Friday March 20 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Federal Home Loan Bank of Seattle short of capital - (seattletimes.nwsource.com) The Federal Home Loan Bank (FHLB) of Seattle said it didn't meet a regulatory capital requirement at the end of last month because of the declining value of mortgage-backed securities. The FHLB of Seattle, a government-chartered cooperative, said in a statement Monday that because of the capital deficiency it is disallowed from paying a dividend or repurchasing capital stock. The Seattle bank in January became the second FHLB, after San Francisco, to warn of a potential capital shortage and take steps to guard reserves. As many as eight of the 12 banks may fall short of capital requirements after writing down holdings of so-called nonagency mortgage securities, Moody's Investors Service predicted. The federal home-loan banks of Atlanta, Pittsburgh and Indianapolis have delayed or suspended dividend payments, and the Chicago bank said last month that it would report a fourth-quarter charge for the impairment of mortgage securities. The 12 banks lend money to more than 8,000 savings and loans, credit unions and commercial banks at below-market rates, mainly to finance their mortgage holdings. While the Seattle FHLB was in compliance with its capital-to-assets ratio and leverage ratio in December, the bank said it had a risk-based capital deficiency as of Feb. 28 because of "distressed prices of certain held-to-maturity" mortgage securities.

RV maker Fleetwood files for bankruptcy - (www.latimes.com) Fleetwood Enterprises Inc., the Riverside recreational vehicle maker, filed for Chapter 11 bankruptcy protection today and said it is in talks to sell itself as it battles to survive a prolonged sales slump. Fleetwood said it would continue to operate as it seeks buyers for its RV and manufactured housing businesses. "The company is in discussions with buyers for all or part of its business," a spokeswoman for the company said. Fleetwood, which employs 3,000 people at 15 plants in 10 states, also said that it would close its travel trailer operation, shutting down three factories and two service centers and eliminating 675 jobs. The company said it was also laying off an additional 65 workers. "Although we made substantial progress in restructuring this division and improved the product offering, current market conditions proved too severe to continue the runaround," Chief Executive Elden L. Smith said in a statement. Meanwhile, Smith said, "the vast majority of our suppliers and dealers should see no disruption in our business."

Where Were The Media As Wall Street Imploded? - (www.npr.org) There are plenty of people to share the blame for the collapse of the nation's financial system. Greedy speculators, mortgage executives and banking chiefs; pliant credit rating agencies; and absentee government regulators come to mind. But what about the self-described watchdogs in the media? As a consistent consumer of newspapers and TV news, and a frequent reader of magazines, I didn't have much sense that the nation's financial system could implode until it was starting to do so. "I get this from friends, family, you know, 'How come you guys didn't see this coming?' " said Peter Coy, economics editor for BusinessWeek magazine. "How come all the journalists missed this big story?" ….. Cracking The Code: Lenders were making reckless mortgages, while financiers and corporate chieftains chased great profits by bundling those shaky mortgages together into incredibly complex investments. But they didn't comprehend the risk they were injecting into the nation's financial bloodstream. Former Federal Reserve Board Chairman Alan Greenspan recently told CNBC's David Faber he didn't understand how they worked either. So how can journalists be expected to crack the code? "If it absolutely has no responsibility whatsoever, then what's the point of reading it?" responded Starkman, writer and editor of a column on financial coverage for the Columbia Journalism Review. "Why be a journalist in the first place?" Before dismissing this as an idle critique, consider the media's handling of other big, recent stories. The New York Times and CBS News' Lesley Stahl ended up offering mea culpas for failing to question claims that Saddam Hussein had weapons of mass destruction before the invasion of Iraq.

24 million go from 'thriving' to 'struggling' - (www.usatoday.com) Casualties of the economic downturn include easy credit, rising home values, stable retirement investment accounts and 4.4 million jobs. Some fear that the American dream may be in peril as well. The aspirations that have defined the American experience — that those who work hard and play by the rules can get ahead, and that the next generation will have a better life than this one — have been battered by a devastating recession that shows few signs of having hit bottom. "Maybe we were dreaming the American dream, you know what I mean?" says David McLimans, a steelworker. The mill he works for in suburban Philadelphia temporarily shut down last week amid the credit crunch. "I'm 63, so I'm not dreaming it anymore. I have what I have and I hope I can keep what I have, but my kids, I worry about. They're struggling." His four grown children have a lot of company. More than 24 million Americans shifted in 2008 from lives that were "thriving" to ones that were "struggling," according to a massive study by Gallup and Healthways, a Tennessee health management company. Results from its Well-Being Index — including physical and mental health as well as personal finances and job satisfaction — are being released Tuesday.

Bank of America, GE Sell $16.5 Billion of FDIC Debt - (www.bloomberg.com) Bank of America Corp., the largest U.S. bank by assets, and General Electric Capital Corp. raised a combined $16.5 billion today selling bonds backed by the U.S. government as they seek to hold down borrowing costs. Bank of America, based in Charlotte, North Carolina, sold $8.5 billion of notes in its second-largest offering under the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee program. The finance arm of General Electric Co. sold $8 billion of notes, also its second-biggest under the program. Financial companies are relying on the FDIC program as yields relative to benchmarks on their debt that isn’t guaranteed by the government soar to the highest on record. Banks have few alternatives to finance themselves at lower interest rates as investors grow concerned that they don’t have enough capital to absorb losses amid a deepening global recession, said Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia. “It’s so much cheaper to issue TLGP debt than unsecured that every bank out there is replacing maturing debt with TLGP deals,” Lebas said in a telephone interview. “No financial issuer in their right mind would come with a non-FDIC debt issue right now. Markets are penalizing them very severely.”

