Thursday February 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

No Doubt: The Worst is Yet to Come – (Frank Barbera on www.financialsense.com) Over the weekend, ‘60 Minutes’ did a lengthy piece on the “Buy American” clause which the Obama Administration at one point seemed likely to be including in the forthcoming stimulus package. Originally, the language in the bill stipulated that government funded projects use only US-made materials (steel etc.). Across the US, Labor Unions have understandably wanted the strong ‘Buy America’ provision, while companies with large-scale exports have opposed the initiative. During his campaign, Obama ads which ran in widely ‘labor-heavy’ states used the slogan, “Buy American, Vote Obama”. In viewing the 60 Minutes report, it was easy to see both points of view, with a senior executive at Nucor arguing that Chinese dumping of cheap steel is costing American jobs, counter-pointed by the CEO of Caterpillar who suggested that this kind of language could open the door to new found Trade Wars with other countries viewing the language as a move toward protectionism by the United States. To that end, President Obama seems to be coming to the conclusion that risking this kind of bearish signal is simply too high a gamble and has now opted to settle on a middle of the road, watered down version in which the Buy American language only requires that the government spend funds in ways that which do not violate U.S. trade agreements. When interviewed, President Obama said that his change was prompted by concerns that tough ‘Buy American’ requirements could spark international trade wars. Speaking with ABC News, Obama stated that he was against provisions that ‘signal protectionism’ stating, “I think that would be a mistake right now. That is a potential source of trade wars that we can’t afford at a time when trade is sinking all across the globe, -- a downward protectionist spiral could be very dangerous.”

Court Blasts Through Foreclosure Cases - (online.wsj.com) To clear a huge backlog of foreclosures, Florida judges are hearing "rocket dockets" of nearly 1,000 cases a day. Hoping to save her house, Saundra Hill Scott arrived at the county courthouse clutching dog-eared mortgage bills and letters from her lender. See photos and hear audio clips from the Lee County Courthouse and Ms. Hill Scott's home. She need not have bothered. The foreclosure hearing lasted less than 20 seconds, with Judge John Carlin asking her two questions: Are you current on your mortgage and are you living in the home? She answered no and yes and then offered to show him her paperwork. "I don't need to see that. That's between you and the bank," he said as he gave Ms. Hill Scott, her husband and three grandchildren 60 days to work out a deal with their lender or vacate their three-bedroom house. While the Obama administration prepares to unveil on Wednesday its plan to rescue the U.S. housing market, officials here in Lee County have come up with their own unique plan for dealing with the crisis. To clear a huge backlog of foreclosures, judges are hearing "rocket dockets" of nearly 1,000 cases a day and calling retired colleagues back to the bench to help ease the workload. The housing crisis has been pounding the Florida court system like a Category 5 hurricane. Not only does the state have among the highest default rates in the country, its legal system, unlike many other states with devastated housing markets, requires judges to sign off on foreclosures. The combination has created a monster glut of cases that are overwhelming the courts. The Obama plan to encourage more loan modifications nationally may stem the flood of foreclosures in Florida somewhat, but Lee County officials say that the area's large number of unemployed residents and housing speculators may end up losing their properties anyway.


Goldman Sachs Partners Forced to Borrow to Cover Margin Calls - (www.cnbc.com) Tough times on Wall Street are reaching all the way to the highest levels of the most storied former investment bank—Goldman Sachs—as partners there are being forced to borrow money to cover margin calls, according to sources within the firm. Several Goldman Sachs partners have leveraged their Goldman Sachs stock to buy alternative investments such as hedge funds & private equity, and they have done so through their Goldman Sachs brokerage accounts. But Goldman stock has declined in value by more than 50 percent since last spring, meaning that Goldman Sachs is in the awkward position of making margin calls on its own partners, who can't meet those calls because their alternative investments are underwater and they don't have enough cash on hand. Now those partners are being forced to borrow money—millions of dollars—to meet Goldman Sachs' own margin calls. Sources at Goldman told CNBC that the borrowing is not a widespread phenomenon. It affects a "few" partners, sources say. But it is significant enough that the firm is arranging for its own financial advising firm to help facilitate borrowing for partners that need the money. Buying stock on margin—basically on credit—is inherently risky. When markets turn down and stock values fall, the people who offer that credit call their clients, needing more cash to make up the lost value. These "margin calls" are a classic sign of bad times in the market all the way back to the depression, and now they're back, big time.

