Thursday February 19 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

U.S. Too "Politically Frightened" to Admit Truth About Banks - (finance.yahoo.com) The next phase of the bank bailout plan presented by Treasury Secretary Tim Geithner (now slated for Tuesday) is expected to be multi-faceted but missing one key element: An admission by policymakers that major U.S. banks are insolvent. There are two explanations why the Obama administration (like its predecessor) refuses to even acknowledge this possibility in public, says Martin Wolf, chief economics commentator for The Financial Times:
· One, policymakers have better information than private economists and really believe the big banks aren't insolvent, i.e. they continue to view the crisis as a "liquidity problem," and believe so-called toxic assets will return from their currently "artificially low" levels once confidence is restored.
· Two, policymakers "are not prepared to admit the truth" because it means existing shareholders and bank managements will be wiped out. It also means "admitting total failure" of efforts to date to stem the crisis, says the author of Fixing Global Finance. Arguing today's toxic assets are "fundamentally worthless" - and there's lots more losses coming - Wolf says the lack of political will (or outright cowardice) to admit to reality means "we're really in trouble." Why? Because confidence in policymakers will continue to deteriorate as their ill-conceived solutions continue to fail.

Europe ambushes Germany on debt bail-out - (www.telegraph.co.uk) The European Union has called an emergency summit of national leaders this month to halt the drift towards protectionism and stem the risks of a debt crisis as the slump deepens. EU finance ministers are to discuss proposals over breakfast in Brussels today for some form of "debt-agency" or mechanism for the EU to raise bonds, a move seen by diplomats as a ploy to ambush Germany into accepting shared responsibility for EU debts – anathema to Berlin. Concern is mounting over the dramatic deterioration of public finances across the EU. Ireland's deficit is heading for 12pc of GDP, and there are doubts over whether Italy and Greece can roll over some €250bn (£218bn) in state debt between them this year. EU company debt is a worry too, now 95pc of GDP compared to 50pc in the US. "The amount of debt to roll over in the eurozone is huge, at a time when banks are tightening credit standards," said Gilles Moec, from Bank of America. "Spanish businesses are in a dire situation." Mirek Topolanek, Czech premier and holder of the EU presidency, said the crisis summit was aimed at thrashing out a joint "recovery plan" and curbing the nationalist reflexes that are tearing the EU apart. The Czechs are livid over comments by French president Nicolas Sarkozy, who threatened to withold aide for French car companies unless they spend it at home. " If we give money to the auto industry to restructure, we don't want to hear about plant moving to the Czech Republic," he said. Mr Topolanek said the comments were "unbelievable" and could cause the Czech Republic to reject the Lisbon Treaty. "If somebody wanted to seriously threaten ratification, they couldn't have picked a better means," he said.

10 dirty tricks to jump-start a new bull, fast! - (www.marketwatch.com) How Wall Street lobbyists, PR hot shots will limit reform, brainwash America. Yes, America wants an economic recovery. A brand new bull. And nobody wants it more than Wall Street. It gets rich off bull markets. Yes, Warren Buffett may be buying, but the odds are against Wall Street now. The financial sector's in the tank: Stocks are huge losers. Earnings stink. Bonuses are down. And if they ask for TARP money, CEO salaries get capped, there are no lavish conferences and you fly commercial -- very humbling for a big boss used to making a million bucks a week. Still, Wall Street wants a new bull more than you do. Why? Bulls breed mega-payoffs. Yes, Wall Street's running a handicap race on a bad playing field, a rotten economy. Yes, the pressure's enormous. But if Wall Street wants to get its hands back in the magic cookie jar soon, it has no choice. It must get super-clever super-fast and jump-start a roaring new bull for the rest of America's 95 million investors, quickly. Get it? Wall Street must deliver a new bull market, fast and soon. How? By hook or by crook. Whatever pragmatic or Machiavellian power plays work. Why? Wall Street's got huge incentives at the end of this rainbow: Citing Watson Wyatt, the Economist says money management is a golden goose, with $64 trillion managed by professionals at the peak of the last bull. Assuming Wall Street controlled a third for an average 2% fee, there's roughly $400 billion at stake. So Wall Street's army of lobbyists will have to pull off some fancy tricks, many at odds with today's demands for "change" by the president and political reformers. But now's the time to act, with the new TARP rules and an $800 billion stimulus bonanza on the way. Look beyond the bad news. Remember, Washington's run by 40,000 lobbyists not 537 elected politicians. I'm betting lobbyists will use the following tactics to neutralize activists and limit reforms. That way, behind the scenes Wall Street keeps control with its business-as-usual tactics, schemes, scams, hustles and wheeling and dealing. Here are the 10 "dirty tricks" Wall Street lobbyists likely will use to help jump-start a new bull market:

