Tuesday March 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Angry French Workers Release Detained Sony Exec – (www.cnbc.com) Workers at a Sony plant in southwestern France detained the chief executive of the Japanese group's French arm overnight to demand better layoff terms when their factory closes in April. Serge Foucher and several other Sony executives were released mid-morning on Friday after workers obtained guarantees that they would take part in a new round of negotiations. Workers had locked up the managers in the plant at Pontonx-sur-l'Adour late on Thursday and blocked the road to the site with tree trunks, local authorities said. Union representatives said their action had been the only way to revive negotiations on layoff packages that were not generous enough. "We hope that this time our voices will be heard," unionist Patrick Hachaguer told Reuters by telephone as workers and the released managers boarded minibuses to go and resume talks at local government offices.

A Besieged Bank, and Its Hometown, Look Inward - (www.nytimes.com) Each workday, when the closing bell sounds on Wall Street, the mayor here in the Wall Street of the South takes stock of this city’s fortunes. It is not hard. If it was a good day for Bank of America, whose headquarters towers over this city and its collective psyche, then it was a good day for the people in Charlotte. But if it was a bad one — and there have been too many of those lately — a bit more local pride and prosperity slip away. Like many people here, the mayor, Patrick McCrory, is flabbergasted by the startling fall of Bank of America and the city’s other banking giant, the Wachovia Corporation. One out of every 10 people here works for one of the banks. Many more have staked retirements and savings on them in the stock market. But Wachovia, a Carolina fixture since 1879, fell into the clutches of a big California bank last year. Now Bank of America too faces an uncertain future, despite two multibillion-dollar rescues from Washington. Bank of America’s share price — in a sense, a proxy for Charlotte’s — has plunged nearly 86 percent in 12 months. Mr. McCrory has one word for it: “Unbelievable.” Few understand the myriad challenges facing Bank of America better than Kenneth D. Lewis, the bank’s battle-weary chief executive. Mr. Lewis, who turns 62 in April, must contend with restive shareholders, the fallout from a troublesome merger, and an investigation by a politically ambitious attorney general in New York — all during the worst banking crisis since the Depression. Calls for his ouster are growing louder.

American Axle May Go Out of Business: Auditors - (www.cnbc.com) American Axle & Manufacturing Holdings' auditors have said the auto supplier may go out of business because of pressure on its main customers, General Motors and Chrysler. "As a result of the current automotive industry environment and the uncertainty relating to the ability of GM and Chrysler to continue operating as going concerns ... it is uncertain whether we will be in compliance with the financial covenants ... throughout 2009," the company said in an SEC filing on Friday. "Should (the company) fail to be in compliance with these covenants and we are unable to obtain a waiver or amend these covenants, we may be unable to continue as a going concern." A $30 stock in mid-2007, American Axle's share price has languished below $1 through the month of March, falling as low as 26 cents on Monday. Last week, the company was warned by the NYSE that it might be delisted, a factor it also cited as putting pressure on its ability to stay afloat. GM and Chrysler received a $17.4 billion government bailout in December and have asked for nearly $22 billion more.

The Problem? Bankers Point to the Rules - (www.nytimes.com) If mark-to-market accounting is to blame for the current financial crisis, then the National Weather Service is to blame for Hurricane Katrina; if it hadn’t told us the hurricane hit New Orleans, the city would never have flooded. This is the logic the bankers are using, and they are getting sympathetic ears in Congress. The bankers have gotten two members of Congress to introduce a bill to establish a new body that could suspend accounting rules for financial institutions. Edward L. Yingling, the president of the American Bankers Association, says the proposal addresses “systemic risks that accounting standards can have on the economy.” Steve Forbes, the publisher and erstwhile presidential candidate, goes even further. “Mark-to-market accounting is the principal reason why our financial system is in a meltdown,” he wrote in a Wall Street Journal op-ed piece. They say the problem, in short, is not that the banks acted irresponsibly in creating financial instruments that blew up, or in making loans that could never be repaid. It is that someone is forcing them to fess up. If only the banks could pretend the assets were valuable, then the system would be safe.

Europe angered at GM’s bail-out plan - (www.ft.com) Senior General Motors executives will receive a grilling in Brussels on Friday amid ­rising fears that governments could end up owning large stakes in the struggling carmaker’s European operations. Ministers from countries including Germany and the UK will hold crisis talks with Carl-Peter Forster, GM Europe’s president, and Fritz Henderson, chief operating officer and the man co-ordinating the Detroit company’s bail-out efforts. Germany’s government is understood to be frustrated with GM’s failure to disclose key information about its future, including whether GM Europe’s finances could be ring-fenced from those of its parent. One German official familiar with GM’s restructuring plan described it as “200 pages of hot air”. European governments feel they have been presented with a choice between letting the US company’s overseas operations fail, putting hundreds of thousands of jobs in jeopardy, or bailing out an unsustainable business. GM says the collapse of its European business would affect up to 300,000 jobs at its assembly plants as well as suppliers and dealers. It says it could run out of money as soon as next month unless it gets €3.3bn ($4.2bn, £3.1bn) of emergency aid from countries where it has plants. Governments are angry that they are being played off against each other, especially Germany, which has elections this year.

