Tuesday March 31 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Hey, what about Freddie Mac's retention bonus plan? - (www.hotair.com) While everyone assails AIG for using less than 0.1% of the taxpayer-bailout money it received to meet contractual obligations in compensation through retention bonuses, another recipient of government largesse has its own bonus program in operation. According to their annual report, Freddie Mac has a generous retention bonus plan built into its operation for the next year. Eligibility includes all of the senior and executive VPs. It comes in four payouts, and only the last has any connection to company performance. Freddie Mac pays the bonus on a quarterly basis for simply sticking around, at least until the final quarter: Payout Timing The aggregate retention award for each individual will be paid in the regular payroll cycle occurring immediately after the following dates …
1 20% December 15, 2008
2 20% August 1, 2009
3 25% December 15, 2009
4 35% March 15, 2010
Payment Numbers 1, 2, and 3 will be based solely in the individual’s continued employment with Freddie Mac the through the indicated payment dates. Performance Requirements Payment Number 4 will be conditioned upon achievement of specific performance objective(s) that will be determined during the upcoming businessplanning process. That sounds a lot like the AIG retention bonus plan, although Freddie Mac does have a disclaimer stating that they can modify or end the program at their discretion. Since Freddie Mac and her sister Fannie Mae got over $200 billion in a pre-TARP bailout, more than the private AIG got (at least in the aggregate), one might ask why Freddie Mac built in retention bonuses in this November filing — two months after the taxpayer bailout.
If AIG’s retention bonuses are a problem, why aren’t Freddie Mac’s?

Million Dollar Bonu$e$ at Fannie Mae - (www.pajamasmedia.com) Say it ain’t so. But looks like it is. Here we are, clutching our devastated 401Ks, howling for scalps at AIG, dizzy with the zeroes of the $3.55 trillion budget and the $797 billion “stimulus” and the $700 billion TARP, and the election of a President whose answer to all ills is to frag bomb the capitalist system, spend us into hock unto the umpteenth generation, blow out our currency in the process, and usher us into an era in which ACORN helps with the census and government doles out the ensuing rations. And, over at the outfit that primed the sub-prime fuse for this chain reaction, Fannie Mae, the top executives are now going to rake in six or seven-figure bonuses over the next year — in some cases double what they got last year. Here’s the AP reporting on Fannie Mae plans bonuses of $1M for execs. OK, I know, these are not the same executives as the ones who did so much to set us up for this free-fall. There has been plenty of debate over what to do about Fannie Mae and its companion incubus, Freddie Mac. There is a rational argument to be made for trying to retain employees who know where the rest rooms are, inside the palatial complex of Fannie Mae’s well-manicured head office. And there is a long and complex discussion to be had, or perhaps a lot more head-scratching to be done, at a few zillion more congressional conferences at private spas, and White House fiestas serving wagyu steak. But does anyone else get that feeling that enough’s enough? I have an anecdote about the former CEO of Fannie Mae, Franklin Raines. I’ve lost track over the past few years of how much, net, he raked in … between the $90 million in bonuses, the fraction repaid over the 2004 accounting scandal , the coming and going at Fannie Mae as the insane cost of this government experiment in housing promotion turned from a blip on the public radar into a nuclear cloud.

Owners skulking away from underwater US houses - (www.reuters.com) Ron Barnard is throwing in the towel. Like a growing number of the 8.3 million American homeowners who owe more on mortgages than their homes are worth, he's ready to just walk away. Barnard and others like him are starting to worry market experts and economists, who fret that the growing trend may deal a blow to an economy on its knees while swelling an already ample pool of bad loans. While others persist in draining savings and running up credit card debt in a last-ditch bid to save their homes, a growing number see no point in making boom-level mortgage payments in a bust market -- with no bottom in sight. "People are hurting," said Barnard, who includes himself in that group. "They're scared or they're angry," In California's Inland Empire east of Los Angeles, where Barnard lives and sells real estate, median home values have plunged more than 40 percent in the last year as formerly sidelined buyers snapped up foreclosed properties.

