Sunday March 22 Housing and Economic stories

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TOP STORIES:

People: Bartender at real 'Cheers' pub laid off after 35 years – (www.mercurynews.com) We have no idea what's happened to Norm, Cliff, Diane, Carla, and Frazier and Lilith, but the real Sam at the real Cheers is, today, really unemployed. Eddie Doyle, who's been bartender for 35 years at the Boston tavern that inspired the classic TV sitcom "Cheers," has been laid off, The Associated Press reports. The bar's owner has said a tough economy and sagging business forced the move, which was one of several layoffs. Doyle said he's not bitter about being laid off, just surprised and a little sad. "This bar, for me ... it was not just another job," Doyle said. "It was the perfect job." Doyle began working at the pub in 1974, at a time when it really was a neighborhood place where "everybody knew your name." That changed after the TV show starring Ted Danson as the faux Doyle. The clientele broadened considerably then and such famous people as Kevin Costner and former chairman of the Joint Chiefs of Staff Admiral William J. Crowe Jr. stopped in. Oh, and Doyle, 66, was nothing like the womanizing barkeep portrayed by Danson. He's married to the same woman he met at the bar, originally called the Bull & Finch Pub, when he was a regular there in the early 1970s.

Banks’ Bondholders May Be Next in Line to Share Bailout Pain - (www.bloomberg.com) Citigroup Inc. and Bank of America Corp.’s bond prices are sliding on concern that owners of debt issued by U.S. financial firms will be forced to swallow losses if the industry needs another bailout. U.S. bank debt has lost 7.6 percent and yields have jumped to record levels compared with benchmark rates in the past month, even after taxpayers committed more than $11.6 trillion to prop up financial firms. With shareholders almost wiped out at banks like Citigroup and lawmakers resisting more rescues, holders may be asked to swap bonds for new debt that offers reduced interest rates or lower face values, analysts said. “The bond market is getting more scared every day,” said Gary Austin of PDR Advisors in Charlotte, North Carolina, who manages $450 million in fixed-income securities. “At some time, the government is going to say enough is enough, the only way we will give you more cash is if the bondholders have to be hit.” Debt investors are an attractive target because of the size of their holdings -- more than $1 trillion just at the four largest U.S. banks -- and because they’ve emerged almost unscathed so far. Since any reduction in debt at a bank helps boost capital ratios, members of Congress including U.S. Representative Brad Sherman, a California Democrat, say it’s time for bondholders to share the pain.

The Business Panic of 33 A.D. - The more things change, the more they stay the same. - (en.wikisource.org) Of the year 33 A.D. it may possibly have been recorded in the diaries of certain Roman business men, that there was a disturbance in the remote province of Judaea a tumult quickly quelled by the energy of his excellency Pontius Pilate, the governor, who seized and crucified one Christus, the chief malcontent, and two bandits, his accomplices. It is more probable, however, that they only remembered this year as marking one of the severest panics which ever shook the foundations of Roman credit. As with most panics, the causes of this were not obvious. About a year before, the firm of Seuthes & Son of Alexandria, lost three richly laden spice ships on the Red Sea in a hurricane. Their ventures in the Ethiopian caravan trade also were unprofitable, ostrich feathers and ivory having lately fallen in value. It soon began to be rumored that they might be obliged to suspend. A little later the well known purple house of Malchus & Company (centered at Tyre, but with factories at Antioch and Ephesus) suddenly became bankrupt ; a strike among their Phoenician workmen, and the embezzlements of a trusted freedman manager being the direct causes of the disaster. Presently it became evident that the great Roman banking house of Quintus Maximus & Lucius Vibo had loaned largely to both Seuthes and Malchus. The depositors, fearing for their money, commenced a run on the bank, and distrust spread because men, experienced on the Via Sacra (the first century Wall Street), said that the still larger house of the Brothers Pettius was also involved with Maximus & Vibo. The two threatened establishments might still have escaped disaster had they been able to realize on their other securities. Unfortunately the Pettii had placed much of their depositors' capital in loans among the noblemen of the Belgae in North Gaul. In quiet times such investments commanded very profitable interest; but an outbreak among that semi-civilized people caused the government to decree a temporary suspension of processes for debt. The Pettii were therefore left with inadequate resources. Maximus & Vibo closed their doors first; but that same afternoon the Pettii did likewise. Grave rumors obtained that, owing to the interlacing of credits, many other banks were affected. Still the crisis might have been localized, had not a new and more serious factor been introduced. In a laudable desire to support the Italian agricultural interest then in a most declining way the Senate, with the assent of Tiberius, the emperor, had ordered one third of every senator's fortune to be invested in lands within Italy. Failure to comply with the ordinance invited prosecution and heavy penalties. The time allowed for readjustment had almost expired, when many rich senators awoke to the fact that they had not made the required relocation of their fortunes. To find capital to buy land, it was necessary for them to call in all their private loans and deposits at the bankers. Publius Spinther, a wealthy nobleman, particularly was obliged to notify Balbus & Ollius, his bankers, that they must find the 30,000,000 sesterces he had deposited with them two years before. Two days later Balbus & Ollius had closed their doors, and their bankruptcy was being entered before the praetor. The same day a notice in the Ada Diurna, the official gazette posted daily in the Forum, told how the great Corinthian bank of Leucippus' Sons had gone into insolvency. A few days later it was heard that a strong banking house in Carthage had suspended. After this all the surviving banks on the Via Sacra announced that they must have timely notice before paying their depositors. The safe arrival of the corn fleet from Alexandria caused the situation at the capital to brighten temporarily; but immediately afterward came news that two banks in Lyons were "rearranging their accounts," as the euphemism ran; likewise another in Byzantium. From the provincial towns of Italy and the farming districts, where creditors had long allowed their loans to run at profitable interest, but were now suddenly calling in their principals, came cries of keen distress and tidings of bankruptcy after bankruptcy. After this nothing seemed able to check the panic at Rome. One bank closed after another. The legal 12% rate of interest was set at nought by any man lucky enough to possess ready money. The praetor's court was crowded with creditors demanding the auctioning of the debtor's houses, slaves, warehouse stock, or furniture. The auctions themselves were thinly attended, for who could buy? Valuable villas and racing studs were knocked down for trifles. Caught in the disaster, many men of excellent credit and seemingly ample fortune were reduced to beggary. The calamity seemed spreading over the Empire, and threatening a stoppage of all commerce and industry, when Gracchus, the praetor, before whom the majority of the cases in bankruptcy came, at his wits' end to decide between the hosts of desperate debtors and equally desperate creditors, resorted to the Senate-house; whence, after a hurried debate, the Conscript Fathers dispatched a fast messenger with a full statement of the danger to their lord and master Tiberius, in his retreat at Capri. While the Caesar's reply was awaited, the business world of the capital held its breath.

