Monday January 5 Housing and Economic stories

TOP STORIES:

The Worst Predictions About 2008 - (www.businessweek.com) Well as you would expect, there are plenty of idiots to go around. I love the Cramer one as my favorite though. 2. AIG (AIG) "could have huge gains in the second quarter." —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008. AIG wound up losing $5 billion in that quarter and $25 billion in the next. It was taken over in September by the U.S. government, which will spend or lend $150 billion to keep it afloat. 3. "I think this is a case where Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound. They're not in danger of going under…I think they are in good shape going forward." —Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008. Two months later, the government forced the mortgage giants into conservatorships and pledged to invest up to $100 billion in each. 4. "I'm not an economist but I do believe that we're growing." —President George W. Bush, in a July 15, 2008 press conference. Nope. Gross domestic product shrank at a 0.5% annual rate in the July-September quarter. On Dec. 1, the National Bureau of Economic Research declared that a recession had begun in December 2007. 9. "In today's regulatory environment, it's virtually impossible to violate rules." —Bernard Madoff, money manager, Oct. 20, 2007. About a year later, Madoff—who once headed the Nasdaq Stock Market—told investigators he had cost his investors $50 billion in an alleged Ponzi scheme.

Capitol Buick-Pontiac-GMC Closes, Punctuating A Sour Year For Car Dealers Here and Nationwide - (www.mercurynews.com) 12/31/2008 - A bleak year for Silicon Valley auto dealers ended this week with the closing of yet another General Motors dealership. Capitol Buick-Pontiac-GMC on Capitol Expressway Auto Mall in San Jose shut its doors abruptly on Tuesday. A bleak year for Silicon Valley auto dealers ended this week with the closing of yet another General Motors dealership. Capitol Buick-Pontiac-GMC on Capitol Expressway Auto Mall in San Jose shut its doors abruptly on Tuesday. Late Wednesday afternoon, no signs alerting customers had been posted on the doors, the parking lot was full of new and used cars and a Christmas tree stood in the locked lobby. But the store was locked, with no employees nor customers in sight. The closing was confirmed by GM. Spokesman Dave Barthmuss said employees had been informed, and that GMAC, which finances many transactions for GM dealers, had been alerted. It follows the closure of Los Gatos Chevrolet, Stevens Creek Buick-Pontiac-GMC and Silicon Valley Hummer this year. In all, six new-car showrooms in Santa Clara County closed in 2008. Through October, new car and trucks sales in Santa Clara County were down 22 percent from last year. That mirrors what's happening nationally, with 2008 being the worst year for new car sales in the United States in 15 years or more. The mortgage and financial market meltdowns, tight credit, rising unemployment and general consumer uneasiness about the economy have kept buyers away from new-car lots. Both GM and Chrysler needed federal loans to stay afloat, and most auto-industry analysts forecast even lower sales in 2009 and more dealership shutdowns.

Schwarzenegger's latest budget plan: Deep cuts, large tax hikes, more borrowing - (www.mercurynews.com) Gov. Arnold Schwarzenegger, vacationing in Idaho with his family, left it to finance aides to release his third budget proposal in as many months. Negotiations with Democrats over a smaller package of tax hikes and spending cuts remain stalled. Gov. Arnold Schwarzenegger's staff Wednesday released his most detailed plan yet to tackle the state's staggering budget deficit, calling for deep cuts to state services, hefty tax increases and a large new round of borrowing to close a projected $41.6 billion shortfall through mid-2010. While little of the proposal was new, it included some striking elements, such as cutting billions of dollars from public school funding and slashing the deduction state taxpayers can claim for their dependents. The plan also arrived a day after the state controller warned tax refunds might have to be paid with IOUs in the spring because California is so short of cash.

Loss styles of the rich and famous - (www.marketwatch.com) A-list names from Hollywood to academia among the alleged victims of Bernard Madoff's $50 billion Ponzi scheme. Among those who have lost money in the alleged Ponzi scheme run by Bernard Madoff are some high-profile names, ranging from economist Henry Kaufman to actor Kevin Bacon, according to media reports Wednesday. The 81-year-old Kaufman, a former chief economist at Salomon Brothers, told The Wall Street Journal that he lost several million dollars in an account with Madoff's firm. Also losing money were Bacon, star of movies such as "Footloose" and "Mystic River," and wife Kyra Sedgwick, who won a 2007 Golden Globe award for her performance in the television series "The Closer." Bacon's publicist confirmed the couple's lost investment to New York magazine, which had earlier reported the story. Madoff was arrested earlier this month after federal prosecutors accused him of running what might turn out to be the largest-ever Ponzi scheme. Madoff was required to file a list of his assets to the Securities and Exchange Commission by Friday. The SEC wanted to see all bank and brokerage accounts, investments, real estate and other personal property held by Madoff and his firm, according to a Dec. 18 agency order. According to Bloomberg, Madoff's lawyer, Ira Sorkin, confirmed that the filing would be made. Meanwhile, SEC inspector General David Kotz is scheduled to testify before lawmakers Monday about the alleged fraud carried out by Madoff, according to a statement Wednesday by a House capital-markets subcommittee. Rep. Paul Kanjorski, D-Pa., the subcommittee chairman, said the hearing would help lawmakers understand whether the SEC had adequate resources and how the alleged scheme evaded detection for so long.

