Wednesday January 21 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Rosner Force Banks to Admit Bad Debt Before They Get Cash - (finance.yahoo.com) It's no coincidence President Bush has requested the second $350 billion of TARP funds at the same time Wall Street is grumbling about how Citigroup, and possibly Bank of America and others, may need additional capital. But before the government puts another dollar of taxpayer money into the banks, they must force these firms to "lift the kimono" and write-down their bad assets, says Joshua Rosner, managing director of Graham Fisher and one of the first analysts to warn of a pending crisis in the mortgage. "Because the assets continue to get worse, the capital [banks] are given just gets hoarded," Rosner says. "They need to hold capital in order to meet regulatory capital requirements instead of using it to make loans that seek productive economic returns." Treasury could act as a clearinghouse for bad debt and hold open market auctions to determine the "true price" of those assets. Once those market prices are established, we can determine which banks are still viable and which aren't, Rosner says. "Then the FDIC can come in in a traditional way [to seize troubled banks] or the government could then use TARP money to institutions free of bad assets."

Schwarzenegger: California Faces Insolvency within Weeks - (www.ml-implode.com) This disruption has stopped work on levees, schools, roads, everything," Mr. Schwarzenegger plans to say. "It has thrown thousands and thousands of people out of work at a time when our unemployment rate is rising. How could we let something like that happen? I know that everyone in this room wants to hear again the sound of construction. No one wants unemployment checks replacing paychecks.""

NYC Real Estate Wipes Out Israel's Pension Funds - (businesssheet.alleyinsider.com) It's not only your investments and 401(k)s that have been syphoned off in the economic crisis. Retirees and about-to-retire workers in other countries are suffering, too. But not because of the Madoff scheme. He's off the hook this time. Israeli pension funds saw $5.1 billion disappear as US and UK real estate investments, made by Jewish billionaires from those countries. with the retirement money, lost their value. Israel is on the verge of a strike because of it. Even the New York City real estate market is not a safe bet anymore. Bloomberg: Israeli pension funds helped diamond mogul Lev Leviev snap up Manhattan real estate, including the former New York Times building, in 2007. Now they’re sharing in his losses as property prices plunge, dragging down the value of corporate bonds that backed the deals. Fellow billionaire Yitzhak Tshuva has the same problem after the foray by his Delek Real Estate Ltd. into British property and roadside restaurants helped force its bonds down 73 percent. Pension funds and individual investors lost about 20 billion shekels ($5.1 billion), or a quarter of what they had invested in corporate bonds, as yields fell in the four months to November. ...“These real estate tycoons imported the global financial crisis to Israel,” said Gill Beeri, managing director of Ramat Gan, Israel-based Ayalon Financial Solutions Ltd. Its Smadar fund lost 14.1 percent in the first 11 months of last year. “There’s increased concern that these companies may default.” Tel Aviv Stock Exchange TA-25 Index fell by 41 percent in the past year as fears of bankruptcy of Israeli firms spread among investors. The government is hashing out a bailout to compensate for the retirement funds in response to strike threats by Israel's largest union over the pension losses.

