Sunday March 29 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Yet Another Incompetent Treasury Appointment - (Mish at globaleconomicanalysis.blogspot.com) It's clear to everyone that Treasury Secretary Geithner is in over his head and has no idea what he is doing. He should be fired. Instead the administration wants to give him help. Is "help" on the way? The answer can be found in Citi Losing Economist to Treasury. Citigroup Inc.'s chief economist is leaving the company for a job at the Treasury Department, according to an internal Citigroup memo. Lewis Alexander, who has been at Citigroup since 1999 and before that worked at the Federal Reserve, will head to the Treasury "to work on domestic financial issues," said the Citigroup memo, which was sent Tuesday. According to a government official, Mr. Alexander will be a counselor to Treasury Secretary Timothy Geithner. Mr. Alexander and a Treasury spokesman weren't available to comment Tuesday. A Citigroup spokesman declined to elaborate on the company's memo. The Obama administration so far has largely avoided tapping Wall Street officials for senior spots at the Treasury, wary of stoking the mounting political backlash surrounding the federal bailouts of the finance industry. That has irked top executives at some banks, who say they can't get an audience with top Treasury officials. Mr. Alexander's role as Citigroup's chief economist didn't entail significant management responsibilities. But his optimistic economic forecasts colored executives' views that the U.S. was unlikely to face a prolonged slump. "I think that's not going to spill over more broadly into the economy, and so I think we're going to have a normal kind of housing cycle that's going to last through the middle of this year," Mr. Alexander said in a 2007 interview on PBS. Those top bank executives should be thanking their lucky stars they have a job. Instead they are whining about not getting an audience with the Treasury. The real story, however, is the continued appointment of incompetent fools in the Treasury department.

For Many Young Irish, First Taste of Hard Times - (www.washingtonpost.com) Niall O'Donoghue grew up in a rich country. He got an architecture degree, a top-paying job with a pay raise every year and a bonus at Christmas. O'Donoghue and his wife bought a house in the city and another in the country. They have two cars, two mortgages and two children under age 2. Then a month ago, O'Donoghue, 33, was laid off, jobless for the first time in his life, another well-dressed victim of one of the world's fastest and deepest economic reversals. "It's a bit of a shock to the system, especially for my generation," O'Donoghue said one recent morning, waiting in the cold with dozens of other people in line outside the Limerick unemployment office. "I don't think things will ever be as good as they were in the last five, six or seven years. That's the bitter truth of it." Young Irish people accustomed to economic boom times have suddenly found themselves living a bleak page out of Irish history. Many in their 20s and 30s -- a generation raised on the assumption of jobs and prosperity at home -- have had their expectations crushed by the global economic crisis. On the gloomiest St. Patrick's Day in years, the national jobless rate stands at 10.4 percent, more than twice the rate at this time last year. More than 354,000 people signed up last month for unemployment benefits, an 87 percent increase over the previous year. After 20 years of roaring growth during Ireland's "Celtic Tiger" economy, the government is bailing out teetering banks; the construction industry, which had driven the boom, is at a standstill. Property prices have crashed and stores and factories are closing. Young professionals who bought houses -- and often second homes as far away as Spain and Bulgaria -- are stuck with mortgages worth more than the properties. Well-educated young workers are losing jobs they assumed were safe, and finding it hard to adjust to problems they thought belonged to their parents and grandparents. "This was the last thing I expected," said Joanne Martin, 24, who pulled up to the unemployment office in a sporty two-seater Mazda. Martin said she graduated from college with degrees in bioengineering and biotechnology and interned with NASA in Florida. But she is still out of work after applying for at least 100 positions in at least 20 different companies. "I never thought it would be like this." Older Irish people remember recessions of the past when the most reliable route to a job was to emigrate to Britain, the United States and beyond.

Hedge Funds Liquidate In Record Numbers In 2008 – (www.cnbc.com) A record 778 hedge funds liquidated during the fourth quarter, capping a year that saw financial markets melt down and investors yank $150 billion of their money at the end of 2008, Hedge Fund Research Inc said Wednesday. The ranks of hedge funds were more than decimated as 1,471 hedge funds closed down last year, or nearly 15 percent of all funds, HFR said. More than 275 funds-of-hedge funds were liquidated in 2008, also a record. Meanwhile, 56 new funds were launched during the quarter, contributing to 659 that opened their doors throughout 2008. On a net basis, the total number of hedge funds fell by 8 percent to 9,284 last year, the Chicago-based firm said. Last year was a disaster for hedge funds, lightly regulated investment pools that are the exclusive playground of big institutions and wealthy families. As markets tanked, investors withdrew money and triggered a cycle of forced selling that put more pressure on markets. The number of liquidations more than doubled the previous quarterly record of 344 set in the third quarter. Last year's liquidations marked a 70 percent increase from the previous annual record set in 2005. Among other findings, HFR said the credit crunch that roiled Wall Street's biggest banks did not loosen their grip on the prime brokerage business: the top three prime brokers still controlled 62 percent of hedge fund industry capital. Last year also was a record for disparity in performance, with about 100 percentage points separating the top 10 percent of performers from the bottom 10 percent.