Regulator Let IndyMac Bank Falsify Report - (www.washingtonpost.com) A senior federal banking regulator approved a plan by IndyMac Bank to exaggerate its financial health in a May federal filing, allowing the California company to avoid regulatory restrictions only two months before it collapsed, a federal inquiry has found.View Only Top Items in This Story The same regulatory agency, the Office of Thrift Supervision, allowed similar legerdemain by other banks, according to a letter sent yesterday to members of Congress by the Treasury Department's inspector general, Eric Thorson. The letter did not provide details about the other incidents

Madoffs Auditor Has "For Rent" Sign on Office - (www.bloomberg.com) The auditing firm under investigation for signing off on Bernard Madoff’s firm’s financial statements has a “for rent” notice on the door, according to the firm’s landlord. Friehling & Horowitz, which operated out of a 550-square foot office space in New City, New York, a northern suburb, wrote that its audit of Madoff’s financial statements provided “reasonable assurance” they were “free of material misstatement,” according to the fiscal 2007 audit. Madoff was charged Dec. 11 by federal prosecutors with securities fraud. He allegedly told employees that Bernard L. Madoff Investment Securities LLC has been insolvent for years. Madoff said the business was a $50 billion Ponzi scheme, using new investments to pay off earlier investments, and “one big lie,” according to the government. “It’s a little obvious his life is in turmoil,” Joshua Chesir, said of David Friehling, the accountant running the firm. “There’s a for-rent sign on the door right now.”

Young, single and without the burden of property - (www.sfgate.com) For the younger employed set who lack crushing debt, mortgages or families to support, the recession has a silver lining: Previously out-of-reach items are suddenly affordable. As consumer prices fell 1.7 percent in November, the biggest monthly drop on record, some have decided to take advantage of the deals - though not without caution. "In a year where we would have expected the consumer to say 'no' to spending, this younger generation - the young adults who have not had to divert all of their discretionary spending to other family members - continues to self-indulge," said NPD Market Research Chief Analyst Marshal Cohen. "It's not a new concept," Cohen added, noting that "mobile young adult consumers" have always wielded buying power. "It's just a surprise that people are doing it when they are told not to."

What Does IndyMac Owe Fannie? - (online.wsj.com) An effort by the Federal Deposit Insurance Corp. to sell the failed IndyMac Bank raises a tricky question: How much does IndyMac owe to the government-backed mortgage company Fannie Mae? People familiar with the situation say that Fannie believes IndyMac has obligations to repurchase around $1 billion of home mortgages that failed to meet Fannie's standards.

Jim Rogers calls most big U.S. banks "bankrupt" - (www.reuters.com) Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded. Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital. Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc (LEHMQ.PK). Some of the funds are being used for acquisitions. "Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor. "What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."



OTHER STORIES:

IMF to Lend $2.5 Billion to Belarus - (online.wsj.com)
Bank-Failure Central?Try Alpharetta, Ga. - (online.wsj.com) Alpharetta, Ga., is a suburb of wide boulevards, sleepy cul-de-sacs and bustling red-brick shopping centers. It also is the bank-failure capital of the U.S.
Where We Are, Where We're Heading (2009) - (www.ml-implode.com) - "We now are "discovering" what I have written about for more than a year first-hand - the so-called "growth" over the last seven...
Implosion In Option ARMs Still Coming Despite Low Rates - (www.dailymarkets.com)
Higher Wages or Bubblenomics: What's it gonna be? - (www.marketoracle.co.uk)
House prices expected to fall further in 2009 - (www.latimes.com)
Executive jobs AIG seeks Fed easing of rules on disposals - (www.ml-implode.com) - "AIG, the insurer bailed out by the US government, is prepared to ask the Federal Reserve to relax rules on its $60bn-plus dispo...
An Explanation of the Economy I Can Finally Understand - (www.ml-implode.com) - "It is New Year's Day and most people are either partied-out, planning on watching a lot of football, resting, etc., but ultimat...
GMAC: Bank Holding Companies Do Go Bankrupt - (www.ml-implode.com) - ...the Fed's 4-1 approval of the GMAC application to become a bank holding company ("BHC") is, to us, the latest evidence that o...
Wells Fargo’s Purchase of Wachovia Tested by Economic Crisis - (www.ml-implode.com) - Wells Fargo & Co.’s $12.7 billion acquisition of Wachovia Corp. faces immediate stress as economists predict home foreclosures w...

Prices still are simply too high - (www.newgeography.com)
Housing Will Improve with LOWER PRICES, not Lower Rates - (www.seekingalpha.com)
Low Mortgage Rates to Spur New Wave of Defaults - (mrmortgage.ml-implode.com)
Jumbo Mortgage Shoppers Get Little Relief From Rates - (www.bloomberg.com)
No house-price rebound until 2011 - (lansner.freedomblogging.com)
16% of U.S. households in foreclosures by 2012 - (mortgage.freedomblogging.com)
Housing market won't recover until 2014 - (www.express.co.uk)
Housing Inventories on the Rise - (www.nytimes.com)
Bailout of Long-Term Capital: A Bad Precedent? - (www.nytimes.com)
Rating the Rating Agencies - (www.lewrockwell.com)

What Happened to the American Dream? - (www.seekingalpha.com)
The Great American Ponzi Scheme - (www.seekingalpha.com)
Mortgage Lessons From 'It's a Wonderful Life' - (www.newsweek.com)
Newer House For Sale in Valley Center - (www.youtube.com)