Treasury and Bank of America reach bailout deal – (news.ino.com/headlines/) Bank of America reached an agreement early Friday for an additional $20 billion in support from the government's emergency bailout fund, plus guarantees against losses on up to $118 billion in troubled assets. The agreement was announced shortly after midnight Friday following marathon negotiations between the bank and federal officials. It marked the latest effort by the Bush administration to bolster the banking system in the face of the worst financial crisis since the Great Depression. The $20 billion injection of fresh capital will come from the government's $700 billion rescue fund and will be similar to assistance provided in November to another troubled bank, Citigroup. Bank of America will use the money from the rescue fund to help it absorb losses at Merill Lynch. The loan guarantees will cover about $118 billion in loans and other holdings such as securities backed by residential and commercial real estate loans. The bulk of these holdings were obtained by Bank of America in its acquisition of Merrill Lynch, a deal which closed earlier this year. The Treasury Department already has pledged the first half of the $700 billion bailout fund, which Congress approved on Oct. 3, to deal with the nation's financial crisis. However, President George W. Bush, on behalf of President-elect Barack Obama, asked Congress to release the second half of the bailout fund earlier this week and on Thursday the Senate voted 52-42 to turn aside an attempt by opponents to block the release of the remaining $350 billion from the bailout fund. Before the new support package, Bank of America had received a total of $25 billion in capital injections from the Treasury bailout fund, called the Troubled Asset Relief Program, or TARP, including $10 billion for Merrill Lynch. In a statement, Treasury said the new support was designed "to strengthen the financial system and protect U.S. taxpayers and the U.S. economy." "It gets down to the cost of the acquisition of Merrill and the risks associated with the deal," said Gary Townsend, president of Maryland-based private investment group Hill-Townsend Capital. "They were obviously in contact and in discussion with the Treasury prior to the end of year close." Even with the government aid, Bank of America's stock has been pummeled. Shares of the Charlotte, N.C.-based bank are down more than 27 percent this year _ dropping to their lowest level in 18 years _ and lost $1.80, or 17.5 percent, to $8.40 in late afternoon trading Thursday after trading as low as $7.35 earlier in the session. Rival Citigroup's shares plunged 87 cents, or 19.5 percent, to $3.66 after falling as low as $3.36 earlier in the session. Bank of America declined comment on the new aid package on Thursday. Some analysts are predicting the nation's biggest bank by assets will report a loss or lower-than-expected earnings for the fourth quarter. Its board has already halved the company's dividend and could slash the payout again. It had been expected to report its fourth quarter results next Tuesday, but the bank moved up the release to early Friday. "We don't know how they are going to be," said Bert Ely, a banking industry consultant in Alexandria, Va. "The question is can they handle the recognition of the committed losses, however bad they are going to be, if they are there."

Depression Ahead, Prepare for Stock Rout: SocGen - (www.cnbc.com) Societe Generale said on Thursday that the United States' economy looks likely to enter a depression and China's could implode. In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout. He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels. Edwards also raised the danger of a global trade war with China. "While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere," Edwards wrote. "It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression."

Economic woes lead to bankruptcy boom - (www.sfgate.com) For five years, San Francisco attorney Tilden Moschetti practiced family law, but in November, he shifted his legal attention to reflect the demand in the market: personal bankruptcy filings. "It's a good market to get into," said Moschetti, who's advertising his practice online by updating a blog that follows bankruptcy news. "Considering where things are right now." As the economic downturn cuts jobs in many professions, the consumer bankruptcy attorney has thrived: Membership in the National Association of Consumer Bankruptcy Attorneys jumped by one-third in 2008, to an estimated 3,200 practicing lawyers. The job description has also shifted. Bankruptcy attorneys, nearly put out of business by a 2005 law that made it more difficult for consumers to file, are dedicating more hours to hand holding devastated clients, compared with previous recessions.

Riots in Riga - (www.bankimplode.com) Coming soon to a town square near you. Does there remain any doubt that the preparations for martial law are for real? As soon as Americans realize they’ve been shafted by TARP and there’s no legal recourse, they will move to the streets pitchforks and hand. It’s a tried and true formula, don’t believe me then read the French Revolution. Here’s more from the BBC. Hundreds of demonstrators have clashed with riot police in Latvia’s capital, Riga, after an anti-government protest. Police used mace and truncheons to disperse rioters who smashed shop windows and overturned a police van after failing to storm parliament. The violence followed a peaceful rally in which some 10,000 people accused the government of economic mismanagement and demanded new elections. Latvia’s economy is expected to contract by at least 5% this year. Until last year, it was one of the fastest growing economies in Europe. Many Latvians frustrated by rising unemployment and tax hikes blame the centre-right governing coalition of Prime Minister Ivars Godmanis for their country’s economic woes. Shops looted: Tuesday’s peaceful protest was Latvia’s largest since it became independent in 1991.As the crowd swelled, dozens of protesters tried to storm the parliament building, and hundreds of demonstrators then hurled rocks and chunks of ice at government buildings. The rioters were dispersed by riot police using mace and truncheons, but they gathered again in a neighbouring street in Riga’s historic business district. The protest was Latvia’s largest since it became independent in 1991


