Tuesday February 10 Housing and Economic stories

TOP STORIES:

FDIC Needs Bigger Credit Line - (www.ml-implode.com) The Federal Deposit Insurance Corp is seeking to more than triple its credit line with the U.S. Treasury Department to $100 billion, a move to give it more financial power to handle U.S. bank failures, the agency said on Monday. The FDIC and Congress are working to boost the agency’s current $30 billion borrowing power in legislation being crafted by U.S. Rep. Barney Frank, chairman of the House Financial Services Committee. The move comes as the FDIC’s deposit insurance fund has shrunk due to a significant uptick in bank failures over the past year. The insurance fund’s value dropped 24 percent in the 2008 third quarter to $34.6 billion… “They have no immediate need for it, but they just want to make sure they’re not constrained in the decision by a lack of the insurance fund,” Frank told reporters after meeting Treasury Secretary Timothy Geithner on Monday. “They don’t want to say, ‘We have to keep this bank open longer than it should because we don’t have enough money.’” If the FDIC borrows funds through the Treasury Department, it would pay back the money through a special assessment on the banking industry.

Record 19 Million U.S. Homes Stood Vacant in 2008 - (www.bloomberg.com) record 19 million U.S. houses stood empty at the end of 2008, including properties for sale and for rent, as banks seized homes faster than they could sell them and prices continued to fall. Vacant homes in the fourth quarter increased by 6.7 percent from the same period a year ago, the U.S. Census Bureau said in a report today. The share of empty homes that are for sale, the so-called vacancy rate, rose to 2.9 percent in the quarter, the most in data that goes back to 1956. The worst U.S. housing slump since the Great Depression is deepening as foreclosures drain value from neighboring homes and make it more likely owners will walk away from properties worth less than their mortgages. About a third of owners whose home values drop 20 percent or more below their loan principal will “hand the keys back to the bank,” said Norm Miller, director of real estate programs for the School of Business Administration at the University of San Diego. “When you’re underwater and prices continue to fall, you tend to walk,” Miller said in an interview. “It’s a downward spiral that’s tough to stop because it feeds on itself. Foreclosures encourage other foreclosures and falling prices discourage buying.”

S&P forecasts 200 Corporate Defaults in 2009 – (www.bloomberg.com) About 200 US junk-rated companies are likely to default this year, according to Standard & Poor’s, affecting almost $350bn worth of debt and adding impetus to alternatives to bankruptcy, such as distressed debt exchanges. About half of the 17 US defaults seen in December were a result of distressed exchanges, where a company offers lenders new securities of a lesser value than the debt they are owed, usually to cut interest costs or delay principal repayment.

PNC posts loss on integration charges; credit woes deepen – (www.marketwatch.com) PNC Financial Services Group Inc. swung to a fourth-quarter loss on charges related to its year-end acquisition of National City as credit quality continued to weaken. The regional bank bought troubled National City for nearly $2 billion as part of the federal government's effort to pair struggling banks with stronger ones. The move catapulted PNC into fifth place nationally in terms of deposits, with more than $180 billion and branches in 13 states. PNC, which has a large presence in New Jersey and eastern Pennsylvania, reported a net loss of $248 million, or 77 cents a share, compared with year-earlier net income of $176 million, or 52 cents a share. Excluding the integration costs, earnings fell to 32 cents from 67 cents a year earlier. The results don't include National City. Revenue increased 3% to $1.68 billion. Analysts surveyed by Thomson Reuters expected earnings of 75 cents a share on revenue of $1.9 billion. PNC said last month that loan losses from the National City acquisition were below its prior estimate, but losses from its own legacy loan portfolio hurt more than expected. The company said that excluding National City, it expected to post a fourth-quarter profit but below its original expectations.

Insurers’ Corporate-Bond Losses May Exceed Subprime - (www.bloomberg.com) Corporate debt defaults may cost U.S. life insurers “substantially” more than losses on securities linked to subprime, Alt-A and commercial mortgages, said Eric Berg, an analyst at Barclays Plc. Corporate defaults are poised for a “significant” increase this year as the recession deepens, Berg, based in New York, said in a research note yesterday. The American Council of Life Insurers estimated the industry, led by MetLife Inc. and Prudential Financial Inc., holds $1 trillion in corporate debt. “None of the life insurers we studied appear to be doing a particularly good job” of picking bonds backed by companies, Berg said. “Understandably, investors are concerned.” Life insurers have plummeted in the last year in New York trading as investment losses and guarantees on slumping retirement products sap capital. Hartford Financial Services Group Inc. leads the industry with $7.9 billion in writedowns and unrealized losses tied to the real estate market since 2007, while New York-based MetLife has accumulated $7.2 billion, according to Bloomberg data. Hartford and Prudential have cut jobs, asked regulators to ease reserve standards and applied for aid from the government’s $700 billion rescue program to replenish funds after reporting net losses in the third quarter. MetLife sold $2.3 billion of stock in October to bolster finances. The Standard & Poor’s Supercomposite Life & Health Insurance Index has declined about 60 percent in the last 12 months.


