Tuesday March 17 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Auto Dealers Plead for U.S. Help as Hundreds May Fail in 2009 - (www.bloomberg.com) The National Automobile Dealers Association appealed to President Barack Obama’s car industry task force for help in cutting financing costs for retailers. The 90-minute discussion with U.S. Treasury auto advisers Steven Rattner and Ronald Bloom didn’t elicit any commitment for aid, NADA Chairman John McEleney said yesterday in an interview. The 19,700-member association expects 1,200 U.S. dealers to close this year, he said. “We certainly did not receive a commitment and nor did we expect to,” McEleney said. “We had a very helpful discussion. We spent about one-third of our time discussing that topic.” Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers held talks yesterday at the White House to discuss the restructuring of U.S. automakers. U.S. auto sales in February slid to the lowest rate since December 1981, led by a 53 percent plunge for GM as the recession deterred buyers and demand fell for the 16th straight month. The group convened “cabinet-level members of the Presidential Task Force on the Auto Industry to discuss the status of restructuring plans from Chrysler LLC and General Motors Corp.,” the Treasury said in an e-mailed statement. Owners of dealerships this week criticized the $1 trillion Term Asset-Backed Securities Loan Facility for failing to meet their most pressing need: financing to buy cars from automakers. Car sellers are complaining they don’t qualify under the program that covers only AAA-rated debt. Auto dealers use loans from finance companies to buy cars and trucks from manufacturers. Ratings companies have ranked loans to dealers below AAA, meaning the debt can’t be bought by investors with funds from the program.

Washington plans for big bank failure - (money.cnn.com) A bill introduced in the Senate would give FDIC chief, Sheila Bair, a huge loan to handle 'emergency situations' in the banking sector. The government is bracing for a big bank failure. A bill introduced in Congress would give the FDIC, the agency that stands behind Americans' bank deposits, temporary authority to borrow as much as $500 billion from the government to shore up the deposit insurance fund. The bill -- the Depositor Protection Act of 2009, backed by Senate Banking Committee Chairman Chris Dodd, D-Conn. and Sen. Mike Crapo, R-Idaho -- wouldn't change the status of individual bank accounts, which through the end of this year are insured up to $250,000. But the Dodd-Crapo bill acknowledges what the financial markets have been signaling for the past month -- that the government must take the lead in a costly cleanup of the mess in the financial sector. "I think it's a commendable start," said Simon Johnson, a former International Monetary Fund chief economist who tracks the crisis on his BaselineScenario.com blog.

More hotels are facing foreclosure, bankruptcy - (www.usatoday.com) When it opened on Waikiki in 1964, The Ilikai was the first luxury high-rise hotel in Hawaii. The oceanfront property also gained fame for appearing in the opening credits of the 1960s TV series Hawaii Five-O. But a rough economy has the landmark condo hotel facing possible closure if it can't find a buyer. A large portion of its hotel units — a majority of its rooms are privately owned condos — was forced into foreclosure after its owner failed to repay a loan due. "Many (customers) won't notice the difference in service," says court-appointed commissioner George Van Buren. "It's unlikely that it'll close." Still, he couldn't "give an unqualified assurance" that it will remain open. The U.S. hotel industry is bracing for more foreclosures or bankruptcies this year as owners increasingly fail to pay back maturing loans or fall behind on payments. Until now, hotels have been spared from waves of foreclosures that have rocked the housing market. But that could change this year, says Los Angeles hotel attorney Jim Butler. "It's like a water balloon and someone forgot to turn off the water. But it hasn't burst yet."

Boehner: No more cash for GM without plan - (www.usatoday.com) House Republican leader John Boehner said Sunday he doesn't support handing over more federal money to keep General Motors Corp. afloat unless the automaker develops a viable and long-term business model and can pay back government loans. "Anything short of that is just throwing good money after bad," Boehner said on CBS's Face the Nation. As part of the deal that provided $17.4 billion in federal aid to General Motors and Chrysler LLC, the companies must seek changes in their contracts with the United Auto Workers by March 31. The car companies, which have asked for an additional $21.6 billion in federal money, must bring their labor costs in line with those of foreign competitors' plants in the U.S. While Boehner said he hopes that GM will not have to turn to bankruptcy, Republican Sens. John McCain of Arizona and Richard Shelby of Alabama said they want the automaker to seek bankruptcy protection, which would allow for reorganization. "I think the best thing that could probably happen to General Motors, in my view, is they go into Chapter 11, they reorganize, they renegotiate their — the union management contracts and come out of it a stronger, better, leaner and more competitive automotive industry," McCain said on Fox News Sunday. Shelby, appearing on ABC's This Week, said Chrysler and Ford as well as GM belong in Chapter 11 and then could get federal money as part of the process of reorganization. "Short of that, the UAW will run those companies and run them into the ground," he said.

SEC staff backs more charges over buck-breaking fund - (www.usatoday.com) The Securities and Exchange Commission's enforcement staff has recommended action against a second affiliate of a New York-based money market firm for alleged securities law violations. The recommendation involves Reserve Partners, the broker-dealer arm of The Reserve, the firm whose flagship Primary Fund fell below the $1-per-share industry standard in September, raising the specter of investor losses. The Primary Fund froze following a run of investor withdrawals prompted by the Sept. 15 bankruptcy of Lehman Bros. At the time, the fund held Lehman debt with a face value of roughly $785 million. The Reserve wrote the Lehman debt down to zero after the investment bank's collapse, and subsequently began liquidating the flagship fund. Reserve Partners, principal underwriter and distributor of the firm's funds, was notified of the SEC recommendation on March 3, the company disclosed Friday. The proposed action would involve either a federal court lawsuit or an SEC administrative proceeding, the firm said.

