Thursday March 12 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

TPG in bankruptcy aid clash – (www.ft.com) TPG, the private equity firm, is stirring controversy on Wall Street by offering to provide bankruptcy financing for a company that it owns, a strategy that could put it in the ironic position of being paid before some other creditors. If successful, TPG might be able to recover some of its investment in Aleris, a maker of aluminium products that it acquired in 2006. However, the proposal is raising questions because of the implications it could have for buy-out firms in other deals that are going bust. Aleris, which is based in Beachwood, Ohio, filed for Chapter 11 bankruptcy protection last month. Distressed-debt investors led by Oaktree Capital and Apollo offered to provide Aleris with $500m in new money for so-called debtor-in-possession (DIP) financing – which enables a company to reorganise under bankruptcy protection. TPG responded by asking the judge in the bankruptcy case to allow it to join the group offering the DIP facility.

In Obama, Labor Finds the Support It Expected - (online.wsj.com) John J. Sweeney, the nation’s top union official, often complains that he was invited just once to the White House during George W. Bush’s eight years in office — and even that was at the Vatican’s behest during a visit by Pope Benedict.Skip to next paragraphIf an index is needed for how much closer organized labor is to President Obama than to his predecessor, it might be the number of times Mr. Sweeney, the A.F.L.-C.I.O.’s president, has visited the White House since Inauguration Day — at least once a week for receptions, bill signings and a meeting on fiscal responsibility. Mr. Obama has delighted labor by issuing four pro-labor executive orders that reversed Bush policies. He has also appointed a union-friendly chairwoman to the National Labor Relations Board and named a labor secretary whose parents were both union members. But those changes worry corporate America, especially as Mr. Obama has signaled he will push for legislation that would expand labor’s thinned ranks by making it far easier to unionize workers. Labor leaders expect Vice President Joseph Biden to spell out the administration’s battle plans for the bill on Thursday, when he is scheduled to speak at the A.F.L.-C.I.O.’s winter meeting in Miami Beach. Any doubts that union leaders might have had about Mr. Obama dissolved several weeks ago when, in announcing a new Task Force on the Middle Class, he said: “I do not view the labor movement as part of the problem. To me, it’s part of the solution. You cannot have a strong middle class without a strong labor movement.” Mr. Sweeney and many other labor leaders were thrilled. “It’s like night and day having a president who believes in helping working people build power,” Mr. Sweeney said. “I look upon Obama as the most pro-union president since John Kennedy, and I have even compared him to Franklin Delano Roosevelt.”

Guess What Got Lost in the Loan Pool? - (www.nytimes.com) WE are all learning, to our deep distress, how the perpetual pursuit of profits drove so many of the bad decisions that financial institutions made during the mortgage mania. Skip to next paragraphBut while investors tally the losses that were generated by loose lending so far, the impact of another lax practice is only beginning to be seen. That is the big banks’ minimalist approach to meeting legal requirements — bookkeeping matters, really — when pooling thousands of loans into securitization trusts. Stated simply, the notes that underlie mortgages placed in securitization trusts must be assigned to those trusts soon after the firms create them. And any transfers of these notes must also be recorded. But this seems not to have been a priority with many big banks. The result is that bankruptcy judges are finding that institutions claiming to hold the notes that back specific mortgages often cannot prove it. On Feb. 11, a circuit court judge in Miami-Dade County in Florida set aside a judgment against Ana L. Fernandez, a borrower whose home had been foreclosed and repurchased on Jan. 21 by Chevy Chase Bank, the institution claiming to hold the note. But the bank had been unable to produce evidence that the original lender had assigned the note, which was in the amount of $225,000, to Chevy Chase. With the sale set aside, Ms. Fernandez remains in the home. “We believe this loan was never assigned,” said Ray Garcia, the lawyer in Miami who represented the borrower. Now, he said, it is up to whoever can produce the underlying note to litigate the case. The statute of limitations on such a matter runs for five years, he said.