Revolt brews in California counties - (www.sacbee.com) Counties in California say they've had enough – and they aren't going to take it anymore. In what amounts to a Boston Tea Party-style revolt against the state Capitol, they're threatening to withhold money. Los Angeles is considering such an option. And Colusa County supervisors said they authorized payment delays for February. "We didn't vote on it, because I don't think anybody wants to go to jail," Colusa County Supervisor Kim Vann said. Closer to home, Sacramento County is planning to file a lawsuit this week against the state and Controller John Chiang for withholding millions of dollars – much of it for social service programs. "The Legislature authorized those expenditures, and (the controller) has decided to withhold it," said Susan Peters, chairwoman of the Sacramento County Board of Supervisors. "I believe it's possible other counties will be joining in the action." Riverside County is looking at a similar lawsuit but plans to go one step further. It authorized going to court to relieve it from having to provide state-mandated services without state funding. Hallye Jordan, a controller spokeswoman, said Chiang "shares the frustration of counties" but was forced to act because of the failure of the Legislature and governor to address the budget deficit. "It's an awful situation," she said. "We understand that many counties are suffering." Regardless, a coalition of six Southern California counties is headed to Sacramento for a Feb. 12 meeting to call attention to the counties' plight, Riverside County spokeswoman Lys Mendez said. By the time leaders from Riverside, Los Angeles, Orange, San Diego, Imperial and San Bernardino counties come together, the revolt could be at full steam. "I think it just reflects the severity of the problem, and folks are just trying to find a way to keep (programs) going," said Jim Wiltshire, deputy director of the California State Association of Counties. Frustration has been spreading since last week, when the state controller vowed to delay payments to counties for health and social services.

It's a $15,000 bonus to affluent flippers - (www.nytimes.com) What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses? A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished. Even if the original Obama plan — around $800 billion in stimulus, with a substantial fraction of that total given over to ineffective tax cuts — had been enacted, it wouldn’t have been enough to fill the looming hole in the U.S. economy, which the Congressional Budget Office estimates will amount to $2.9 trillion over the next three years. Yet the centrists did their best to make the plan weaker and worse. One of the best features of the original plan was aid to cash-strapped state governments, which would have provided a quick boost to the economy while preserving essential services. But the centrists insisted on a $40 billion cut in that spending. The original plan also included badly needed spending on school construction; $16 billion of that spending was cut. It included aid to the unemployed, especially help in maintaining health care — cut. Food stamps — cut. All in all, more than $80 billion was cut from the plan, with the great bulk of those cuts falling on precisely the measures that would do the most to reduce the depth and pain of this slump.

West should adopt Islam's prohibition on interest - (www.sfgate.com) As credit markets have imploded, triggering a global economic crisis, Islamically correct investors have seen a change of fortune: The conservative principles this small group of devout Muslims clung to during the economic heyday has insulated them from the worst of the past year's suffering. Their renunciation of the interest-based economy kept them away from investments in financial services companies, whose stocks have collapsed, and out of traditional mortgages. "There was a time two or three years ago that Islamic finance was considered simply too conservative," said Professor Ibrahim Warde, author of "Islamic Finance in the Global Economy" and an adjunct professor at the Fletcher School of Law and Diplomacy at Tufts University. "Right now, many people are recognizing that maybe it wasn't such a bad thing." Dow Jones Islamic Market Indexes, which represent benchmarks for Islamically correct investment categories, have been outperforming their non-Islamically compliant counterparts by 3 to 4 percent in key indexes. The two Amana Income and Growth funds, the largest Islamic mutual funds in the country with $1.2 billion in combined assets, have been outperforming the S&P 500 in the past year by 13 and 7 percent, respectively. (Both Amana funds also outperform the S&P index on 5- and 10-year comparisons.) Bay Area residents who bought homes through an Islamically compliant lender in San Jose, the Ameen Housing Cooperative, don't have to worry whether their lender will work with them if they lose their jobs. Islamic lenders are required to work in good faith with distressed borrowers to figure out ways to make payments manageable - and co-op leaders say they will.


OTHER STORIES:

Banks Rescue Will 'Make Things Worse': Rogers - (www.cnbc.com)
Central Banks Sacrifice Independence as Crisis Grows - (www.bloomberg.com)
Crisis 'more serious than 1930s' - (news.bbc.co.uk)

Bond market calls Fed's bluff as global economy falls apart - (www.telegraph.co.uk)
U.S. Taxpayers Risk $9.7 Trillion on Bailouts as Senate Votes - (www.bloomberg.com)
GM, Chrysler May Face Bankruptcy to Protect U.S. Debt - (www.bloomberg.com)
Job losses at small companies could reach 2 million by 2010 - (www.latimes.com)

Kanjorski Details Shocking Fed & Treasury TARP Threats - (www.dailybail.com) The day the banks were just three hours from collapse - (www.dailymail.co.uk)
The rise and - (almost) fall of America's banks - (news.yahoo.com)
Obama's Dangerous Bank Bailout - (online.wsj.com)
Bank Nationalization? An Argument for Quick Action - (www.newsweek.com)

This Perp Walk Needs Handcuffs - (www.newgeography.com)
You Try to Live on $500K in NYC - (www.nytimes.com)
U.S. Taxpayers Risk $9.7 Trillion on Bailout Programs - (www.bloomberg.com)
Geithner Seeks Fools To Buy Toxic Assets - (www.bloomberg.com)
Dr. Doom & Black Swan: You Ain't Seen Nothin' Yet - (www.cnbc.com)
The Dangers Of Superficial Knowledge - (www.scoop.co.nz)
$15,000 tax credit is superficial thinking - (www.progress.org)

Graph of job losses in recent recessions - (www.speaker.gov)
GM, Chrysler May Face Bankruptcy to Protect U.S. Debt - (www.bloomberg.com)
Bond market calls Fed's bluff - (www.telegraph.co.uk)
The Audacity of Pork - (thelastgoodidea.blogspot.com)
Wanda Sykes Explaining the Bailouts - (www.dailybail.com)