Saturday March 21 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Baltimore Board of Realtors President Bankrupt - (www.citypaper.com) Vito Simone, the prominent realtor and property investor and President of the Greater Baltimore Board of Realtors, filed a chapter 7 bankruptcy petition with his wife, Gail. The couple claim assets of $468,900 and debts of more than $3.5 million. The petition, dated Feb. 18, has not previously been reported. Reached at home on his cell phone, Simone is reluctant to talk about his finances. "I'm not sure that we can talk about it for a story yet," he says, before blaming business partners—particularly those in his construction companies—for his financial reversals. "A lot of those people let me down terribly,' Simone says. "It affected me in devastating ways. It affected my family in devastating ways." An associate broker with Yerman, Witman, Gaines and Conklin Realty, Simone has been quoted often in the media as an expert on real estate, especially "buyers agency," when a realtor works for a prospective home buyer. He has been active in selling and rehabbing homes throughout the city, particularly in Reservoir Hill. He sat on the "Flipping and Predatory Lending Task Force" empaneled by Sens. Barbara Mikulski and Paul Sarbanes after the flipping scandals of the late 1990s, served in 2005 as treasurer of the Maryland Chapter of National Association of Hispanic Real Estate Professionals, and as a member of the Mayor's Council for City Living's Existing Housing Committee, an active member of the Baltimore Economy and Efficiency Foundation, and a participant in Congressman Elijah Cummings' new Housing Council. Simone's bankruptcy filing lists dozens of creditors, including at least three law firms and what appear to be numerous customers of Simone's companies. Simone and his wife own Simone Real Estate, LLC; Tenant Buyer Homes, LLC; VGS Properties, LLC; Simone Construction, Inc.; and a 50 percent interest in each of Baltimore Rehab Services, LLC and Druid Lake Partners, LLC.

Adviser invented $1B clients to lure investor - (www.investmentnews.com) Locke Capital Management Inc. and its chief executive, Leila Jenkins, lied repeatedly to customers by inventing clients who supposedly lived in Switzerland and had more than $1 billion in assets, the Securities and Exchange Commission charged today. Ms. Jenkins, CEO, president and chief investment officer of the Newport, R.I.-based investment advisory firm, invented a “massive” phony customers in order to land real clients, the SEC said in a complaint filed in the U.S. District Court for the District of Rhode Island. In addition, she lied to SEC staff about the existence of the invented client and furnished the agency with bogus documents, including fake account statements, the agency said.

Cities brace for losses as property "values" continue to drop - (www.latimes.com) Assessors in Los Angeles, Riverside and San Bernardino counties are forecasting the first drops in property tax collections in more than a decade, presaging reduced revenues for many cash-strapped local governments. FOR THE RECORD: The headline on a previous version of this article incorrectly stated that an estimated 1% drop in property taxes would cost L.A. County $11 billion. That $11 billion is actually the amount that would be shaved off the county's assessment rolls. Until now, property tax revenues had been a relatively stable source of money for cities amid a recession that has dramatically reduced sales tax intake, particularly from car dealers. Even with the decline in home values, the property tax base in five Southland counties grew last year thanks to continuing sales and the completion of construction begun during the 2003-2006 building boom. But assessors in those counties said they have reduced the value of more than half a million properties and expect to make deeper cuts to their rolls by the summer. This is bad news for local governments that have been relying on property tax proceeds to help make up the shortfall from reduced incomes and spending in their areas. Already, cities and counties across California have been freezing jobs, imposing work furloughs and pay cuts, postponing repairs and reducing some public services. "Cities are calling us almost weekly now trying to find out where we are at and what kind of effects the reduced assessment will have on their budgets," said Larry Ward, Riverside County's assessor, clerk and recorder. He said he won't make any predictions until the end of June, when the 2009 assessment roll is closed and submitted for audit.But in Los Angeles County, Assessor Rick Auerbach is estimating a 1% reduction in the county's $1.1 trillion property tax base. It would be the first time the assessment roll has dropped since 1996, when counties were struggling to adjust property values after a deep recession triggered by major cuts in the local aerospace industry. Auerbach said the losses could grow in coming months.

Two out of three foreclosures are house flippers - (www.floridatoday.com) No one wants to touch the Space Coast's real foreclosure crisis. Not the banks, not Congress, not Barack Obama. The president's $75 billion mercy mission is aimed at helping struggling families in places such as Palm Bay and Port St. John to escape foreclosure and stay in their homes. It won't grapple with "irresponsible lenders, scam artists and borrowers who knowingly made bad decisions," as House Republican leader John Boehner described Wednesday in a response to the effort. The problem is that those are exactly the players -- not the struggling families -- whose foreclosures have hurt Brevard County's economy, killing jobs and fortunes. Here, more than two out of three foreclosed properties sold at auction are not primary homes. Instead, they're non-homestead properties, most likely purchased by investors or condo-flippers during the housing bubble. With 14,000 foreclosure lawsuits filed in Brevard in the past two years, our market is in for a lasting glut of one-time investment homes.