'Bury' some big banks, GOP senator says - (money.cnn.com) The United States should let some big troubled banks fail rather than commit more federal funds to prop them up, two key congressional Republicans said Sunday. Sen. Richard Shelby, R-Ala., ranking member on the Banking Committee, said the United States should not mimic Japan, which in the 1990s propped up failing banks and prolonged its economic downturn. "Close them down, get them out of business. If they're dead, they ought to be buried," Shelby told ABC's "This Week" program. "We bury the small banks. We've got to bury some big ones and send a strong message to the market." Financial authorities have been under increasing fire as hundreds of billions of dollars of loans and capital infusions into distressed institutions have failed to halt the economic downturn, which has only accelerated in recent weeks.

Orszag promises better spending bill - next time - (money.cnn.com) Budget director defends Obama's backing of measure criticized for earmarks. Facing mounting criticism of a spending package packed with billions of dollars in earmarks, the Obama administration made a vow Sunday: this president will bring a halt to pork-laden bills. "It will not happen when the president has the full legislative and appropriations process in place," Peter Orszag, director of the White House Office of Management and Budget, told CNN's "State of the Union with John King." He argued that the White House had little choice but to support the bill, which it inherited from the previous administration. The bill will keep the government running through 2009. "This is like your relief pitcher coming into the ninth inning, and wanting to redo the whole game," said Orszag. "Next year we're going to be the starting pitcher, and the game's going to be completely different." But House Minority Whip Eric Cantor, R-Va., rejected the argument and noted that President Obama had vowed to take action against earmarks during the presidential campaign.

Dairy Farm Crisis; Milk Prices Turn Sour – (globaleconomicanalysis.blogspot.com) A perfect storm of bad farm policy in conjunction with a global slowdown is pressuring dairy farmers. Here is an interesting story about a dairy farm close to where I live: U.S. dairy farms in crisis as milk prices turn sour. Many of the more than 60,000 dairy farms in the United States have been cutting costs, selling off their cows, or leaving the dairy business altogether as milk prices plummet 35 percent in just the past two months while dairy farm operating costs remain uncomfortably high. Some farms are losing $200 per head every month. "We've dealt with 18 percent interest. We've dealt with farm recession. We've dealt with droughts and floods and this is by far the worst economic situation we have ever dealt with in our years of farming," said Kooistra, who has run Kooistra Farms in Woodstock, Illinois, with her husband since 1980. "Right now, the price of milk will barely cover our feed costs and to pay our veterinarian. I'm not even counting all the other expenses that go along with keeping a farm running, the utilities, the fuel costs," she said. "Given the suddenness and severity of the plunge in farm-level milk prices, a significant number of farmers won't survive the winter," Jerry Kozak, president and chief executive of National Milk Producers Federation, said last month. Farmers have an opportunity to get paid for culling their herds via the farmer-funded CWT program, which was in the process of securing a line of credit to augment its efforts in 2009, according to NMPF's Kozak. Industry analysts say the reason for the steep drop in milk prices is simple-- too much milk and not enough demand for it. Restaurant traffic is down in the United States as recession jitters have consumers reeling in their spending. About 40 percent of U.S. milk production is made into cheese and roughly 60 percent of the cheese is used in the restaurant and food-service sectors, according to analysts. Dairy exports, which helped drive U.S. milk prices to the sky-high levels in 2007 and 2008, are also down sharply.



OTHER STORIES:

Why Stocks Could Skyrocket After March 12 - (www.cnbc.com)
Top Banks Got $50 Billion from AIG Bailout: Report - (www.cnbc.com)
Goldman CEO: Nationalizing Banks Not Good Idea - (www.cnbc.com)
Revealed: 15 AIG bailout counterparties - (money.cnn.com)
Next exit: The Bernanke interchange - (money.cnn.com)
Cut your salary before cutting staff - (money.cnn.com)
US Should Let Some Big Banks Go: Republicans - (www.cnbc.com)
Venezuela: Oil Prices Likely to Remain Steady - (www.cnbc.com)

IRS to drop private debt collection program - (www.usatoday.com)
Even for Market Veterans, It’s Uncharted Territory - (www.nytimes.com)
Scholes Advises ‘Blow Up’ Over-the-Counter Contracts - (www.bloomberg.com)
Everyone is fleeing the falling knives - (www.ft.com)
Hedge fund headache - (www.ft.com)
Nationalize? Hey, Not So Fast - (www.nytimes.com)
Volcker Urges Dividing Investment, Commercial Banks - (www.bloomberg.com)
ECB’s Stark Says Rate Cuts Won’t End Crisis, May Backfire - (news.bbc.co.uk)
The Last Days of the Oligarchs? - (www.nytimes.com)
Lloyds Cedes Control to Government, Insures Assets - (www.bloomberg.com)
Market Pros Still Proving They Can't Pick a Bottom - (www.cnbc.com)
Let Failing Businesses Go Bankrupt: Electrolux CEO - (www.cnbc.com)
UK Government May Get 77% Stake in Lloyds Bank - (www.cnbc.com)

True nature of lending to Eastern Europe - (www.ft.com)
Report: Japanese welfare rolls hit record high - (finance.yahoo.com)
Obama nominates 3 to key Treasury Department posts - (news.yahoo.com/s/ap)
Job Losses Could Drown Stimulus - (www.washingtonpost.com)
Surging U.S. Unemployment Rate Pressures Obama for More Action - (www.bloomberg.com)
1 in 5 U.S. mortgages are underwater, report says - (www.latimes.com)
A.I.G., Where Taxpayers’ Dollars Go to Die - (www.nytimes.com)
Bond king prepares to deal with new world order - (www.ft.com)