing To Refinance as Rates Fall - (www.cnbc.com)
30-Year Mortgage Hits Low - (www.cnbc.com)
How Low Can Rates Go? - (www.cnbc.com)
Madoff Scandal Shaking Real Estate Industry - (www.cnbc.com)
Wedbush Morgan CEO: Madoff Performance Was 'Odd' - (www.cnbc.com)
Oracle Earnings: 'Good' News Might Be Too Good - (www.cnbc.com)