Stanford Financial Chief Tried to Flee Country: Source - (www.cnbc.com) The head of Stanford Financial Group charged with orchestrating an $8 billion fraud tried Tuesday to get a one-way flight out of the country, a source told CNBC. R. Allen Stanford tried to arrange the direct flight to Antigua, where his offshore banking operations are based. He contacted a private jet owner at 3 pm and attempted to pay for the flight with a credit card, but was refused because the company would only accept a wire transfer, a source in the private jet industry said. Stanford had asked to leave by 6 pm. The Securities and Exchange Commission charged Stanford with an $8 billion fraud in which he allegedly lured investors with promises of high returns on certificates of deposit. Instead, he put the money in "black boxes" with hard-to-trade assets, the SEC said. Of the money Stanford allegedly swindled, as much as $1.5 billion belonged to US investors, who recouped most of their investments through redemptions that began to pour in following the Bernie Madoff Ponzi scheme, CNBC reported.

Stanford Attorney’s Withdrawal ‘Screams Fraud,” Spurred SEC - (www.bloomberg.com) As R. Allen Stanford assured clients last week that U.S. investigators were conducting “routine examinations” of his Texas investment advisory firm, a lawyer for his company’s Antigua affiliate was backing out. Stanford, the 58-year-old billionaire now accused of running a “massive, ongoing fraud,” spent his final weeks at the firm struggling to soothe clients while disregarding subpoenas that sought to account for almost $8 billion of their money, according to a lawsuit filed yesterday by the Securities and Exchange Commission. Regulators pounced days after a lawyer at the Antigua bank at the heart of the case “disaffirmed” everything he had told authorities. “The attorney’s withdrawal is a massive red flag” that “screams fraud,” said Peter Henning, who teaches criminal and securities law at Wayne State University in Detroit. “If the SEC hadn’t turned up the heat by that point, it did then.” The SEC’s civil suit accused Antigua-based Stanford International Bank of touting “improbable, if not impossible” returns while selling certificates of deposits to investors for more than a decade. A federal judge in Dallas agreed to freeze assets and appoint a receiver to account for the roughly $8 billion investors spent on the CDs, according to the SEC. The attorney who stepped down was Thomas Sjoblom at Proskauer Rose LLP in Washington, according to a person familiar with the matter. Sjoblom declined to comment. Stanford spokesman Brian Bertsch referred questions to the regulator.

Pickens Reduces Energy Investments, Holdings Fall 97% - (www.bloomberg.com) T. Boone Pickens, the billionaire hedge-fund manager who forecasts oil will more than double in the next 10 months after being driven down by the global recession, shed energy-related shares as their value declined, a public filing showed today. Pickens, who held 26 energy companies in his BP Capital Management LP fund as of a Nov. 14 filing, had nine according to a filing made today. As Pickens sold positions, the worth of the holdings in the fund tumbled 97 percent during the final three months of 2008 to $40 million from $1.29 billion on Sept. 30, a comparison of the filings showed. “It looks like a big commodity dump,” said Gianna Bern, president of Flossmoor, Illinois-based Brookshire Advisory & Research Inc., an energy research and consulting firm. “Crude oil will not come back until we see a global economic turnaround,” she said. Some smaller clients of oil services companies Halliburton Co. and Schlumberger Ltd., both based in Houston, are finding it hard to raise financing for projects because of the credit crunch, Bern said.

Greenspan backs bank nationalisation - (www.ft.com) The US government may have to nationalise some banks on a temporary basis to fix the financial system and restore the flow of credit, Alan Greenspan, the former Federal Reserve chairman, has told the Financial Times. In an interview, Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers. ”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.” Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation. “We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalisation is what works, then we should do it.”

California Foreclosure Epicenter Shows Challenge Facing Obama - (www.bloomberg.com) It has taken Susan Erb just three years to see the value of her Merced, California, home plunge by more than half to $350,000. Next month, her mortgage payment jumps 20 percent to $3,321 and she knows she can’t afford it. Her bank won’t rework the loan unless she stops paying altogether. “Now I know how people feel when I go knocking on their door,” said Erb, 53, a real estate agent who works for a company that notifies residents in foreclosed properties that they must vacate. “I’m in their shoes.” Merced, the epicenter of the U.S. foreclosure crisis, demonstrates the steep challenges President Barack Obama will face in trying to stem defaults. One in 59 housing units in the Merced metropolitan area received a foreclosure filing in January, the highest rate in the U.S., according to RealtyTrac Inc., an Irvine, California-based seller of default data. For- sale signs are everywhere and a building boom fueled by subprime mortgages has been brought to a standstill. Just 16 construction permits were issued last year. In 2005, there were 1,427. “We’re ground zero,” said Merced Mayor Ellie Wooten, 75. The city, population 81,000, had an unemployment rate of 15.5 percent in December, “and it’s going to get worse,” she said.