IRS Plans a Deduction for “Connected” Madoff Victims - (www.nytimes.com) Why is it that this was never provided to previous ponzi scheme victims. This group of privileged individuals and groups was allowed to invest in a closed fund that most were not allowed to. The fund did not contribute to SIPC insurance fund, yet they are being allowed to claim SIPC insurance funds and get special IRS write-offs. The Internal Revenue Service said Tuesday that it would allow victims of Bernard L. Madoff’s huge investment fraud to claim a tax deduction related to the bulk of their losses. The plan represents the first time the I.R.S. has come forward with a policy on the treatment of Mr. Madoff’s victims, who include Elie Wiesel, the Holocaust survivor and Nobel laureate; Steven Spielberg, the filmmaker; and John Malkovich, the actor, among scores of other individuals, charities and universities. The matter has been a point of debate and anxiety for the victims and their accountants, given the lack of clarity in the tax code about how it should be handled.
The plan, which applies to victims of all Ponzi schemes, is likely to provide major relief to victims of Mr. Madoff, who pleaded guilty last week to orchestrating what prosecutors say is the largest Ponzi scheme — one that exceeded $50 billion and involved 13,000 investors. It is also likely to provide clarity for victims as they prepare to file federal income tax returns by the April 15 deadline, and help the I.R.S. avoid an unwanted avalanche of amended returns from victims. The commissioner of internal revenue, Douglas Shulman, announced the plan in testimony before a Senate Finance Committee hearing on Ponzi schemes, tax evasion and offshore banking fraud. Later, in a briefing, Mr. Shulman said that “clearly the Madoff case is tragic as so many people were victims of this fraud, but the case also raises a staggering array of tax issues.”

Chicago's Condo Market on Ice - (www.chicagopublicradio.org) Lakeshore East was a small golf course until 2002, when Magellan Development bought the property. Now there are five highrises here and another one almost done. Ambi: Concrete pouring sound and cheering. Eighty-two stories above ground, Magellan executives cheer as they pour concrete for the final floor of the Aqua building. It’s a slim tower with balconies that ripple like waves. And it's hit a sweet spot - already 98-percent of the condos have sold. The fact that the building exists at all is kind of a miracle. Magellan co-CEO Jim Loewenberg says they got the construction loans in 2007, right before banks stopped lending. LOEWENBERG: The whole issues were starting to come to a head, the banks were starting to not trust each other, and so I just don’t know if it would have been done if it had been 60 days later. That credit collapse sent downtown real estate into freefall. AUCTION: 480, 490, 490 left side, now 500,000, five from the back, now 510.... Downtown just witnessed its first-ever auction of luxury condos. And there may be more. AUCTION: 557, once twice, I have 556, 557 third and final call, 557? Sold, congratulations, 556,000. Buyer number is 467. That penthouse in the South Loop went for almost 40 percent off. The South Loop exploded with growth during the boom. But it now has the most unsold condos of any neighborhood downtown. Until recently, downtown prices hadn’t dropped much, but sales were pretty much frozen. Developer Thomas Roszak says he put dozens of his condos on the block as a way to thaw the market. ROSZAK: No one’s selling anything right now. Today we’re going to prove there are 40 buyers out there and they're all willing to buy at a certain price, so from today on, everybody out there who’s a seller will have to react to the price we just determined today. People may be willing to buy at a certain price - whether they can get loans is another matter. Mortgages of more than 400-thousand dollars are hard to come by these days. That could delay a recovery. In the meantime, the city is left with some of the collateral damage.

Freddie Mac: The Government's Next Black Hole? - (www.time.com) AIG is to date the most expensive corporate bailout in American history, requiring $180 billion in government funds. But it may soon have competition. Last week mortgage giant Freddie Mac said it had lost $50 billion in 2008 alone. A look at the company's books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could be even larger. "Freddie's portfolio of [mortgage] insurance is more risky than the market was led to believe," says Paul Miller, an analyst at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink. But Fannie was better capitalized than Freddie going into the credit crunch. So even though Freddie by many measures is smaller than Fannie, the problems at Freddie will probably end up costing more. Citigroup and other banks have also lost money and will need more capital to survive. But in those cases it's not clear who will take the hit — shareholders, bondholders or the government. In the cases of AIG, Freddie Mac and Fannie Mae, however, there is no question where the money will come from. Freddie and Fannie were taken over by the government and put into conservatorship last fall. AIG is currently 80% owned by the government. The losses at those companies are now taxpayer losses. (See 25 people to blame for the financial crisis.)