OTHER STORIES:

Bank of America Gets $20 Billion Aid for Merrill Deal - (www.cnbc.com) Bank of America will receive $20 billion in fresh government cash and a federal backstop against $118 billion of bad assets to help the bank absorb Merrill Lynch & Co, U.S. officials said on Friday
Bank Problems Seen Spreading - (www.cnbc.com)
Banks Need TARP to Survive - (www.cnbc.com)
Citigroup Seen Shaking Up Board - (www.cnbc.com) Some of Merrill Lynch's Losses Stem from Thain Era

Volcker Group’s recommendations for financial reforms - (www.ml-implode.com) - "Volcker’s “Group of 30″ released its report today on suggested reforms for financial markets. The full 80 page report has to b...
Senate Votes to Release Bailout Money - (www.ml-implode.com) - "Obama's economic team finally did get a bit more specific with their plans for the second $350 billion of the TARP, and it was ...
The Real Cause of the Financial Crisis: An MIT Blackjack Team Perspective - (www.ml-implode.com) - ""The mathematics of probability that govern the trade-offs of risk and reward are fundamentally counter-intuitive. The reason t...
In court, Countrywide says its ads are ‘puffery’ - [2009-01-15] - In marketing, advertising and testimony before Congress, Countrywide Home Loans has said repeatedly that it is working hard to m...
CNBC's Faber: "Where Are We?" (With The Bailouts) - (www.ml-implode.com) - It is kind of amusing to see the press now admit that maybe letting the bad banks fail would have been a better idea. At least,...
Facing Budget Gap, Schwarzenegger Urges Lawmakers to Bridge Divide - (www.ml-implode.com)
HUD Challenged Over Alleged RESPA Violations - (www.ml-implode.com)
A curious call from Societe Generale - (www.ml-implode.com)

Mortgage Rates Down Again - (www.ml-implode.com)
No Bottom in Sight for U.S. Homebuilders: Report - (www.ml-implode.com)
Social Mood Will Define The Future - (www.ml-implode.com)
Swindlers Find Growing Market in Foreclosures - (www.ml-implode.com)

New York rents falling hard, anecdotal evidence - (optionarmageddon.ml-implode.com)
Estimated Change in House Prices: San Francisco will be worst hit - (www.seekingalpha.com)
In bad economy, Californians packing up and leaving - (www.dallasnews.com)
U.S. mortgage meltdown linked to 2005 bankruptcy law - (www.kansascity.com) This study is complete crap. This mortgage meltdown was in progress and the top was in around October 2005.
Beazer Homes: Sales Off more than 50% - (www.calculatedriskblog.com)
Warning that Irish house prices may fall by 80% - (www.irishtimes.com)
Miami-Dade Foreclosures Up 111% in 2008 - (www.miamicondoforum.com)
Toyota Slashes North American Production - (www.cnbc.com)
GM Cuts Auto Sales Outlook - (www.cnbc.com)
Should CEOs Of Public Firms Have Medical Privacy? - (www.cnbc.com)

Bernanke Hints Banks In Much Worse Shape Than Previously Admitted - (Mish)
Citi's Flip On Mortgage Cramdowns A Bad Idea - (www.seekingalpha.com)
We're All Foolish Keynesians Again - (online.wsj.com)
Deflationary Sprial Not Likely In US - (www.seekingalpha.com)
Is Financial Crisis Growing Worse—Or Is It Just Us? - (www.cnbc.com)
Intel Earnings Fall as PC Sales Remain Weak - (www.cnbc.com)
Cramer: Are the Bulls Back? - (www.cnbc.com)
Fox Business sues Fed for information on bailouts - (www.reuters.com)
A Bailout For Yuppies - (www.newgeography.com)
John Paulson Profits in Downturn - (www.portfolio.com)
The Bailout Game - (www.thebailoutgame.us)