Tim Geithner's Black Hole - (mobile.washingtonpost.com) Pity Barack Obama's economic advisers. The blogs are now demanding their scalps, and Treasury Secretary Tim Geithner and his colleagues face a nasty dilemma: There are no solutions to the banking crisis without extraordinary political and financial risks. Thus, they have adopted a three-pronged approach, delay, delay, delay, in the hope that somebody comes up with a breakthrough. Here's the problem: Today's true market value of the U.S. banks' toxic assets (that ugly stuff that needs to be removed from bank balance sheets before the economy can recover) amounts to between 5 and 30 cents on the dollar. To remain solvent, however, the banks say they need a valuation of 50 to 60 cents on the dollar. Translation: as much as another $2 trillion taxpayer bailout. That kind of expensive solution could send the president's approval rating into a nose dive. Consider: $2 trillion is about two-thirds of the tax revenue the federal government collects each year. The logical alternative -- talk show hosts' solution du jour -- is to temporarily restructure or nationalize the banks and leave taxpayers alone. Remove the toxic assets, replace management and cut the too-big-to-fail financial dinosaurs into smaller, nimbler entities. Then reprivatize these smaller banks and let the recovery begin. Oh, if it were that simple. I suspect Obama's advisers would like nothing more than to dismantle an irresponsible firm such as Citigroup. They are afraid to do so, for one reason: All the big banks are connected to a potentially lethal web of paper insurance instruments called credit default swaps. These paper derivatives have become our financial system's new master. The theory holds that dismantling a big bank could unravel this paper market, with catastrophic global financial consequences. Or not. Nobody knows, because the market for these unregulated financial derivatives, amounting potentially to over $40 trillion (by comparison, global gross domestic product is now not much more than $60 trillion), is the financial equivalent of uncharted waters. Geithner has reason to be terrified. He was part of the Henry Paulson-led team that underestimated the devastating global-contagion effect of the collapse of Lehman Brothers. Geithner won't make the mistake of underestimation again. Geithner also knows that the mood in Congress has changed. Were a global financial brush fire to break out as a result of bank restructuring or nationalization, today's populist Congress might just let it burn. Congressional anger is likely to intensify when policymakers realize that credit default swaps demand a stream of premium payments like a life insurance policy, not just a payment due at termination. And recent signs indicate that firms such as Citigroup, in recycling their taxpayer bailout funding, may have helped other financial firms, including some in Europe, meet these payment obligations. In addition, Geithner worries that because the troubled insurance giant American International Group (AIG) is a conduit for the banks' use of credit default swaps, a collapse of AIG (as an unintended consequence of dismantling the big banks) could be catastrophic. AIG's more than 300 million terrified holders of insurance-related investments and pension funds, who have investments totaling $20 trillion (U.S. GDP is $14 trillion), could suddenly rush for redemptions -- the equivalent of a run on a bank. Geithner would face a worldwide insurance collapse to accompany his global banking collapse.

Media struggles in search for legitimate "victims" - (sacramentolanding.blogspot.com) One of the most disappointing aspects of the media's coverage since the housing bubble burst (besides the blind reliance on "expert" opinion), has been the parade of so-called victims. Is it just me, or has the media struggled mightily in its search for legitimate causalities of the housing bubble fiasco? Are they looking in the wrong places? Is it simply that there is not enough genuine victims? I pondered these questions as I read an article by Jim Wasserman in Sunday's Sacramento Bee. Among others, the story profiles a man by the name of Ryan Jessup, who "walked away" from his Oak Park house (this site says it was a short sale). [M]any who can afford their payments have decided it's no longer worth it. They walk, or, as is becoming the trend, park rent-free in the house for months until they get the boot. It's a question that Ryan Jessup of Sacramento answered a year ago, when he, too, sensed the financial game had turned against him. Early in 2008, the software engineer stopped making payments on his Victorian house in Oak Park. A long habit of playing by the rules, he said, had provided him a good income, a credit score of 804 and a lovely $430,000 house. But when playing by the rules meant riding down the housing market to who knows where, he said, "It came down to morals or survival. I chose survival. It made no sense to stay." ..Many borrowers like Clawson and Jessup no longer feel so obligated to a financial system they believe overstimulated the housing market, sold them questionable loan products, sometimes by fraud, and then didn't provide help they need in the face of falling home values. ...Jessup walked away. "I haven't even looked (at the credit score)," he said. "It's like being hit by a train or a bus."...Jessup, looking back, has no regrets. He lives with a friend now who has also stopped making payments on a condo bought at the peak of the market in 2005. What Mr. Wasserman didn't say in the article is that apparently Ryan Jessup has quite the history of touting the virtues of Sacramento real estate in comments at sacbee.com. As the name sounded familiar, I dug through Sacramento Land(ing)'s "save for future use" folder and ran across some quotes by a sacbee.com commenter named "rjessup2mouse." Could rjessup2mouse be Ryan Jessup?