Ford sales crash into a wall - (www.marketwatch.com) Ford Motor Co. on Tuesday reported a 40.2% drop in January U.S. sales, pinning the blame on a big pullback from its fleet customers and saying its retail business has stabilized since the swift retreat last fall. Ford initially said it sold 90,596 cars and trucks during the month, which would have been a 42% retreat from 156,391 vehicles a year earlier. But those numbers were skewed by the company's exclusion of Volvo from January 2009 sales numbers. Sales including Volvo, which is currently being shopped around, pulled back to 93,506. Ford, Lincoln and Mercury car sales dropped 35.1% to 28,707. Total trucks fell 40.5% to 61,889 with the flagship F-Series pickup down 38.6%. Ford said fleet sales, primarily to rental car companies, plunged 65%. The retail business slipped 27%, though Ford pointed out that it gained retail market share for the fourth consecutive month, a streak that hasn't happened since 1995. Ford is looking for government stimulus to provide some support or maybe even a catalyst heading into the second half of what looks to be a very difficult year.

Carlyle-Owned Auto Parts Maker Enters Bankruptcy - (www.washingtonpost.com) A German auto parts manufacturer owned by Carlyle Group declared bankruptcy yesterday, causing the District-based private-equity giant to lose its $180 million investment, a Carlyle spokesman said yesterday. The insolvency of Edscha, which manufactures door hinges, convertible roofs and driver controls for major carmakers, follows a 50 percent drop in some of the company's businesses during the fourth quarter of 2008. "Edscha succumbed to the double-barreled effect of an ailing worldwide economy and a suffering automobile industry," Carlyle spokesman Chris Ullman said. Carlyle bought Edscha in January 2003 and grew sales from $1 billion in 2005 to almost $1.4 billion in the fiscal year that ended June 2008. With a collapse in the worldwide automobile market last year, business at Edscha plummeted. Carlyle injected $25 million in December to help see Edscha through the economic downturn, the company said.

U.S. Property Owners Lost $3.3 Trillion in Home Value Last Year - (www.bloomberg.com) The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow.com said. The median estimated home price declined 11.6 percent in 2008 to $192,119 and homeowners lost $1.4 trillion in value in the fourth quarter alone, the Seattle-based real estate data service said in a report today. “It’s like a runaway train gaining momentum,” Stan Humphries, Zillow’s vice president of data and analytics, said in an interview. “It’s difficult to say when we’ll see a bottom to the housing market.” The U.S. economy shrank the most in the fourth quarter since 1982, contracting at a 3.8 percent annual pace, the Commerce Department said Jan. 30. Record foreclosures have pushed down prices as unemployment rose. More than 2.3 million properties got a default or auction notice or were seized by lenders last year, according to RealtyTrac Inc., a seller of data on defaults. About $6.1 trillion of value has been lost since the housing market peaked in the second quarter of 2006 and last year’s decline was almost triple the $1.3 trillion lost in 2007, Zillow said.


OTHER STORIES:

High-End Housing Market Ravaged by Stock Selloff - (www.ml-implode.com)
Westfield to Raise A$2.9 Billion to Pay Down Debt - (www.ml-implode.com)
S&P cuts 1,078 U.S. Alt-A RMBS ratings to 'D' - (www.ml-implode.com)
Runaway Trains Gather Momentum - (www.ml-implode.com)


Porsche sales skid 36% - (www.marketwatch.com)
Daimler sales slide 35.5% - (www.marketwatch.com)
Treasuries Decline on Concern U.S. Government Debt Will Swell - (www.bloomberg.com)
Crude Trades Little Changed After OPEC Cuts January Production - (www.bloomberg.com)
Gold makes slight gains as dollar turns lower - (www.marketwatch.com)
U.S. Stocks Advance as Merck, Schering Lead Rally in Drugmakers - (www.bloomberg.com)
Citigroup Leads Tumble in Hybrid Bonds on Nationalization Bets - (www.bloomberg.com)
Wall Street’s New Pariah Status - (www.ntimes.com)
52% of homes in LA/OC sold at a loss - (www.ocregister.com)

Boom in Inland Empire industrial space is beginning to go bust - (www.latimes.com)
Brazil’s Industrial Output Plunges Most in 17 Years - (www.bloomberg.com)
Australia Cuts Key Interest Rate to 45-Year-Low 3.25% - (www.bloomberg.com)
BOJ to Buy 1 Trillion Yen in Shares Owned by Lenders - (www.bloomberg.com)
BOE Takes 287 Billion Pounds in Liquidity Collateral - (www.bloomberg.com)
Downturn causes 20m job losses in China - (www.ft.com)
In Shift, Chinese Are Spending More Money Overseas - (www.nytimes.com)

Obama working out spending and limits for bailout - (finance.yahoo.com)
Republican rhetoric hardens on stimulus - (www.ft.com)
U.S. Pending Home Resales Rise as Prices, Rates Drop - (www.bloomberg.com)

January could mark new low for retail sales data - (www.reuters.com)
UPS Freezes Pay After U.S. Volume Drops the Most Since 1999 - (www.bloomberg.com)
Motorola Posts Loss of $3.6 Billion on Slumping Phone Sales - (www.bloomberg.com)
Citigroup to Use $36.5 Billion of Funds for Lending - (www.bloomberg.com)
Dow Chemical Has $1.55 Billion Loss on Weak Demand - (www.bloomberg.com)
Despite Federal Aid, Many Banks Fail to Revive Lending - (www.washingtonpost.com)
Tough review of US weapons budget - (www.ft.com)
Lehman Brothers’ Debt Has Shrunk by Two-Thirds to $200 Billion - (www.bloomberg.com)
Geithner Needs to Show Banks Some Tough Love - (www.washingtonpost.com)
As Home Prices Go, So Do Cities - (www.nytimes.com)