Hedge Funds May Cut a Record 20,000 Jobs as Losses Erode Fees - (www.bloomberg.com) Hedge funds may cut 20,000 workers worldwide this year, a record 14 percent of the industry’s jobs, as investment losses and client withdrawals erode fees. The dismissals will come on top of the 10,000 jobs that disappeared last year at the investment partnerships, according to estimates by New York-based Options Group, an executive-search firm. Employment peaked at 155,000 in 2007, and has since dropped to about 145,000, the firm said. “Hiring activity is much reduced and it’s going to get worse,” said Hank Higdon, managing partner at Higdon Partners LLC, a New York-based search firm focused on financial services. “I don’t see markets improving at all.” About 920 hedge funds, or 12 percent, closed last year, according to data compiled by Chicago-based Hedge Fund Research Inc. Of the 6,800 single-manager funds that remain, 70 percent lost money in 2008, meaning they can’t resume collecting performance fees until the losses are recouped. Those fees, generally 20 percent of investment profits, are the primary source of cash used to pay bonuses.

More Debt Won't Rescue The Great American Ponzi - (optionarmageddon.ml-implode.com) Policy-makers not only misunderstand the economic crisis, they continue to underestimate it. Consequently, solutions to date have not only failed to “fix” anything, they have made the problem worse. The problem isn’t falling asset prices, it’s not rising foreclosures, it’s too much debt. With an assist from mark-to-market accounting,* too much debt inflated the asset bubble in the first place. Yves has it exactly right that the only “solution” to this crisis is price discovery, to allow asset prices to fall to whatever level they need to in order for markets to clear. This is bad news for over-levered balance sheets, but there’s nothing else to be done. And yet American policy-makers appear convinced that more debt can rescue an economy already drowning in it. If we can just keep the leverage party going, all will be well. $787 billion to fund “stimulus,” another $9 trillion committed to guarantee bad debts, 0% interest rates and quantitative easing to drive more lending, new off balance sheet vehicles to hide from the public the toxic assets they’ve absorbed. All of it to be funded with debt, most of it the responsibility of taxpayers. If I may offer just one reason this will all fail: rising interest rates. Interest rates need only revert to their historical median in order to hammer asset values, and balance sheets, into oblivion.



OTHER STORIES:

Five Reasons Renting Still Beats Buying - (realestate.yahoo.com)
Depression Dynamic Ensues as Markets Revisit 1930s - (www.bloomberg.com)
Bankrupting Leverage: Are We A Zombie Nation? - (yourmortgageoryourlife.wordpress.com)
Cleveland Commercial Loan Delinquencies Signal More - (www.bloomberg.com)
San Francisco construction slows to a crawl - (www.sfgate.com)
Forget About "Recovery" - (jameshowardkunstler.typepad.com)
Letting go of your dream price is hard to do - (www.boston.com)

Public Transit Ridership Hits Highest Level in 52 Years - (www.washingtonpost.com)
Buffett says nation will face higher unemployment - (www.sfgate.com)
But FDIC Is Hiring! - (www.fdic.gov)
Treasuries Fall as $63 Billion Debt Sales Loom, Stocks Rise - (www.bloomberg.com)
Oil gains on expectations of OPEC output cuts - (www.marketwatch.com)
Yen, Dollar Weaken as Stock Gains Spur Demand for Higher Yields - (www.bloomberg.com)
U.S. Stocks Advance as Citigroup Drives JPMorgan, Banks Higher - (www.bloomberg.com)
Lost through destructive creation - (www.ft.com)
Fresh pessimism sweeps over credit sector - (www.ft.com)
Detox for Troubled Assets - (www.washingtonpost.com)

Central banks boost supply of money - (finance.yahoo.com)
The Economic Crisis and the Developing World - (www.time.com)
Leery of Debt, Germany Shuns a Spending Spree - (www.nytimes.com)
China Home Prices Fall by Record on Slowing Economy - (www.bloomberg.com)
Bernanke Urges Finance-Rules Overhaul to Stem Build-Up of Risks - (www.bloomberg.com)

U.S. Second-Quarter Hiring Plans Hit Record Low, Manpower Says - (www.bloomberg.com)
U.S. Unemployment Rate to Reach 9.4% This Year, Survey Shows - (www.bloomberg.com)
Stern: NBA Will Survive Poor Economy - (www.washingtonpost.com)
United Technologies to Cut 11,600 Jobs Worldwide - (www.bloomberg.com)
AIG Warned of 'Catastrophic' Failure - (www.washingtonpost.com)
Tim Geithner's Black Hole - (www.washingtonpost.com)
To Halt Slide, Apply Debt or Control? - (www.nytimes.com)