Freddie asks for $30 bln more - (www.marketwatch.com) Freddie Mac said late Wednesday that it's getting billions of dollars in extra government support after reporting a huge quarterly loss. The fourth-quarter net loss of $23.9 billion, or $7.37 a share, Freddie said. That was a slight improvement from the third quarter of last year, when the mortgage giant suffered a net loss of $25.3 billion, or $19.44 a share. The Federal Housing Finance Agency, which oversees Freddie, has asked the Treasury Department for $30.8 billion and the company said it expects to receive that money in March. That was at the low end of a range that Freddie forecast in late January. Back then, the company said the FHFA planned to ask the government for $30 billion to $35 billion after a preliminary evaluation of its fourth-quarter results. See full story. The government seized Freddie and rival Fannie Mae in September after rising mortgage delinquencies and foreclosures swamped the companies. Since then, house prices have plunged further as the collapse of Lehman Brothers and American International Group pushed the U.S. into a deep recession, triggering a surge in unemployment. Treasury had already injected almost $15 billion into Freddie last year, in return for senior preferred stock in the mortgage giant. After the latest investment, the government's preferred equity stake will be $45.6 billion, the company said. Despite huge losses, the government is still pumping billions of dollars into Fannie and Freddie, because they're crucial to the housing market. Most mortgages are either purchased or guaranteed by these companies and the Treasury and Federal Reserve have promised continued support to try to keep money flowing and halt the real estate slump.

U.A.W. Deal Cuts Hourly Rate to $55 - (www.nytimes.com) Ford Motor said Wednesday that its new agreement with the United Automobile Workers union would save at least $500 million a year and, within several years, bring its labor costs into line with what foreign competitors pay their workers in the United States. Skip to next paragraphFord said the deal, which U.A.W. members ratified this week, immediately reduces its “all-in” hourly rate, which includes benefits, to $55. It said the figure would continue to decline as more workers took buyouts and as the new-vehicle market recovered, allowing increased production. Ford’s labor costs now amount to a little more than $60 an hour, including health care for retirees. Labor costs for the so-called transplant automakers, including Toyota and Honda, have been about $49 an hour in the United States and are rising, Ford estimates.

Hedge funds to suffer further in scramble for cash - (www.reuters.com) The hard-hit hedge fund industry will shrink back to 2005 levels of around $1 trillion (728 billion pounds) this year as cash-needy investors, rocked by the Bernard Madoff scandal and further performance losses, get a chance to exit. There is little relief from redemptions in sight for funds as U.S. institutional investors pull out cash to meet commitments to private equity, while portfolios that had locked up investor money last year will shortly see disillusioned investors leave. "I think we'll have two quarters of significant redemptions," Chris Manser, global head of fund of hedge funds at AXA Investment Managers, told Reuters. "Because of Madoff and very difficult performance a lot of funds will be receiving high levels of redemptions." Hedge funds saw outflows of $152 billion, or 9 percent, in the fourth quarter of last year, according to Hedge Fund Research, bringing down total assets in the freewheeling industry to $1.4 trillion at the end of the year after performance deteriorated in the second half.

