Thursday February 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Manager's luxe life on the line in Madoff case - (finance.yahoo.com/s/ap) Walter Noel Jr. and his wife Monica had it all: Luxurious houses on Connecticut's wealthy coast, Palm Beach and the Hamptons, a Park Avenue pied-a-terre and, most of all, a hilltop retreat on an exclusive island in the Caribbean named after a goddess. They hobnobbed with Mick Jagger and Tommy Hilfiger, who sounded a bit jealous of their view. The couple's five tall, attractive daughters mostly married foreign men in high social circles, adding to an extraordinary network of international connections that along with remarkably consistent returns helped Noel expand his New York-based money management firm with billions of investments from the elite around the world. "They almost were like a fashion magazine version of a very wealthy, prosperous attractive family," said David Patrick Columbia, who runs New York Social Diary.com, a site that observes the lives of the rich. "They're very well liked, very popular." That world is now in jeopardy as investors line up to sue over the $7 billion in client funds that Noel's Fairfield Greenwich Group invested with Bernard Madoff, the alleged architect of what investigators say may be the largest Ponzi scheme in history. Madoff is accused of duping investors out of as much as $50 billion by paying returns to certain investors out of the principal received from others. The lawsuits filed against Noel and his company accuse them of ignoring obvious red flags with Madoff and unjustly enriching themselves of at least $1 billion, and say Fairfield Greenwich Group failed to provide even minimal scrutiny of Madoff. Investors say the firm misled shareholders about monitoring the investments, all while collecting lucrative investing fees.

Global Crisis Destroys 40% of World Wealth; Bailout to Hit $4 Trillion - (globaleconomicanalysis.blogspot.com) The world Economic Forum is reporting Global crisis 'has destroyed 40pc of world wealth'. The past five quarters have seen 40pc of the world's wealth destroyed and business leaders expect the global economic crisis can only get worse. Steve Schwarzman, chairman of private equity giant Blackstone, said an "almost incomprehensible" amount of cash had evaporated since the financial crisis took hold. "Business will be very different," he added. His comments came on a day of the World Economic Forum characterised by the gloom of its participants and warnings that the crisis will endure for some time. News Corp chief executive Rupert Murdoch kicked off the meetings by warning that the atmosphere was worsening – despite global economic confidence plumbing the lowest depths on record. "The crisis is getting worse," he said. "It's going to take drastic action to turn it around, if it can be turned around, quickly. I believe it will take a long time."

x-Goldman lobbyist now Geithner's right-hand man – (www.ap.com) The White House on Wednesday defended Treasury Secretary Timothy Geithner's choice of Mark Patterson — an ex-lobbyist from Goldman Sachs — to be his chief of staff. The selection is at least the third high-profile exception to a policy by President Barack Obama that says no one who has lobbied on a set of issues within the past two years can take a role in his administration that deals with the same subject matter. White House press secretary Robert Gibbs reiterated his claim that that rule is the "strongest that any administration in the history of our country has had." Until last April, Patterson, a Goldman vice president for government relations, acted as a lobbyist on a wide range of issues that could come under his purview in his new job. Under Obama's restrictions, Patterson would be severely hampered in the new job unless he gets a waiver from the White House on grounds that it is in the public interest. Patterson's former Wall Street firm has benefited from $10 billion in government bailouts in the current recession. The issues on which Patterson acted as a lobbyist until last April appear to cover a large swath of his duties at Treasury, according to a lobbying disclosure report filed with Congress last July. Issues Patterson lobbied on included covered bonds, tax treatment of corporate reorganization transactions, nonbinding shareholder votes on executive compensation, continuation of the industrial loan company charter for Goldman Sachs, over-the-counter energy derivatives, tax patents, extension of tax credits for cellulosic ethanol and market disruptions regarding auction rate securities, a Treasury official said Wednesday night. Patterson only monitored legislation on mortgage issues and did not lobby, added the Treasury official, who was not authorized to speak about the matter on the record. His appointment follows two other prominent exceptions to Obama's rule covering former lobbyists.

