Wednesday February 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

One in five California public workers to be fired - (business.timesonline.co.uk) The state of California was yesterday set to fire 20,000 public employees as it teetered on the brink of a total financial collapse. The crisis in the Golden State, home to 37 million people and a $1.8 trillion economy, is now so intense that anyone who overpaid their 2008 taxes will receive an IOU instead of a refund cheque. Meanwhile, all public works projects are being cancelled, schools are facing closure, the Department of Motor Vehicles has shuttered many of its offices and the state’s bonds are almost unsaleable on Wall Street, which has in turn pushed up the cost of borrowing, forcing the state into the kind of death-spiral that has laid waste to many businesses over recent months. “We are dealing with a catastrophe of unbelievable proportions,” said the state Senator Alan Lowenthal, a Democrat, and chairman of the Senate transportation committee. Many aspects of the crisis are making an already-grim economic situation worse: thousands of construction workers are being laid-off from road and bridge repair projects and it is becoming more time-consuming to arrange the paperwork to either buy or sell a car.

4 Bay Area GMC Pontiac Buick dealerships close - (www.mercurynews.com) Four GMC Pontiac Buick dealerships — in San Jose, Dublin, Newark and Colma — have abruptly closed their doors, as a fresh wave of shutdowns and consolidations roils the ranks of Bay Area auto dealers in the new year. About 100 employees lost their jobs because of the closing of Dublin Buick Pontiac GMC in Dublin and the shutdown of Fremont Pontiac GMC in Newark. Those East Bay operations closed Jan. 29. An unknown number of employees were affected by the shutdown of Colma Buick Pontiac GMC in Colma and the closing of Capital Buick Pontiac GMC in San Jose. All four dealerships were owned by the same group, led by retail entrepreneur Ken Okenquist.

Cash found in Ohio house’s walls becomes nightmare - (www.pantagraph.com) A contractor who found $182,000 in Depression-era currency hidden in a bathroom wall has ended up with only a few thousand dollars, but he feels some vindication. The windfall discovery amounted to little more than grief for contractor Bob Kitts, who couldn’t agree on how to split the money with homeowner Amanda Reece. It didn’t help Reece much, either. She testified in a deposition that she was considering bankruptcy and that a bank recently foreclosed on one of her properties. And 21 descendants of Patrick Dunne — the wealthy businessman who stashed the money that was minted in a time of bank collapses and joblessness — will each get a mere fraction of the find. “If these two individuals had sat down and resolved their disputes and divided the money, the heirs would have had no knowledge of it,” said attorney Gid Marcinkevicius, who represents the Dunne estate. “Because they were not able to sit down and divide it in a rational way, they both lost.” Kitts was tearing the bathroom walls out of an 83-year-old home near Lake Erie in 2006 when he discovered two green metal lockboxes suspended inside a wall below the medicine chest, hanging from a wire. Inside were white envelopes with the return address for “P. Dunne News Agency.”

Bay Area food banks busy as economy tanks - (www.contracostatimes.com) Federal program intends to help feed the poor and overpay for goods to help stabilize prices for farmers facing shrinking demand. In November, government food went to more than 7,000 households, or 22,200 people, in Contra Costa and Solano counties, up more than 40 percent from last year. The story is similar for the Alameda County Community Food Bank, which saw the number of people served monthly under the program rise 31 percent, from an average of 21,400 to nearly 28,000 in the last quarter of 2008, said spokesman Brian Higgins. Sigler called the demand over the past six months "explosive and unprecedented." There are rumors lately, she said, of a big "bonus" buy of cheese, thanks to plummeting dairy prices across the world. That could only help, said Michael Marsh, CEO of Modesto-based Western United Dairymen. He said the price California milk producers fetch per gallon dropped from $1.51 in January to 98 cents this month. Central Valley lawmakers met last week with new Secretary of Agriculture Tom Vilsack to lobby for help. Dairy farmers have joined in agreements to cull their herds to shrink demand and make their farms more efficient. For the poor, he said, that could mean another federal bonus buy, Marsh said. "One of the other messages delivered to (Vilsack) is the importance of removing excess beef from the marketplace, to avoid compromising beef prices as well. We can move that beef into feeding programs to help hungry Americans." Filet mignon for the hungry, courtesy of Uncle Sam? Unlikely. But Contreras, a 41-year-old kitchen cabinet installer from Concord with a wife and four children, said he wasn't so picky. Whatever's in the bag, and a sack of tortillas, will go a long way, he said. "The kids eat it. We all eat it," he said, loading a bag of USDA food into the van. "It's not like we're used to eating anything special."