Banks Rush Bond Sales as FDIC Says It May Raise Guarantee Fees - (www.bloomberg.com) Federal Deposit Insurance Corp. officials advised the largest U.S. banks on March 9 that they may be charged more for the agency’s debt guarantees, according to people familiar with the matter. Bank of America Corp., Goldman Sachs Group Inc. and the financing arm of General Electric Co. led $29.8 billion of FDIC- backed bond sales since the meeting, making this the second- busiest week since companies began using the FDIC’s Temporary Liquidity Guarantee Program on Nov. 25, according to data compiled by Bloomberg. FDIC officials said they plan to add a fee of 25 basis points on banks and 50 basis points on bank holding companies. Right now, it charges 1 percentage point of the amount sold on debt maturing in one year under the TLGP. The fees would be applied as of April 1 and are meant to restock the Washington- based FDIC’s deposit insurance fund, the people said. The amount of FDIC-backed bond sales was “pretty significant,” said Greg Haendel, who helps oversee $6.2 billion in fixed-income assets as a money manager at Transamerica Investment Management in Los Angeles. On March 11, the FDIC said its directors would meet on March 17 to discuss amending the TLGP. FDIC spokesman David Barr said yesterday the agency has “continuing discussions with the industry on TLGP, however we don’t comment on any specifics of our discussions.”

Realtor attacked by 88-year old customer - (www.walletpop.com) Police have arrested 88-year old South Carolinian Richard Blow and charged with shooting a Coldwell Banker real estate broker in a dispute involving deposit money relating to an investment property. The shooting took place at Coldwell Banker United in Rock Hill at around 2:20 PM on Wednesday. Police say that Mr. Blow walked and began arguing with 68-year-old Jerry O'Neill in the lobby of the office before shooting him in the stomach. He then reportedly waiting in the parking lot for the police to arrive. According to media reports, Mr. Blow's car is decorated with a license plate that reads "Let me tell you about my grandchildren."

Harvard's MBA masters of the apocalypse - (www.timesonline.co.uk) If Robespierre were to ascend from hell and seek out today’s guillotine fodder, he might start with a list of those with three incriminating initials beside their names: MBA. The Masters of Business Administration, that swollen class of jargon-spewing, value-destroying financiers and consultants have done more than any other group of people to create the economic misery we find ourselves in. From Royal Bank of Scotland to Merrill Lynch, from HBOS to Leh-man Brothers, the Masters of Disaster have their fingerprints on every recent financial fiasco. I write as the holder of an MBA from Harvard Business School – once regarded as a golden ticket to riches, but these days more like scarlet letters of shame. We MBAs are haunted by the thought that the tag really stands for Mediocre But Arrogant, Mighty Big Attitude, Me Before Anyone and Management By Accident. For today’s purposes, perhaps it should be Masters of the Business Apocalypse. Harvard Business School alumni include Stan O’Neal and John Thain, the last two heads of Merrill Lynch, plus Andy Hornby, former chief executive of HBOS, who graduated top of his class. And then of course, there’s George W Bush, Hank Paul-son, the former US Treasury secretary, and Christopher Cox, the former chairman of the Securities and Exchange Commission (SEC), a remarkable trinity who more than fulfilled the mission of their alma mater: “To educate leaders who make a difference in the world.” It just wasn’t the difference the school had hoped for.