Allied Capital Tries to Avert Defaulting on Debt Terms - (www.washingtonpost.com) Buyout firm Allied Capital yesterday said the value of its investments in companies has declined so dramatically that it might default on its debt agreements, creating uncertainty over Allied's hefty dividend and its ability to borrow money in the future. The District firm, which has been an anchor in the region's finance industry for 50 years, said it will open discussions with its lenders to try to get a waiver allowing its assets to go below 200 percent of its current debt. Allied said in a news release that if it cannot obtain a waiver, it would not be able to pay dividends or make other distributions to shareholders. The company would also be unable to borrow. Allied's high dividend, pegged at 65 cents for the last quarter of 2008, is one of its most attractive qualities for investors. Allied stock closed at $1.91 yesterday, down 47 percent. Founded in 1958 and operating as a public company since 1960, Allied Capital invests in small and mid-size businesses in return for equity. Allied has about 117 companies in its portfolio. It employs 132 people, including 112 at its Northwest Washington office on Pennsylvania Avenue, 19 in New York and one in Dubai. Business development firms such as Allied and its Bethesda-based rival American Capital Strategies have seen their investment portfolios drop and have had difficulty raising capital in the financial crisis.

Americans receiving jobless benefits hits record - (finance.yahoo.com) The Labor Department released figures Thursday showing that the percentage of the workforce receiving unemployment benefits reached a 25-year high in mid-January. The raw numbers were the highest since the government started keeping records in 1967, although the workforce was much smaller then. Adding to the grim picture were separate government reports that showed December home sales plunged to their lowest rate since recording began in 1963. And orders for big-ticket manufactured goods dropped more than expected, capping the worst year for manufacturers since 2001. But the jobless numbers were the worst -- with more layoffs on the way. The Labor Department reported Thursday that a seasonally adjusted 4.78 million Americans claimed unemployment insurance for the week ended Jan. 17. That's an increase of 159,000 from the previous week and worse than economists' expectations. As a percentage of workers covered by unemployment insurance, the tally is the highest since August 1983.

"Unprecedented and shocking" Decline in Air Cargo – (www.calculatedriskblog.com) From the International Air Transport Association: Cargo Plummets 22.6% in December. In the month of December global international cargo traffic plummeted by 22.6% compared to December 2007. The same comparison for international passenger traffic showed a 4.6% drop. The international load factor stood at 73.8%. For the full-year 2008, international cargo traffic was down 4.0%, passenger traffic showed a modest increase of 1.6%, and the international load factor stood at 75.9%. “The 22.6% free fall in global cargo is unprecedented and shocking. There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded, the decline was only 13.9%,” said Giovanni Bisignani, IATA’s Director General and CEO.” Air cargo carries 35% of the value of goods traded internationally.

CRE Tax Bills Due, Will Anyone Pay? - (globaleconomicanalysis.blogspot.com) In a harbinger of things to come, Austin officials are nervous about tax bill for 10 office buildings. Local tax officials are concerned as uncertainty looms over whether Austin's biggest office landlord will be able to pay $17.8 million in property taxes that are due Monday. The money is due from Thomas Properties Group Inc. and Lehman Brothers, which, along with the California State Teachers' Retirement System, own 10 office buildings in Austin, including the Frost Bank Tower downtown. Thomas Properties has gone to court in an attempt to force Lehman Brothers Holdings Inc. to release money from a $100 million revolving loan to pay the property tax bill. But the lawsuit is entangled in Lehman Brothers Holdings Inc.'s complex bankruptcy case in New York, and it's not clear when the Thomas matter might be resolved. City and county budget and tax officials have met twice in the past two months to discuss the outlook for tax collections generally, as well as the potential impact if the Thomas Properties/Lehman money isn't forthcoming, said Dusty Knight, chief deputy of the Travis County tax assessor/collector's office.