Morgan Stanley’s Chinese Land Scandal - (www.nytimes.com) Since the height of China’s property boom, Morgan Stanley’s huge real estate deals here have been the envy of the industry. Then, scandal hit. Last month, with property prices here and elsewhere in free fall, the bank dropped a bombshell: in a Securities and Exchange Commission filing, it said it had fired an executive in its China real estate division after uncovering evidence that he might have violated the United States Foreign Corrupt Practices Act, which bars American business people from bribing foreign officials. That executive, Garth Peterson, was a star deal maker who had become a powerful figure on the Shanghai investment scene, people knowledgeable about the investigation said. His supervisor, the head of global real estate investing, was placed on administrative leave. In China, which is struggling to deal with corruption and bribery, the revelation is the latest bit of sobering news after a wild real estate boom suddenly went bust late last year, leaving some of the world’s biggest financial institutions with potentially huge losses.

Arsonists Torch Berlin Porsches, BMWs on Economic Woe - (www.bloomberg.com) When Berlin resident Simone Klostermann returned from vacation and couldn’t find her Mercedes SLK, she thought it had been towed. Police told her the 35,000- euro ($45,000) car had been torched. “They’d squirted something flammable into the car’s engine block in the gap between the windshield and the hood,” said Klostermann. “The engine was completely destroyed.” The 34-year-old’s experience isn’t unique in the German capital. At least 29 vehicles were destroyed in arson attacks this year, most of them luxury cars, according to police. The number is already about 30 percent of the total for 2008. The latest to go up in flames was a Porsche, on Feb. 14, two days after a Mercedes was set alight in a public car park. While youths in Athens protest by throwing Molotov cocktails, in Paris by toppling barricades, and in Budapest by hurling eggs at politicians, protesters in Berlin rage at their economic plight by targeting the most expensive cars -- symbols of German wealth and power. A group calling itself BMW -- the initials stand for Movement for Militant Resistance in German -- has claimed responsibility for several attacks in left-wing magazines and Web sites, police spokesman Bernhard Schodrowski said.

FDIC: $19 billion now backs over $4.8 trillion - (optionarmageddon.ml-implode.com) Yesterday I used a GMAC ad to illustrate a point about publicly-funded deposit insurance—we should do away with it. It encourages depositors to shop for high interest rates rather than healthy banks; it forces onto the public the cost of risks taken by imprudent individuals; and it massively misdirects society’s resources by underpricing the cost of government-backed insurance. Why are taxpayers now pumping hundreds of billions into a bailout of Fannie and Freddie? Because the government guaranteed their debt essentially for nothing. Had the government’s guarantee been priced properly, investments in Fan and Fred would have been far less remunerative. We offered trillions of $ worth of free lunches and now we have to pay for them. The same is true of public deposit insurance. Why are Treasury and the Fed moving mountains to save failing banks? Because taxpayers offered trillions of $ of free lunches to depositors for which we now are being forced to pay. There’s nearly $5 trillion worth of insured deposits in the American banking system. But the FDIC’s Deposit Insurance Fund (DIF) is less than 1% of that total: $18.9 billion. And it’s falling fast, down from $52.4 billion (-64%) at the end of 2007.

Taxpayer Beware: Bank Bailout Will Hurt - (www.npr.org) Morning Edition, February 27, 2009 · A single piece of paper may just be one of the most surprising and illuminating documents of the whole banking crisis. It's a one-page research note from an economist at Deutsche Bank, and it outlines in the clearest terms the kind of solution many bankers are looking for. The basic message: We should forget trying to get a good deal for taxpayers because even trying will hurt. "Ultimately, the taxpayer will be on the hook one way or another, either through greatly diminished job prospects and/or significantly higher taxes down the line," the document says. In other words, the paper says, if the government tries to save taxpayers money, many people will lose their jobs and the whole economy will suffer. The research note offers a solution any banker would love: The government should "estimate the highest price it can pay for the various toxic assets on financial institution balance sheets," then pay that price to buy them. Another economist, Simon Johnson, a professor at the Massachusetts Institute of Technology's Sloan School of Management, wrote about this note on his blog. "This is a robbery note!" Johnson says. "It's saying, 'Guys, either you'll have 20 percent unemployment or national debt will go up to these dangerous levels, unless you buy toxic assets — not for what they're worth, not for what the market price is, as much as you can pay.' "