Wealthy cities discovering they're not recession-proof - (www.latimes.com) Beverly Hills, Santa Monica and Newport Beach, which are usually shielded from economic downturns, are seeing decreases in sales tax revenues, along with two-thirds of cities in Southern California. There are million-dollar mansions in foreclosure, layoffs on Rodeo Drive. And reservations are no longer a must at all but the most exclusive restaurants. As recently as the summer, many wealthy Southern California enclaves appeared beyond the reach of the worst recession in decades. But rich cities, it turns out, aren't always so different from the rest. City officials in Beverly Hills -- a place insulated from most economic downturns -- now project a $24-million drop in tax revenues over the next 16 months. The loss represents about 15% of the general fund budget, said Beverly Hills City Manager Roderick Wood. "This will be the largest percentage budget reduction, as far as we can tell, during the city's history," Wood said. "Even for a community as well-funded as Beverly Hills, you absolutely feel a 15% reduction in the budget."

Financier charged with $9.2 billion fraud - (money.cnn.com) The Securities and Exchange Commission said Tuesday that it has charged financier R. Allen Stanford and three of his companies with orchestrating a $9.2 billion investment and sales fraud. The SEC's complaint alleges that the fraud centered on a CD program in which Stanford International Bank promised "improbable and unsubstantiated high interest rates." SIB, based in Antigua, allegedly acted through a network of Stanford Group Company financial advisers to sell approximately $8 billion of "certificates of deposit" to investors. The SEC's complaint also alleged an additional scheme relating to $1.2 billion in sales. The bank boasted a unique investment strategy that it said allowed it to receive double-digit returns on its investments for the past 15 years, the SEC said.

Is Ireland the next big bomb in the global debt crisis? - (www.latimes.com) Ireland's main stock index dived 4% today, the fifth straight decline, after European media reports over the weekend focused on the possibility of the once-booming Emerald Isle reneging on its debt. "Fears are mounting that Ireland could default on its soaring national debt pile, amid continuing worries about its troubled banking sector," Britain’s Sunday Times reported. In the credit-default-swap market, the cost to insure $10 million in Irish sovereign debt against default jumped to $377,000 on Friday, up from $262,000 at the end of January and just $24,000 a year ago, MarketWatch.com reported. The Times noted that pledges made by Ireland to support its crumbled banking sector amount to 220% of the country’s annual economic output. Loans outstanding at Irish banks are more than 11 times the size of the economy. Ireland still has a "Aaa" credit rating from Moody’s Investors Service, but the rating was placed on "negative outlook" last month, meaning it’s at risk of a downgrade.