Truck Tonnage Index: Cliff Diving – (www.calculatedriskblog.com) From the American Trucking Association: ATA Truck Tonnage Index Plummeted 11.1 Percent in December. The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index plunged 11.1 percent in December 2008, marking the largest month-to-month reduction since April 1994, when the unionized less-than-truckload industry was in the midst of a strike. December’s drop was the third-largest single-month drop since ATA began collecting the data in 1973. In December, the seasonally adjusted tonnage index equaled just 98.3 (2000 = 100), its lowest level since December 2000. The not seasonally adjusted index edged 0.6 percent higher in December. Compared with December 2007, the index declined 14.1 percent, the biggest year-over-year decrease since February 1996. During the fourth quarter, tonnage was down 6.0 percent from the same quarter in 2007.

U.S. Draft Law Would Ban Most Trading in Credit Swaps - (www.nytimes.com) Draft legislation that would change how over-the-counter derivatives are regulated might prohibit most trading in the $29 trillion credit-default swap market. House of Representatives Agriculture Committee Chairman Collin Peterson of Minnesota circulated an updated draft bill yesterday that would ban credit-default swap trading unless investors owned the underlying bonds. The document, distributed by e-mail by the committee staff in Washington, would also force U.S. trading in the $684 trillion over-the-counter derivatives market to be processed by a clearinghouse. “This would basically kill the single-name CDS market,” said Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California. “Given the small size of many issuers’ bonds outstanding, this would make it practically impossible for the CDS market to exist.” U.S. regulators and politicians are stepping up pressure on banks to use clearinghouses and agree to increased oversight of the OTC markets to improve transparency amid the credit crisis. Bad bets on credit-default swaps led to the U.S. takeover of American International Group Inc. in September.

France braced for mass strikes - (www.ft.com) At least a million striking workers held demonstrations across France on Thursday in protest at the government’s reform programme and its response to the economic crisis, demanding extra help for ordinary families in place of state aid for the banks. Union leaders said at least 2.5m people took part in 200 demonstrations in what they said was the biggest protest by employees for 20 years. The interior ministry said the number was 1m. Nicolas Sarkozy, the president, on Thursday night acknowledged the “legitimate worries” triggered by the downturn. He also offered a concession to union leaders in the form of talks “to agree the programme of reforms to be introduced in 2009”, suggesting the government might be prepared to put on ice its efforts to overhaul the public sector during the recession. The one-day strike was the most widely observed since Mr Sarkozy became president in 2007, with a large turnout among teachers and civil servants. But it caused less disruption to public transport, public services and businesses than anticipated, and participation in the private sector was low. Traffic was quiet in Paris, with many workers choosing to take the day off.

Global Worries Over U.S. Stimulus Spending - (www.nytimes.com) Even as Congress looks for ways to expand President Obama’s $819 billion stimulus package, the rest of the world is wondering how Washington will pay for it all. Few people attending the World Economic Forum question the need to kick-start America’s economy, the world’s largest, with a package that could reach $1 trillion over two years. But the long-term fallout from increased borrowing by the United Stated government, and its potential to drive up inflation and interest rates around the world, seems to getting more attention here than in Washington. “The U.S. needs to show some proof they have a plan to get out of the fiscal problem,” said Ernesto Zedillo, the former Mexican president who helped steer his country through a financial crisis in 1994. “We, as developing countries, need to know we won’t be crowded out of the capital markets, which is already happening.” Mr. Zedillo said that Washington, unlike most other countries, had the option of simply printing more money, because the dollar was a reserve currency for the rest of the world.