CB Richard Ellis Diversified -- at a Debt-Heavy Cost - (online.wsj.com) Purchase of Property Manager Trammell Crow Is Paying Off in Slump, but the Borrowing Burden Is Taking a Toll. But the Trammell Crow deal also raised CB's debt load from about $800 million in 2005 to $2.2 billion a year later. That is becoming a burden as the company's revenue from its brokerage and leasing businesses declines. Analysts have grown concerned that CB could breach the covenants on some of its loans, forcing it into technical default and putting it at the mercy of lenders. Last week, credit-ratings firm Moody's Investors Service downgraded CB debt. Unlike real-estate-owning companies, brokerage firms don't have a bedrock of leasing revenue they can rely on when market activity slows. Before 2008, their biggest sources of revenue were fees from brokering leases and sales of buildings. In the fourth quarter, CB saw the revenue from those two activities drop 28% and 65%, respectively, from the same period in 2007. Total revenue was off 30%. But the property-management business is growing. That business, which lets other companies cut costs by outsourcing the management of the buildings they own to CB, jumped from being the third-biggest revenue generator for the company in 2007 to the top of the list last year, bringing in $1.7 billion in 2008.



OTHER STORIES:

Housing Plan: $275 Billion to Help 9 Million Families - (www.cnbc.com) President Obama's plan to deal with the U.S. housing crisis aims to help as many as 9 million families avoid foreclosure.
Help For Responsible Homeowners, Too - (www.cnbc.com)
Break for Those Who Least Deserve It - (www.cnbc.com)
Goldman Sachs Partners Borrow to Cover Margin Calls - (www.cnbc.com)
Bernanke: Fed Taking Step Toward Inflation Target - (www.cnbc.com)
Crescenzi: Game Changer In Housing Numbers - (www.cnbc.com)
Wagoner: Conservative Outlook Costs More - (www.cnbc.com)
GM's Next Move Will Be The Toughest - (www.cnbc.com)
Buffett Cuts Berkshire Stake in J&J by Half - (www.cnbc.com)
Cramer: Don't Follow Buffett this Time - (www.cnbc.com)
Stanford Financial Has Deep Venezuelan Ties - (www.cnbc.com)
Greenspan: Need More TARP Funds to Stabilize Banks - (www.cnbc.com)

Treasury Notes Decline as U.S. Readies Auctions for Next Week - (www.bloomberg.com)
Oil Trades Near $35 on Speculation U.S. Stockpiles to Climb - (www.bloomberg.com)
Wall Street rebounds on techs, bargain hunting - (www.reuters.com)
Gold Demand Rose 26% in Quarter on Investment Appeal, WGC Says - (www.bloomberg.com)
Bank nationalisation gains ground with Republicans - (www.ft.com)

Hedge-Fund Firms Pressed to Consolidate After Losses Erode Fees - (www.bloomberg.com)
EU: stimulus plans leaving big budget gaps - (www.washingtonpost.com)
BOE Unanimously Agrees to Seek More Authority to Create Money - (www.bloomberg.com)
Currency Issues Weigh on Eastern Europe - (www.nytimes.com)
Downgrades Loom for Hungary, Poland, Bond Yields Show - (www.bloomberg.com)
BOJ meets with Japan in worst slump since 1970s - (www.marketwatch.com)
Asia’s jobless may hit 23.3m in 2009 - (www.ft.com)
China's financial clout locks in energy supplies - (yahoo.finance.com)
China threat to Indian IT - (www.ft.com)
Obama Pledges $275 Billion to Stem U.S. Foreclosures - (www.bloomberg.com)
Housing starts plunge 17% to record low in January - (www.marketwatch.com)

U.S. Industrial Production Fell in January, Led By Auto Plunge - (www.bloomberg.com)
Obama mortgage plan to aid up to 9 million families - (www.reuters.com)
Mortgage applications rose 45.7% last week - (www.marketwatch.com)
Californian dream turns into nightmare - (www.ft.com)
GM Seeks Up to $16.6 Billion in New Aid, Plans 47,000 Job Cuts - (www.bloomberg.com)
Automakers Seek $14 Billion More in Aid - (www.nytimes.com)
Microsoft chief lays down gauntlet on mobiles - (www.ft.com)
SEC charges executives at BlackBerry maker Research in Motion - (www.ft.com)