Citi's Long History of Overreach, Then Rescue - (www.washingtonpost.com) When Citicorp and Travelers Group agreed on a historic merger in 1998, the heads of the two companies placed a courtesy call to inform the Treasury Department. Then they held a news conference to suggest that Congress change the law to allow their union. Congress soon complied. It was a signature moment for a bank that has long taken big risks with the conviction that it is irreplaceable. Over the past century, Citigroup has repeatedly launched new strategies to make money, then stumbled and lost money, forcing the government to restore its health. The 1998 merger, an attempt to create a one-stop shop for financial projects, ultimately faltered. Citigroup, with the help of tens of billions of dollars in government aid, is now dismantling itself, leaving behind a company that will resemble the old Citicorp, a bank focused on serving multinational corporations.

Banks Counted on Looting America’s Coffers - (www.nytimes.com) Sixteen years ago, two economists published a research paper with a delightfully simple title: “Looting.” The economists were George Akerlof, who would later win a Nobel Prize, and Paul Romer, the renowned expert on economic growth. In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking advantage of the government. The investors had borrowed huge amounts of money, made big profits when times were good and then left the government holding the bag for their eventual (and predictable) losses. In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer said, would have operated in a completely different manner. The investors displayed a “total disregard for even the most basic principles of lending,” failing to verify standard information about their borrowers or, in some cases, even to ask for that information. The investors “acted as if future losses were somebody else’s problem,” the economists wrote. “They were right.” On Tuesday morning in Washington, Ben Bernanke, the Federal Reserve chairman, gave a speech that read like a sad coda to the “Looting” paper. Because the government is unwilling to let big, interconnected financial firms fail — and because people at those firms knew it — they engaged in what Mr. Bernanke called “excessive risk-taking.” To prevent such problems in the future, he called for tougher regulation.




OTHER STORIES:

Florida property tax hikes more permanent than house prices - (www.patrick.net)
Sub-prime borrowers are milking the system - (www.godlikeproductions.com)
Credit Cards Are the Next Credit Crunch - (online.wsj.com)
Real estate woes seep into malls, office towers - (features.csmonitor.com)

Property prices will have to fall further - (www.guardian.co.uk)
Attack of the condo craters - (blog.macleans.ca)
China Price Drop Spurs Deflation Fears - (online.wsj.com)
Regulatory reports show 5 biggest banks face huge loss risk - (www.mcclatchydc.com)
New Zealand PM Sees Productivity As The Solution - (online.wsj.com)
Follow the Kiwi leader, not Obama - (theaustralian.news.com.au)
Bad real estate advice from TV agents - (www.walletpop.com)
What does one TRILLION dollars look like? - (www.pagetutor.com)

Treasuries Little Changed Before $18 Billion Ten-Year Auction - (www.bloomberg.com)
Oil lurks near $46 after demand report slows rally - (finance.yahoo.com)
Wall Street looks to extend big gains - (finance.yahoo.com)
Gold Little Changed Below $900 as Equity Gain Cuts Haven Appeal - (www.bloomberg.com)
U.S. May Use Capital Injections to Help Banks Sell ‘Bad’ Assets - (www.bloomberg.com)
Banks’ Bondholders May Be Next in Line to Share Bailout Pain - (www.bloomberg.com)
45 percent of world's wealth destroyed: Blackstone CEO - (www.reuters.com)
Hedge funds to suffer further in scramble for cash - (www.reuters.com)
Private Equity Indigestion Comes With Bain Bloomin’ Onion Debts - (www.bloomberg.com)
Miami Condo Colossus Is Monument to Excess - (www.nytimes.com)
Madoff Will Plead Guilty; Faces Life for Vast Swindle - (www.nytimes.com)

Hedge Funds Lost $11 Billion in February on Economy - (www.bloomberg.com)
Atlantic stimulus rift grows - (www.ft.com)
China hit by massive drop in exports - (www.ft.com)
Brazil economy shrinks at fastest rate since 1996 - (www.reuters.com)
Norway Oil Fund Drops 23.3% in 2008 on Stock Plunge - (www.bloomberg.com)
Bernanke Says Financial Rules Need an Overhaul - (www.nytimes.com)
UBS Has SF20.9 Billion 2008 Loss, ‘Extremely Cautious’ Outlook - (www.bloomberg.com)
Kodak, MGM Mirage Among Firms at Highest Default Risk - (www.bloomberg.com)
Fed’s Rate Policy Didn’t Cause Housing Bubble, Greenspan Says - (www.bloomberg.com)