Banks on the brink: Unsavory options may be only salvation. - (www.insidebayarea.com) And right now, the federal govern­ment — working without a road map, and without a net — is putting together a plan to keep U.S. banks from collaps­ing. Not just to get the banks lending again. To keep them alive. The government announced a plan this past week short on details that would expand the Federal Reserve's role in lending and may include lifting soured mortgage assets off selected banks' books, possibly along with guarantees against other losses and maybe more direct injections of cash. Financial industry experts say it is a matter of choosing the best of several options, none of them very palatable. And no one knows for sure what will work because nothing like this has happened in living memory. Getting it wrong could trigger a re­play of what happened after Lehman Brothers collapsed last fall — the stock market in free fall, seizure of the credit markets, ripples of layoffs. Perhaps even a run on other banks — so many customers rushing to pull out their cash that it would make the bank run in “It's a Wonderful Life” look like, well, a feel-good holiday movie. “The banks are at a terrible junc­tion,” says Robert Reich, a labor secre­tary under President Bill Clinton. “The bottom is falling out. Almost every area of the credit markets, we're find­ing people unable to repay their loans. That means many banks are basically insolvent.” “If one big bank implodes,” he says, “the reverberations could be endless.” So how did we get into this mess? And how do we get out? Washington and Wall Street are still playing the blame game. But most fi­nancial experts agree that a cocktail of bad economic policies and lax govern­ment oversight led lenders, borrowers and investors to take huge risks. Greed and recklessness trumped fear and reason, and they led banks to the brink.

Californian dream turns into nightmare - (www.ft.com) Counties struggle to fund welfare system. In Contra Costa County, a few miles from San Francisco and the millionaires of Silicon Valley, widespread poverty has returned to California. Buffeted by a housing collapse and a slumping economy, the county of 1m is struggling to cope with a sharp rise in the number of residents seeking welfare assistance.
EDITOR’S CHOICE

Banks broke the law, got rewarded rather than punished - (www.cbsnews.com) How did the mortgage industry destroy itself and set off an economic collapse that ruined the finances of millions of Americans? Executives tend to hold themselves blameless, saying that no one could have seen the disaster coming. Well, judge for yourself after you hear the story of Paul Bishop, who worked at the nation's second largest savings and loan. World Savings Bank was among the industry's most admired mortgage lenders. But Bishop says the kind of lending practices he saw were leading to a world of trouble that would ultimately result in billions in losses and a federal investigation. What does Paul Bishop say he told executives at World Savings, three years before the crash? "We're breaking the law, okay? We're breaking the law. You know we're breaking the law. I know we're breaking the law. What the hell do you think is going on here? You know, you're granting too many people loans who simply can't qualify," Bishop told 60 Minutes correspondent Scott Pelley. Bishop's story is a rare inside look at forces that tore the economy apart, as seen by a plain-spoken loan salesman who is now suing World Savings, claiming that he was fired for telling executives what they didn't want to hear.

How the Crash Will Reshape America - (www.theatlantic.com) My father was a child of the Great Depression. Born in Newark, New Jersey, in 1921 to Italian immigrant parents, he experienced the economic crisis head-on. He took a job working in an eyeglass factory in the city’s Ironbound section in 1934, at age 13, combining his wages with those of his father, mother, and six siblings to make a single-family income. When I was growing up, he spoke often of his memories of breadlines, tent cities, and government-issued clothing. At Christmas, he would tell my brother and me how his parents, unable to afford new toys, had wrapped the same toy steam shovel, year after year, and placed it for him under the tree. In my extended family, my uncles occupied a pecking order based on who had grown up in the roughest economic circumstances. My Uncle Walter, who went on to earn a master’s degree in chemical engineering and eventually became a senior executive at Colgate-Palmolive, came out on top—not because of his academic or career achievements, but because he grew up with the hardest lot. My father’s experiences were broadly shared throughout the country. Although times were perhaps worst in the declining rural areas of the Dust Bowl, every region suffered, and the residents of small towns and big cities alike breathed in the same uncertainty and distress. The Great Depression was a national crisis—and in many ways a nationalizing event. The entire country, it seemed, tuned in to President Roosevelt’s fireside chats. The current economic crisis is unlikely to result in the same kind of shared experience. To be sure, the economic contraction is causing pain just about everywhere. In October, less than a month after the financial markets began to melt down, Moody’s Investor Services published an assessment of recent economic activity within 381 U.S. metropolitan areas. Three hundred and two were already in deep recession, and 64 more were at risk. Only 15 areas were still expanding. Notable among them were the oil- and natural-resource-rich regions of Texas and Oklahoma, buoyed by energy prices that have since fallen; and the Greater Washington, D.C., region, where government bailouts, the nationalization of financial companies, and fiscal expansion are creating work for lawyers, lobbyists, political scientists, and government contractors.