Motor City on the brink of bankruptcy, but still 15 people want to be mayor - (www.chicagotribune.com) Among the many dispiriting numbers that bleakly depict the decrepitude of this onetime industrial behemoth, the steep slide of housing values helps define the daunting challenge to anyone who wants to lead this shrinking, poverty-pocked city of about 800,000 people. "We're always fighting ourselves out of a hole," said Wayne County Sheriff Warren Evans. Despite the depth of the hole, Evans is running for mayor. In fact, he is one of 15 people who have raised their hands to be mayor of Detroit and fill the remaining months in office of the former mayor who now wears a green jumpsuit and resides in Evans' spartan house of justice, the Wayne County Jail. Detroit has long been the snide remark and punch line to derogatory urban humor, and the conviction last fall of two-term Mayor Kwame Kilpatrick for lying about an extramarital affair with his chief of staff reinforced suspicions that Detroit is beyond help, let alone self-governance. But as the domestic auto industry, the city's principal private-sector employer and founding corporate father, seeks a financial bailout from Washington, formerly whispered remarks about the prospect of the nation's 11th-largest city being the first major American city to go bankrupt are now publicly discussed.





OTHER STORIES:

In Denver, Residents Lament the Closing of a Newspaper - (online.wsj.com)
U.S. Stock-Index Futures Decline; Berkshire, Caterpillar Drop - (www.bloomberg.com)
Gold Rebounds From Biggest Drop Since December on Haven Demand - (www.bloomberg.com)
World stock markets tumble on US slump, bank woes - (finance.yahoo.com)
Oil drops below $43 on economic pessimism - (www.bloomberg.com)
Treasuries Rise as Stocks Fall, Report to Show Factories Shrank - (www.bloomberg.com)
VIX Premium Shows Bear Market Lasting 2 Years on Trader ‘Panic’ - (www.bloomberg.com)
A Sideways Peek Into the Value of KKR’s Investments - (www.nytimes.com)
Sweden’s ‘Mr. Fix-It’ Bank Bailout May Be Model for U.S., U.K. - (www.bloomberg.com)
China’s Manufacturing Shrinks as Crisis Cuts Demand - (www.bloomberg.com)
Recession deepens for British factories - (www.marketwatch.com)
AIG to Get Up to $30 Billion More in New Bailout After Loss - (www.bloomberg.com)
Grocers, name-brand food producers at odds over prices - (www.latimes.com)

Propping Up a House of Cards - (www.nytimes.com)
Revenge of the Glut - (www.nytimes.com)
Public Colleges Get a Surge of Bargain-Hunters - (www.nytimes.com)
Pepsi, IBM Now More Creditworthy than US Gov't - (georgewashington2.blogspot.com)
China Wants US Guarantees for Treasuries - (www.bloomberg.com)

Rick Santelli's Planted Rant? - (www.ritholtz.com)
Renters Are Wealthier than House 'Owners' - (www.seekingalpha.com)
Why Houseownership Falling Despite Lower Prices: Jobs - (www.newgeography.com)
Housing Market Continues To Slide In Connecticut - (www.courant.com)
Home$ still to fall - (www.nypost.com)
Housing: Where Is the Bottom? - (www.seekingalpha.com)
Some residential lots have virtually no value - (www.inbusinesslasvegas.com)
How the economic crash may reshape America - (www.tampabay.com)
The Economic Need for Stable Policies, Not a Stimulus - (www.sciam.com)
Financial Times Interview With Banker Moelis - (www.wallstreetoasis.com)
Who Rules America? - (sociology.ucsc.edu)
Consequences of the New Wall Street System - (www.newleftreview.org)
Videos of Bernanke and Ron Paul - (www.dailybail.com)
Atlas felt a sense of deja vu - (www.economist.com)
Regretting The American Dream - (www.reallyfuckedhomeowner.com)