Weill to End Citi Consulting Job, Giving Up Millions - (www.bloomberg.com) Former Citigroup Inc. Chairman Sanford “Sandy” Weill will end a 10-year consulting contract with the bank that gave him millions of dollars in perks, including an office, car and driver and the use of company jets. Weill, who retired as chairman and started the consulting job less than three years ago, told Citigroup in August 2008 that he wanted to terminate the arrangement, Shannon Bell, a spokeswoman for the New York-based bank, said today. He and the company “mutually agreed to stop” the benefits, starting in April, Bell said. Weill didn’t return a call to his Citigroup office. Weill, 75, is distancing himself from the financial colossus he built over 17 years as Chief Executive Officer Vikram Pandit, 52, begins dismantling it following a last year’s record $18.7 billion loss. Two weeks ago, Pandit marked the bank’s CitiFinancial consumer-finance and Primerica insurance units as “non-core” and said they would eventually be sold.


OTHER STORIES:

U.S. Durable Goods Orders Decline for Fifth Month - (www.bloomberg.com)
Fed Warns of Global Slowdown That Adds to U.S. Deflation Risk - (www.bloomberg.com)
The Fed hangs on to its last bullet - (money.cnn.com)
GE’s AAA Rating Starts Slow Trip to Graveyard - (www.bloomberg.com)

U.S. Pumps $1 Billion Into Credit Unions to Shore Up Confidence - (www.bloomberg.com)
New bank bailout could cost up to $2 trillion: report - (www.reuters.com)
Senators Bid To Regulate Hedge Funds - (www.nytimes.com)
U.S. Commercial Paper Falls Most on Record as Fed Buying Drops - (www.bloomberg.com)
Sweden offers lessons for US toxic clean up - (www.ft.com)
Trichet warns on capital hoarding - (www.ft.com)
German jobless rate jumps to 8.3 percent - (finance.yahoo.com/s/ap)
New Zealand slashes rates to record low - (www.ft.com)
Indian Exporters Cut 1 Million Jobs as Orders Decline - (www.bloomberg.com) Indian exporters have shed as many as 1 million jobs, more than 15 times a December estimate, amid the most protracted decline in overseas sales in a decade, the commerce ministry said. “The job losses are very substantial and are likely to be of the order of 700,000 to 1 million, including temporary staff,” Commerce Secretary G.K. Pillai told Bloomberg News in an interview in New Delhi yesterday. Exports fell 1 percent in December and any recovery “is likely only by June,” he said.
Russia and China Blame Capitalists - (www.nytimes.com)
German January Unemployment Rises Twice as Much as Forecast - (www.bloomberg.com)
IMF Sees $2.2 Trillion in Losses Slowing World Growth - (www.bloomberg.com)
Wen and Putin lecture western leaders - (www.ft.com)
Ireland’s Cowen Says Economy May Shrink 10% by 2010 - (www.bloomberg.com)
New-home sales fall to record low in Dec. - (www.marketwatch.com)

U.S. Durable Goods Orders Decline for Fifth Month - (www.bloomberg.com)
Geithner Says Plan for Banks Is in the Works - (www.nytimes.com)
Obama slams Wall Street over bonuses - (www.ft.com)
Americans receiving jobless benefits hits record - (finance.yahoo.com/s/ap)
Stimulus Components Vary in Speed and Efficiency - (www.nytimes.com)
Fed Warns of Global Slowdown That Adds to U.S. Deflation Risk - (www.bloomberg.com)
Ford Burns $5.5 Billion in Cash, Taps Revolving Loan - (www.bloomberg.com)
Kodak Says It Will Eliminate 3,500 to 4,500 Jobs - (www.bloomberg.com)
Ford to draw bank credit of $10.1bn - (www.ft.com)
Technology Companies Cut Most Jobs in Five Years - (www.bloomberg.com)

Airlines group says industry lost $5BN in 2008 - (finance.yahoo.com/s/ap)

What Red Ink? Wall Street Paid Hefty Bonuses - (www.nytimes.com)
Sony sinks into Q3 loss, Nintendo cuts outlook - (www.reuters.com)
The game changer - (www.ft.com)
World Facing ‘Enormous’ Food Challenge as Water Scarcity Looms - (www.bloomberg.com)