OTHER STORIES:

Stimulus: Now for the hard part - (money.cnn.com)
Get stimulated! Your questions answered - (money.cnn.com)
Berkshire portfolio down 25% - (money.cnn.com)

Stocks put November lows to the re-test, as S&P dips under 800 - (www.marketwatch.com)
Gold Climbs to Seven-Month High in London as Economy May Worsen - (www.bloomberg.com)
Oil Drops as Manufacturing Data Shows U.S. Recession Deepening - (www.bloomberg.com)
Treasuries Rise as Global Slump Concern Deepens, Stocks Decline - (www.bloomberg.com)
U.S. Accuses Texas Financial Firm of ‘Massive’ Fraud - (www.nytimes.com)
Obama May Press Banks to Cut Mortgage Payments - (www.nytimes.com)
Foreign Demand for U.S. Long-Term Assets Increases - (www.bloomberg.com)
Government pension agency braces for recession - (www.latimes.com)
Hedge-Fund Assets Set to Drop $192 Billion by March, UBS Says - (www.bloomberg.com)
Government pension agency braces for recession - (www.latimes.com)

East European Banks Slump to Six-Year Low as Economies Worsen - (www.bloomberg.com)
Japan’s Finance Minister to Quit After G-7 Blunder - (www.nytimes.com)
Japan growth plunges to a 35-year low - (www.ft.com)
Japanese Economy, Leader Both Sinking - (www.washingtonpost.com)
Russian industrial output falls 20% - (www.ft.com)
Shipping Index’s 147% Rise Signals Jump in Commodity Currencies - (www.bloomberg.com)
Obama’s Economic Stimulus Bill Most Ambitious Since Roosevelt - (www.bloomberg.com)
NY manufacturing slump worsens in February - (www.reuters.com)
California Lawmakers Face Lockdown as Budget Falters in Senate - (www.bloomberg.com)
Economy Strains Under Weight of Unsold Items - (www.washingtonpost.com)

Clinton suggests Tarp go green - (www.ft.com)
A lot is riding on GM and Chrysler's plans - (www.latimes.com)
Daimler Has EU1.53 Billion Loss on Recession, Chrysler Costs - (www.bloomberg.com)
Obama to appoint panel for auto recovery - (www.chicagotribune.com)
Dead End in Detroit - (www.nytimes.com)
Honda sees soaring demand for cheapest hybrid - (www.chicagotribune.com)
Declining luxury sales weigh on L’Oréal - (www.ft.com)
Late Change in Course Hobbled Rollout of Geithner's Bank Plan - (www.washingtonpost.com)

Taleb on bad bankers - (www.dailybail.com)
If British Empire Wasn't Too Big to Fail, Neither is Citigroup - (www.minyanville.com)
Settling Scores With Wall Street - (www.thenation.com)
To the President: Why forsake those who avoided the debt trap? - (thelastgoodidea.blogspot.com)
Geithner's Plan: Not Transparent and Still a Bailout - (robertreich.blogspot.com)
The terror beneath the TARP - (www.businessspectator.com.au)
Stimulus will only deepen the depression - (optionarmageddon.ml-implode.com)
Japan's deflation sapped spending, but made bargains - (www.marketwatch.com)
U.S. Making Same Mistakes that Led to Japans Lost Decade - (www.moneymorning.com)
Worse than Japan? - (www.economist.com)
Fed Finally Admits Gain in Family Wealth Was A Mirage - (www.nytimes.com)
The Blow the Working Class Saw Coming - (www.washingtonpost.com)
It's going to get worse before it gets worse - (www.writingshop.ws)

How debt creates money - (www.debtdeflation.com)
Requirement For Buying A House - Don't Lose Money - (www.geldpress.com)
Privatized profits, socialized losses - (patrick.net)
Stimulus Package Q&A - (www.ritholtz.com)