Every California employee is a millionaire in retirement - (www.ecoworld.com) We have been warning readers about the pension crisis for a few years now. In a nutshell, the problem is the following: California public employee unions - which are virtually unregulated despite the fact they operate in the uncompetitive public sector - have pretty much taken over California’s state and local governments. In recent years they have negotiated pay and benefit increases so dramatic that the average government worker in California often earns 2-4x what globalized private sector workers earn to do jobs of comparable worth. This dramatic disparity is largely due to the value of their retirement pensions. The present value of what someone collects in retirement must be applied to the years they work, in order to correctly value their annual compensation. And by that measure, pretty much every employee working for the state of California is a millionaire. Please note there is a huge difference between unions that operate in the competitive private sector, and unions that now arguably control our public sector. Also please note this commentary is in no way meant to disparage the good men and women who work in the public sector to perform vital services for us. Moreover, this commentary is not suggesting we eliminate government services - on the contrary, this commentary simply advocates making taxpayer funded government services and benefits apply to all workers equally. Currently the public sector serves itself first, leaving the scraps for the taxpayers. This must be challenged. During the internet bubble, then the housing bubble, most financial analysts understood we were experiencing unsustainable economic growth. But this didn’t stop the public employee unions from using these temporary surpluses as an excuse to serve their members at the expense of the taxpaying private sector workers. Crowing about excessive ”executive compensation” collected by an insignficant handful of corporate executives, they demanded endless hikes in pay and benefits. The fact that they should have been comparing their compensation to their ordinary counterparts who work in the private sector was a fact they conveniently ignored. If politicians opposed them, they could be crushed in the next election. The fact their pension funds invested in the same evil corporations they routinely demonized was also conveniently ignored.

Builders Compete With Their Own Foreclosures - (online.wsj.com) As the normally hot spring selling season begins, two houses in the Inland Empire region of Southern California sum up the big problem facing many of the nation's largest home builders.
One of the houses, a four bedroom built in 2006 that was seized by a lender in a foreclosure action, is listed for sale at $229,900. Meanwhile, in the same housing development, D.R. Horton Inc. is trying to sell a new house that looks nearly identical for $299,000, or 23% more. Or consider Pulte Homes Inc.'s predicament in Henderson, Nev., near Las Vegas. The builder is trying to sell a new, four-bedroom house for $214,990, while a home owner is trying to dump a similar house, which Pulte built two years ago, for $149,999. That price is less than the owner's mortgage under a "short sale" approved by the lender. In many markets, "we are no longer competing with other builders. We are competing with foreclosures," said Steve Ruffner, president of the Southern California division of KB Home.
Sales of used homes are actually rising in some regions because of foreclosures, but new-home sales fell to a four-decade low in January, down 77% from their peak in summer 2005. Altogether, home builders sold houses at a seasonally adjusted annual rate of 309,000 units in January, down from a peak of 1.4 million in July 2005. Home builders are confronting the competition from foreclosures at a difficult time in their history. Small builders are dying by the dozens, while some large companies are staying afloat by cutting expenses and scrambling to restructure debt.




OTHER STORIES:

Oil rise above $47 as investors eye OPEC meeting - (finance.yahoo.com)
Treasuries Drop as Stocks Gain, China Asks for Debt Assurance - (www.bloomberg.com)
Wall Street set to extend gains for 4th session - (finance.yahoo.com)
700,000 bank-owned foreclosures not yet on market - (www.minyanville.com)
Foreclosures leap in Manatee County, FL - (www.heraldtribune.com)

Cash-backed buyers chase cheap properties - (www.dailybusinessreview.com)
Investors fixing the financial crisis - (www.latimes.com)
Not Out of the Woods Yet, Not By a Long Shot! - (www.financialsense.com)
Unemployment Still Rising - (www.housingwire.com)
Bubble is bursting and house prices are falling - (mysite.verizon.net)
Stocks in Europe, Asia, U.S. Futures Gain; Barclays, Banks Rise - (www.bloomberg.com)
China’s Wen ‘Worried’ on Safety of Treasuries, Seeks Assurances - (www.bloomberg.com)
Stocks Soar, But Dismal Signs Remain - (www.washingtonpost.com)
China Can Add to Stimulus ‘At Any Time,’ Wen Says - (www.bloomberg.com)
Palm Beach County foreclosures see 50% jump - (www.palmbeachpost.com)
Foreclosures ramping up in L.A. County - (www.pasadenastarnews.com)

Japan’s Corporate Bond Sales at 10-Year High After March Record - (www.bloomberg.com)
G20 split over more crisis spending as meeting looms - (www.reuters.com)
Your comp is, uh, your own house - (www.reallyfuckedhomeowner.com)
Overpriced CA Condo Shows Bubble Not Dead Yet - (peternoyes.blogspot.com)
English house prices 'could drop another 55%' - (www.dailymail.co.uk)
U.S. Household Net Worth Had Record Decline in Fourth Quarter - (www.bloomberg.com)
Buffett’s Berkshire Has AAA Debt Rating Cut by Fitch - (www.bloomberg.com)

U.S. Health Care's Competitive Disadvantage - (www.businessweek.com)
Case-Shiller chart, updated - (www.ritholtz.com)
Government pensions create hidden millionaires - (www.patrick.net)
Haircut Time For Bondholders - (www.patrick.net)
Financial Fraud Attacked by Prosecutors - (www.nytimes.com)
Forget Britney; Media Outrage Hits Big Spenders - (www.nytimes.com)