Monday January 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

L.A. area home prices close out 2008 down 35% - (www.latimes.com) Southern California home prices continued their decline at the end of 2008, closing the year at 2003 price levels, a real estate research firm reported today. The December median sales price for all Southern California homes fell to $278,000, a 35% drop from the same month a year prior, according to San Diego-based MDA DataQuick. The falling prices were again driven by sales of foreclosed properties, which comprised 56% of all homes sold in the region. Consequently, the lowest median sales prices were reported in San Bernardino County ($180,000) and Riverside County ($209,000), where foreclosures have been rampant. Los Angeles County's median sales price of $320,000 was down 32% from December 2007, while Orange County's median price fell 30% to $397,000. San Diego's median price dropped 30% from December 2007, to $300,000. Ventura County's $338,000 median December sales price was down 36% from the prior year. Low prices drove the number of Southern California homes sold in December up by 51% over the previous year. "It does look like the spigot is being opened a little bit, at least for low-cost home purchases," said John Walsh, MDA DataQuick president.

Latest Bank Bailouts Aren't Likely to Help: Dr. Doom - (www.cnbc.com) The financial media is minimizing Faber’s importance by calling him Dr. Doom repeatedly. People really ought to pay attention to what he is saying. The new bank bailouts are not likely to work because they are run by the same people who prolonged the economic agony by throwing money at weak companies rather than allowing them to fail and encouraging the strong ones, Marc Faber, the publisher of the Gloom, Doom and Boom Report, told CNBC Monday. Britain threw its troubled banks another multi-billion pound lifeline Monday by allowing them to insure against steep losses and guaranteeing their debt, while an adviser for U.S. President Elect Barack Obama said the rest of the TART money will be used to clean out bad assets from the financial system. "The financial crisis has occurred because of government interventions," Faber told "Squawk Box Europe." "Specifically central banks, or specifically the US Fed, by keeping interest rates artificially low for too long, they created a huge leverage in the system. So the people who created the problem now are in charge to bail out the system and that's why I am very skeptical that it would work," he added. The governments' efforts to pour money into certain businesses to keep them afloat while letting others fail were arbitrary and increased volatility, he said. "I think it was good that Lehman went bankrupt but I can't see any reason why AIG has been supported. Either you bail out everybody or nobody," said Faber.

Fund to repay investors in securities not cash – (www.ft.com) Hedge fund GoldenTree Asset Management is offering securities to investors who want to withdraw cash, The Financial Times reported... In a letter to investors last month, GoldenTree said: 'Withdrawing partners that do not elect to revoke their withdrawal request will receive their proceeds primarily in kind. It is unlikely that any cash will be distributed.' This has triggered protests from investors, many of whom would have problems disposing of the securities as GoldenTree specializes in investing in complex, often illiquid, debt instruments.

Should Uncle Sam pay for financial advisors for everyone? - (www.latimes.com) I guess this story could be classified as ridiculous financial media story of the week. Unfortunately, this one is coming from a very smart guy. The problem is these stories are coming out almost daily. Add one more federal bailout program to the list: subsidized financial advice... Add one more federal bailout program to the list: subsidized financial advice for the masses. That's the proposal of Yale University economics professor Robert Shiller, perhaps better known for his research chronicling the housing market’s collapse. Writing in the New York Times over the weekend, Shiller asserted that the mortgage mess might not have mushroomed to its current proportions if millions of Americans had had the help of an objective third-party counselor on financial issues. "Many errors in personal finance can be prevented," Shiller wrote. "But first, people need to understand what they ought to do. The government’s various bailout plans need to take this into account -- by starting a major program to subsidize personal financial advice for everyone. "Giving the general public access to trained advisors would be a boon for the nation in this time of doubt and distrust," he wrote. Shiller cited recent research showing how abysmally low many Americans score on financial literacy tests: A paper by Kris Gerardi of the Federal Reserve Bank of Atlanta, Lorenz Goette of the University of Geneva and Stephan Meier of Columbia University asked a battery of simple financial literacy questions of recent homebuyers. Many of the respondents could not correctly answer even simple questions, like this one: What will a $300 item cost after it goes on a "50 percent off" sale? (The answer is $150.)

Federal Home Loan Bank of Seattle Suspends Dividend, Likely Short of Capital on Mortgage Debt - (www.bloomberg.com) The Federal Home Loan Bank of Seattle said it will suspend dividends and “excess” stock repurchases, becoming the second of the government-chartered lending cooperatives to say its capital may be running low. The likely capital shortfall as of Dec. 31 was caused by “unrealized market value losses” on residential mortgage bonds without government backing, the bank said in a U.S. Securities and Exchange Commission filing today. Washington Mutual Inc. and Merrill Lynch & Co. had been the biggest stakeholders and borrowers in the Seattle Federal Home Loan Bank, or FHLB. Seattle joins the San Francisco FHLB in taking steps to guard its reserves after the U.S. housing market collapse sent mortgage-backed bonds tumbling. The declines may leave as many as eight of the 12 FHLBs below capital requirements, Moody’s Investors Service has said, eroding a below-market rate source of about $1 trillion in financing for Citigroup Inc., JPMorgan Chase & Co. and other companies that participate in the cooperatives. “Systemic weakness in the FHLBs, which may require federal action, could have a number of implications for U.S. banks and thrifts, including: higher costs of FHLB borrowings, reduced value of FHLB stock, and increased demand for alternative sources of liquidity,” Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco, wrote in the report to clients yesterday. The San Francisco FHLB reported Jan. 8 that it was suspending dividends and repurchases of shares in excess of what is required for members’ current loans because of losses on so- called private-label, or non-agency, mortgage bonds. It didn’t say whether it expects to still be above capital requirements.

