Sunday March 15 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Hawaii: Teachers union unit files for bankruptcy – (Netscape Money and Business) The union that represents Hawaii's public schoolteachers says the activities and finances of a subsidiary corporation had been ``grossly mismanaged.'' Member Benefits Corp., which filed for bankruptcy Monday, has been shut down. It had managed the Hawaii State Teachers Association's Voluntary Employees Benefits Association. The HSTA decided to dissolve the corporation last year after determining the for-profit subsidiary didn't fit within the union's mission. The union has told it members the mismanagement was discovered by an outside team of attorneys and accountants that was brought in as part of the process of closing the corporation.

Pressure to reveal major AIG counterparties grows – (www.marketwatch.com) Calls increased Tuesday to reveal the financial institutions that got almost $40 billion in collateral from American International Group shortly after the government first bailed out the insurer last year. AIG almost collapsed in September after ratings agency downgrades triggered demands for billions of dollars in extra collateral from firms that had bought derivative-based protection from the insurer on complex mortgage-related products known as collateralized debt obligations, or CDOs. AIG didn't have that much money and faced bankruptcy. But it was saved by an $85 billion emergency loan facility from the Federal Reserve. By Nov. 5, the insurer had paid out $37.3 billion of that money to counterparties who had purchased a certain type of derivative-based protection from AIG called multi-sector credit-default swaps, according to the company's third-quarter regulatory filing. "AIG has given the counterparties $20 billion. Those people could be just about anybody in the world. Why won't the Fed disclose who those are?" Sen. Ron Wyden, D-Ore., asked Fed Chairman Ben Bernanke during congressional testimony on Tuesday. Bernanke said the counterparties made "legal, legitimate, financial transactions" with AIG and presumed at the time that the contracts would remain private. "That is a consideration we have to take into account," he added. Sen. Mark Warner, D-Va., suggested that AIG's counterparties should have to take a "haircut," rather than be made whole, because some of them probably didn't do enough due diligence on whether the insurer was financially strong enough to be selling such protection. "In effect, what we're saying is, consequently, folks who bought these instruments and that, at some point in their process, should have been doing some level of credit analysis of what AIG was selling who didn't do that credit analysis are going to still come out whole for their lack of appropriate due diligence or responsible behavior," he said. "I'm as unhappy as you are about that, senator," Bernanke replied. "I just don't know what to do about it."

Bair Says FDIC Insurance Fund Could Be Insolvent This Year - (www.bloomberg.com) - Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency. “Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group. ... Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank’s 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said yesterday in a telephone interview. “I’ve never seen emotions like this,” said Fine, adding that he’s received more than 1,000 e-mails and telephone messages from angry bankers. ... Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department and legislation pending in Congress would boost the amount to $100 billion. “Banks, not taxpayers, are expected to fund the system,” Bair said. Asking for taxpayer support “could paint all banks with the ‘bailout’ brush.”

Fed Refuses to Release Bank Lending Data, Insists on Secrecy - (www.bloomberg.com) The Federal Reserve Board of Governors receives daily reports on loans to banks and securities firms, the institution said in response to a Freedom of Information Act lawsuit filed by Bloomberg News. The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma” on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral. The bank provides “select members and staff of the Board of Governors with daily and weekly reports” on Primary Dealer Credit Facility borrowing, said Susan E. McLaughlin, a senior vice president in the markets group of the Federal Reserve Bank of New York in a deposition for the Fed. The documents “include the names of the primary dealers that have borrowed from the PDCF, individual loan amounts, composition of securities pledged and rates for specific loans.” The Board of Governors contends that it’s separate from its member banks, including the Federal Reserve Bank of New York which runs the lending programs. Most documents relevant to the Bloomberg suit are at the Federal Reserve Bank of New York, which the Fed contends isn’t subject to FOIA law. The Board of Governors has 231 pages of documents, which it is denying access to under an exemption under trade secrets.

GM auditors raise doubts on automaker's viability - (finance.yahoo.com) GM auditors raise doubts about viability, company says Chapter 11 possible if bailout fails. General Motors Corp.'s auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations, and the company said it may have to seek bankruptcy protection if it can't execute a huge restructuring plan. The automaker revealed the concerns Thursday in an annual report filed with the U.S. Securities and Exchange Commission. "The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for the accounting firm Deloitte & Touche LLP wrote in the report. In pre-market trading, GM shares fell 14 percent from Wednesday's close, to $1.90.