Miami Condo Colossus Is Monument to Excess - (www.nytimes.com) Icon Brickell, a new condominium complex in downtown Miami, was intended to be Jorge Perez’s answer to the Time Warner Center, the massive mixed-use building developed in Manhattan by his longtime business associate, Stephen M. Ross. Skip to next paragraphMr. Perez, the chairman of the Related Group (an affiliate of Mr. Ross’s New York-based Related Companies) and the undisputed condo king of South Florida, has peppered the waterfront with residential units in recent years, but he has never built anything on the scale of the $1.25 billion Icon Brickell. At the point where the Miami River meets the Biscayne Bay, it has 1,646 condos, a 28,000-square-foot fitness area and a two-acre pool deck with a 12-foot-high limestone fireplace. The 22-foot-tall sculptured columns, 100 of them, marking the entryway were inspired by the monumental moai statues on Easter Island and cost $15 million. But instead of representing a triumph for Mr. Perez, 59, Icon Brickell has become a symbol of the excesses of the building boom in downtown Miami. Since 2003, 83 towers with nearly 23,000 condo units have been added to the downtown skyline, from fancy Brickell Avenue through the more modest Biscayne Corridor, causing an oversupply of epic proportions in this city of 400,000 people. As of Dec. 31, almost 45 percent of the new condos remained unsold, according to Peter Zalewski, the owner of Condo Vultures Realty, who represents investors seeking to buy condos in bulk and rent them out until the market recovers. Related has had disappointing sales at two other twin-tower condo developments near its new project: the Plaza, with 1,000 units, and 500 Brickell, with 633 units. But they pale next to the performance of Icon Brickell, where condos were listed at $400,000 to $800,000. “It could very much be that his masterpiece will also be his downfall,” said Jack McCabe, the chief executive of McCabe Research and Consulting in Deerfield, Fla.

Bernanke says AIG tightens grip on perks, pay - (www.reuters.com) Gone are the days of luxury California hotel retreats for executives of bailed-out U.S. insurance giant American International Group. Once mighty AIG has a new employee expense handbook, a special governance committee, and strict limits on executive pay, according to a letter from Federal Reserve Chairman Ben Bernanke to Senator John Kerry that was obtained by Reuters on Tuesday. The new expense policy was mandated by the U.S. Treasury Department and "may be materially amended only with the prior written consent of the Treasury," Bernanke said. The letter from the Fed chairman to Kerry, a Massachusetts Democrat, opens a window onto how much influence the Fed and Treasury have over day-to-day events at AIG. It also shows that Kerry, at least, can get answers on AIG from the Fed.



OTHER STORIES:

Foreclosures Surge as Umemployment Takes Toll - (www.cnbc.com)
Be Very Afraid, UK Watchdog Tells Bankers - (www.cnbc.com)
World Economy Seen Shrinking, G20 Meeting Looms - (www.cnbc.com)
Charts Show Dow May Be in for Bear Rally: Guppy - (www.cnbc.com)
Warren Buffett No Longer 'World's Richest Billionaire' - (www.cnbc.com)

AmEx CEO's millions - (online.wsj.com)PNC's CEO rakes in $15 mln - (www.marketwatch.com)
U.S. May Use Capital Injections to Help Banks Sell ‘Bad’ Assets - (www.bloomberg.com)
Private Equity Indigestion Comes With Bain Bloomin’ Onion Debts - (www.bloomberg.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)
Conflicting Signals About the Chinese Economy - (www.nytimes.com)
Atlantic stimulus rift grows - (www.ft.com)

China hit by massive drop in exports - (www.ft.com)
China’s Big Recycling Market Is Sagging - (www.nytimes.com)
Norway Oil Fund Drops 23.3% in 2008 on Stock Plunge - (www.bloomberg.com)
4 States With Unemployment Above 10% - (www.nytimes.com)
Mortgage applications rose 11.3% last week: MBA - (www.marketwatch.com)
Global Confidence Fell in March as Economies Crumbled - (www.bloomberg.com)
Freddie to Tap $30.8 Billion in Aid as Losses Deepen - (www.bloomberg.com)
UBS Has SF20.9 Billion 2008 Loss, ‘Extremely Cautious’ Outlook - (www.bloomberg.com)
Citi's Long History of Overreach, Then Rescue - (www.washingtonpost.com)
Recession has taken toll on alternative energy - (www.sfgate.com)

Banks Counted on Looting America’s Coffers - (www.nytimes.com)
Fed’s Rate Policy Didn’t Cause Housing Bubble, Greenspan Says - (www.bloomberg.com)