California $Billions In The Hole Again - (Mish at globaleconomicanalysis.blogspot.com) California Budget Faces New $8-Billion Shortfall. The plan that Gov. Arnold Schwarzenegger and lawmakers approved last month to fill California's giant budget hole has already fallen out of balance with a projected $8-billion shortfall, the Legislature's nonpartisan budget analyst said Friday. After analyzing recent data showing rapidly rising unemployment and lower-than-expected economic growth, Legislative Analyst Mac Taylor said the state is on track to have even less money than lawmakers anticipated in February. California's economy in is such bad shape that Taylor's office anticipates that residents' combined personal income will be lower this year than it was last year, leading to fewer tax dollars for state coffers. "I went as far back as 1950, and I could not find a situation in which personal income had actually declined in the state, so that's a rather unusual event," Taylor said at a news conference Friday. The dour projection is likely to complicate Schwarzenegger's effort to win voter approval for a package of budget-related ballot measures scheduled for a special election May 19. Assembly Speaker Karen Bass (D-Los Angeles) said the new estimate made it more imperative that voters approve the May ballot measures. If the package of propositions --particularly the lottery borrowing -- is rejected, the budget gap would increase by $6 billion, she said. Taylor said the new $8-billion budget hole should not be as difficult to grapple with as was the $42-billion gap. He said the state may be able to tap $3 billion in federal money intended to increase schools spending as part of the federal economic stimulus package passed by Congress.

Uptick Rule Nonsense - (Mish at globaleconomicanalysis.blogspot.com) The search for scapegoats is widening. Please consider a letter written to Jim Sinclair by Duncan Niederauer, Chief Executive Officer, NYSE Euronext. Duncan's letter was posted in the article Developments On The Restoration Of The Uptick Rule. Dear James: Last fall we promised to keep you apprised of any developments on short selling or the uptick rule. As you know, I have been a big proponent of reinstating the uptick rule and from the survey we did last fall, the vast majority of you agree with me. We are the only U.S. exchange to support this position from day one. It seems that we are finally gaining some traction with regulators and there is now some political momentum to make a change, and I am hopeful that the other trading venues in the U.S. will finally support such a change. Barney Frank, who chairs the U.S. House of Representatives Financial Services Committee, said earlier this week that he hopes the uptick rule will be reinstated within the next month and I was in Washington yesterday speaking with top officials at the SEC about this very thing. I am not sure if the rule will be reinstated in its original form, but I do see us working with other equity markets and regulators in the near future to come up with a few new ideas for the best way in which some form of the "tick test" could be reintroduced. This could involve a price test that takes the greater speed of today’s markets into account or stock-specific rules that would be triggered by trading activity. No matter what form the rule ultimately takes, change is coming and that should help restore some confidence and stability in the markets. As always, your comments and suggestions are welcome. I will keep you updated as more information is available and we will continue to advance on this and other positions that support your company and shareholder interests. Nonsensical Proposal: A requirement that only permits stocks to be shorted on upticks makes exactly as much sense as only allowing stocks to be purchased on downticks. In a single word "None".

SoCal median home price plummets 39 percent - (www.sfgate.com) The median home price in Southern California dropped 39 percent in February from a year ago as bargain-hunting buyers descended on homes in the region's most affordable inland neighborhoods, a tracking firm said Tuesday. The price in a six-county region of Southern California plunged to $250,000 last month, compared to $408,000 in February of 2008, San Diego-based MDA DataQuick said. The report said home sales jumped more than 41 percent. February's median price was unchanged from January, representing the first time that month-to-month prices have not declined in 10 months. DataQuick spokesman Andrew LePage warned however that the month-to-month figures don't necessarily show a leveling off of home prices, since it would take several more months for such a trend to establish itself.




OTHER STORIES:

Germany warns US on spiral of inflation - (www.ft.com)
Hedge-Fund Liquidations Jumped to Record in 2008 - (www.bloomberg.com)
Nissan TALF deal rolled out to big demand - (www.reuters.com)
Geithner faces critical test over bank plan - (www.ft.com)
Crisis having "major" impact on central bank reserve management - (www.reuters.com)

Judge Rules Vallejo Can Void Union Contracts - (Mish at globaleconomicanalysis.blogspot.com)
Credit Card Defaults Hit 20 Year High - (Mish at globaleconomicanalysis.blogspot.com)
Bank CEO calls Geithner's Plan "Asinine" - (Mish at globaleconomicanalysis.blogspot.com)

Senator suggests AIG execs should kill themselves - (news.yahoo.com)
Grassley: AIG execs should repent, not kill selves - (www.sfgate.com)
Once paid, AIG bonuses will be hard to recover - (www.sfgate.com)
Real Scandal of AIG: executives accountable to no one - (robertreich.blogspot.com)
Judge Rules Vallejo Can Void Union Contracts - (Mish at globaleconomicanalysis.blogspot.com)

Bernanke's False Analogy of "A Burning House" - (www.informationclearinghouse.info)
Bernanke's Witness Protection Program - (www.patrick.net)
The Real Ponzi Scheme: Unreal Interest Rates - (news.goldseek.com)

Oahu rents likely to keep falling - (www.honoluluadvertiser.com)
Good graphs of Las Vegas crash - (www.lasvegassun.com)
Banks failures still relatively few - (msnbc.msn.com)
Why bailout money goes to banks, not us - (www.sfgate.com)
Residential mortgage fraud hit all-time high in 2008 - (www.signonsandiego.com)
Financial Secrets of the Wizard of Oz - (news.bbc.co.uk)
Golden Gate Economics - (www.youtube.com)