GE Treated Like a ‘Leper’ as Investors Punish Shares - (www.bloomberg.com) General Electric Co. investors are treating the company as though it’s on the verge of failing ahead of a potential cut in its top-level AAA rating. “It’s a leper right now,” said Marilyn Cohen, president of Envision Capital Management Inc. in Los Angeles, who oversees $180 million in fixed-income assets and no longer owns GE bonds. Bankruptcy “seems improbable, but we’ve seen improbable things happen,” Cohen said. GE, which just posted its third-highest annual profit ever, has lost about $264 billion in market value in 12 months. Yesterday it fell a fourth straight day to the lowest closing price since November 1992, feeding a surge in options volume and credit-default swaps. Investors are punishing the shares on a presumption, which the company disputes, that GE Capital will need more outside funding to cover potential writedowns and losses in real estate, consumer credit cards and leasing. The run underscores how stock investors may have lost confidence in companies with finance operations -- even those like GE that own industrial businesses, still predict a profit, and operate with some degree of backing from the U.S. government. While federal commercial paper liquidity backstops and debt guarantees since October have prevented the type of creditor panics that sank Bear Stearns Cos. and Lehman Brothers Holdings Inc., a former Federal Reserve official says the programs haven’t made a convincing case for stock investors. “Creditors are being bailed out everywhere but equity owners are not,” said William Poole, president of the St. Louis Federal Reserve Bank until March 2008. “What that does is create cascading weakness because you can’t raise any equity capital.”

ADP Reports February Nonfarm Private Employment Decreased 697,000 - (http://globaleconomicanalysis.blogspot.com) Nonfarm Private Employment Decreased 697,000 according to the February ADP National Employment Report®. Nonfarm private employment decreased 697,000 from January 2009 to February 2009 on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from December 2008 to January 2009 was revised down by 92,000, from a decline of 522,000 to a decline of 614,000….. Look for another grim employment report on Friday, perhaps in the range of 600,000 to 800,000 jobs lost. This will be the 14th consecutive months of jobs lost, and the numbers appear to be accelerating to the downside with no end in sight.

Doting On Animals In Hard Times - (www.forbes.com) When markets drip tears and For Rent signs appear over products in shops that were once For Sale, people still spend almost as much resources, time and energy as ever on a completely wasteful economic category: pets. I once did some consulting for the chairman's office of A&P and assumed that surely, in tough times, poor people would choose the generic cat food rather than Hill's Science Diet Culinary Creations cat food. But I was wrong. Consumers would rather buy plain-label generic creamed corn or tomato soup for themselves than subject their four-footed treasures to what they fear will be second-rate grub. Ellen DeGeneres promotes her Halo line, with "holistic foods for pets' total well-being. Highest quality meats, grain and fresh vegetables." She could be joined by the producers of Haute Canine, the Natural Gourmet Dog Snack and Dandy Doggy Bowser Brittle (with rain-forest nuts). Of course there are countless miserable stories of pets abandoned in foreclosed homes, left off from cars in parks and simply ignored once a summer vacation is over. The story is not wholly pretty and contains abundant cruelty, exploitation and heartlessness.


OTHER STORIES:

Toll Brothers Narrows Its Loss on Cost Cuts - (www.ml-implode.com) " The luxury homebuilder, Toll Brothers, narrowed its loss in its first quarter, offsetting a drop in revenue with cuts in its ...
Home Sales Rise With Foreclosures - (www.ml-implode.com) - " So-called “motivated sales,” or foreclosures, drove a 7 percent increase in home sales across the nation in December, accordin...
Bank of America Charges May Surge as Mortgages Marked to Market - (www.ml-implode.com) - " So far, recovery plans by the federal government and private lenders have avoided writing down mortgage loans to market values...
You’re Dead? That Won’t Stop the Debt Collector - (www.ml-implode.com)

U.S. Stock-Index Futures Drop as General Motors, JPMorgan Slump - (www.bloomberg.com)
Gold Rises for First Day in Nine as Lower Equities Spur Demand - (www.bloomberg.com)
Oil falls to near $44 on continuing demand worries - (finance.yahoo.com)
European Stocks, U.S. Futures Drop; Aviva, Salzgitter, BHP Fall - (www.bloomberg.com)
Treasuries Little Changed Before U.S. Auction Announcement - (www.bloomberg.com)
U.S. Sets Big Incentives to Head Off Foreclosures - (www.nytimes.com)
Treasury Begins to Release Details of Loan Plan - (www.nytimes.com)
ECB cuts key rate to record low - (www.marketwatch.com)
Bank of England Cuts Rates, Starts Asset Purchases - (www.bloomberg.com)
China to ‘Significantly Increase’ Spending, Wen Says - (www.bloomberg.com)
Economy to Dominate Annual Chinese Gathering - (www.nytimes.com)

U.K. February House Prices Decline Annual 17.7%, Halifax Says - (www.bloomberg.com)
China Exporters Blame Yuan in ‘Life and Death’ Crisis - (www.bloomberg.com)
European Spending Drops Most in 13 Years as ECB Mulls Action - (www.bloomberg.com)
Ireland scrambles to limit borrowing - (www.ft.com)
Recession Deepening Across Regions, Industries, Fed Says - (www.washingtonpost.com)
Fed Report Paints Bleak Economic Picture - (www.nytimes.com)
U.S. Service Industries Contracted at Faster Pace - (www.bloomberg.com)
Fed Refuses to Release Bank Lending Data, Insists on Secrecy - (www.bloomberg.com)

JPMorgan, Wells Fargo, Bank America Face Ratings Cuts - (www.bloomberg.com)
Ford launches major debt restructuring - (www.reuters.com)
The Poseidon Mortgage Adventure - (www.forbes.com)