Federal Mortgage Banks Already Burning Taxpayer Money Rapidly - (www.washingtonpost.com) The mortgage crisis is seeping into one of the last dry corners of the mortgage business, the regional network of Federal Home Loan Banks, which provide U.S. banks with hundreds of billions of dollars in low-cost funding to support lending to home buyers. The little-known network has grown in importance as banks lose access to other sources of funding because of the credit crunch. The volume of outstanding loans provided by the home-loan banks has increased by 58 percent since the beginning of 2007, to more than $1 trillion at the end of September. But several of these banks hold mortgage-related investments that have plummeted in value. The losses are draining the capital foundations of the home-loan banks, forcing them either to reduce their lending -- making mortgages more expensive and harder to get -- or to raise additional capital. The money could come from taxpayers. The Treasury Department created a program in September that for the first time allows the home-loan banks to borrow directly from the federal government. That hasn't happened yet, but some financial experts said it's looking increasingly likely. A report from Moody's Investors Service this week, citing "the demonstrated importance of the [home-loan banks] to the banking system through the credit crisis," concluded that the government was likely to provide the necessary support to keep loans flowing.

State Pensions’ $865 Billion Loss Affects New Workers – (www.bloomberg.com) State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires. Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College. The Standard & Poor’s 500 Index of stocks fell 41 percent in the period. “Not a whole lot of people get too excited about pension funds,” Philadelphia Mayor Michael Nutter said in an interview. “But if you have to pay those costs, they do grab your attention.” After Philadelphia’s fund lost $650 million in the first nine months of last year, Nutter joined the mayors of Atlanta and Phoenix in writing a letter to Treasury Secretary Henry Paulson seeking financial help for U.S. cities. Their November letter cited investment deficits and rising pension costs. The $865 billion in losses, which exceed the $700 billion Troubled Asset Relief Program that Congress approved in October, comes as states face budget deficits totaling $42 billion.

Fairfield Greenwich Shutting Down - (clusterstock.alleyinsider.com) We're told by a reliable source that the Fairfield Greenwich Group is finally shutting down. The fund of funds hedge fund made and lost its reputation and fortune by putting investor money into the hands of the world's greatest swindler, Bernie Madoff.


OTHER STORIES:

Soros Says Stimulus Not Enough; TARP Misused - (www.cnbc.com)
Russia Will Join OPEC Soon, Boone Pickens Predicts - (www.cnbc.com)

Obama Bringing "Strong Message" to Ailing Banks - (www.cnbc.com)
Chasing Bonds Rally Is 'Terrible Mistake': Jim Rogers - (www.cnbc.com)
Hunt for Missing Manager Leads to Louisiana: Report - (www.cnbc.com)
Busch: Don't Take the Lead from the UK Again.... - (www.cnbc.com)
Fiat Poised to Take Over Stake in Chrysler: Reports - (www.cnbc.com)
Clock Is Ticking for GM, Chrysler - (www.cnbc.com)
Slideshow: Barack-Tails: Drinks of The Inauguration - (www.cnbc.com)
Buffett: Don't Expect Short-Term Miracles from Obama - (www.cnbc.com)
RBS Posts the Largest Loss in UK History - (www.cnbc.com)
Carlos Slim May Be Buying Big Stake in NY Times - (www.cnbc.com)

Cost of Borrowing Zooms Up for Corporations - (www.nytimes.com)
Jim Rogers Says Worried About Dollar, Favors China - (www.bloomberg.com)
‘Time to Sell’ Treasuries, Biggest Korean Fund Says - (www.bloomberg.com)
No sign of Florida financier or his clients' millions - (www.usatoday.com)
UK unveils second bank rescue - (www.ft.com)
Britain Announces New Bank Bailout - (www.nytimes.com)
British Banks, After Bailout, in Line for More - (www.nytimes.com)

Obama Advisers Say They Will Aim TARP Funds at Widening Credit - (www.bloomberg.com)
Report: New York to lead US cities in job losses - (finance.yahoo.com)
California Finds Public-Works Spending No Unemployment Cure-All - (www.bloomberg.com)
RBS expects full-year loss up to 28 billion pounds - (finance.yahoo.com)
Prepare to bury the fatally wounded big banks - (www.ft.com)
Book says inflation rates of 1970s could return - (www.usatoday.com)
A weak housing market is good for me - (property.timesonline.co.uk)
California's budget crisis may delay tax refunds - (www.marketwatch.com)
High-income Debtors Being Foreclosed On In California - (www.washingtonpost.com)
Obama team weighs government bank to push bad debts onto taxpayers - (finance.yahoo.com)
Federal Mortgage Banks Already Burning Taxpayer Money Rapidly - (www.washingtonpost.com)
Lessons from when the bubble burst in Japan - (search.japantimes.co.jp)
Maybe the bond market is right - (www.seekingalpha.com)
Interest Rate Drop Has Dire Results for Legal Aid - (www.nytimes.com)

Rents falling nationally - (www.marketwatch.com)
Loan Fraud Seen on the Rise - (www.nytimes.com)
Yet another hedge fund manager missing - (www.bloomberg.com)
Hedge-Fund Managers Bullish on MREs, Guns, Inflatable Lifeboats - (www.boingboing.net)
Foreclosure aid likely to help 4 foolish states, hurt everyone else - (www.businessweek.com)
Foreclosure Heat Map - (www.ritholtz.com)
Bailout Is a Windfall to Banks, Not Borrowers - (www.nytimes.com)
Bankers First - (www.portfolio.com)