San Quentin Prison Seen as a Hot Property - (online.wsj.com) Even amid the real-estate bust, waterfront property in the San Francisco Bay area is a luxury few can afford. That's why some California lawmakers want to sell San Quentin State Prison -- which houses more than 5,300 inmates on prime land with stunning views of the bay -- to developers who might pay as much as $2 billion. State Sen. Jeff Denham, who has sponsored a bill to sell the complex of historic buildings for private development, thinks the proceeds could help replenish California's recession-depleted coffers. Call To Sell San Quentin Prison Kindles Debate Over Death Row. "I believe maximum-security inmates shouldn't have waterfront property," said Mr. Denham, a Republican from Modesto, in the state's Central Valley. "They could build a new facility somewhere else in the state and it could be done at a fraction of the cost." First, he and other lawmakers who agree with him would have to block Gov. Arnold Schwarzenegger's plan to spend $356 million as early as May to expand San Quentin's famous death row, a previously approved project meant to alleviate overcrowding. California's deep recession has rekindled a debate over the use of San Quentin, a 432-acre peninsula on the edge of the tony town of Larkspur in Marin County. The debate also highlights long-running questions about the viability of the state's capital-punishment system, in which nearly 650 male death-row inmates are more likely to die of natural causes than by execution as they wait for appeals.

Madoff's Wife Protects The Loot - (www.bloomberg.com) Bernard Madoff’s wife has declared her Palm Beach, Florida, estate as her primary residence, a move that may shield the $9.4 million home from creditors. Ruth Madoff applied for and received a homestead exemption for property taxes, said Dorothy Jacks, assistant property appraiser for Palm Beach County. The Florida constitution protects homeowners who have obtained the exemption and seizing the property may be difficult, said Danaya Wright, a law professor at the University of Florida in Gainesville. The U.S. government said this week it plans to seize assets including the Madoffs’ $7 million Manhattan apartment and the Palm Beach home. Bernard Madoff, 70, was jailed March 12 after admitting to masterminding the biggest Ponzi scheme in history. The exemption Ruth Madoff received may be an effort to protect the property from creditors, said Jack McCabe, founder of McCabe Research & Consulting LLC in Deerfield Beach, Florida. “The two big drawing cards to Florida were sunshine and affordability,” McCabe said. “Now it’s for sunshine and the protection of your primary mansion.”

Credit is a drug. The Fed is America's dealer. - (optionarmageddon.ml-implode.com) The Fed will be creating money electronically out of thin air to finance these purchases. When you buy a bond, its price rises and its yield drops. Buying another $750 billion of MBS along with $300 billion worth of Treasurys with printed money is a simple trade-off, debasing the currency so we can put a lid on the public’s and home buyer’s cost of debt finance. This is terrible monetary policy. Keeping interest rates artificially low will encourage credit expansion when what’s needed to actually heal the economy is credit contraction. This sounds counter-intuitive, isn’t more lending what’s needed to “get the economy going?” No, too much credit is what got us into this economic mess in the first place. Asset values of all kinds are still over-inflated relative to their intrinsic value, the value of their discounted cash flows. Credit is a drug. And the Fed is America’s dealer. We know we need to quit the stuff, but we’ll worry about that tomorrow. What we need right now is another fix in order to get through today. Our dealer, of course, is happy to oblige. This is just a recipe for deeper and more destructive addiction and, eventually, far more painful withdrawal.

More Debt: A False Solution To A Credit Crisis - (www.postchronicle.com) A nagging question haunts U.S. government efforts to revive a dormant financial system: Can a crisis that started because of excess credit be solved with more debt? The typical answer from economists is a qualified no. That is, "No, more credit will not make the problem go away. But yes, the government should do its best to restore bank lending to prevent an even worse economic outcome". Yet the refrain out of Washington places a lot of credence on the ability of debt to revive the country's economy. U.S. Treasury Secretary Timothy Geithner was only the latest to proclaim what has now become an official mantra. Without credit, which he and others call the "lifeblood" of the economy, you can kiss recovery hopes goodbye. Federal Reserve Chairman Ben Bernanke, justifying the massive help the central bank has offered to financial institutions, made his own case: "This disparate treatment, unappealing as it is, appears unavoidable. Our economic system is critically dependent on the free flow of credit." Detractors of this view argue that it offers an overly convoluted approach. The problem, they say is much simpler.



OTHER STORIES:

Fed crosses rubicon, setting off firestorm - (www.marketwatch.com)
Bernanke's economic strategy: Trillions now, worry later - (latimesblogs.latimes.com)
Dollar Rally Crumbles as Fed Ramps Up Printing Press - (www.bloomberg.com)
Fed Will Buy Everything That's Not Nailed Down - (prudentinvestor.blogspot.com)

US Debt Passes $11 Trillion - (optionarmageddon.ml-implode.com)
'Meltdown' author blames policy and Fed - (www.upi.com)
The Fed Did It, and Greenspan Should Admit It - (www.mises.org)
Forget bonuses. We're being bilked out of tens of billions! - (www.patrick.net)
Fannie Mae: Selling Foreclosures In A Tricky Market - (www.npr.org)
Five Wall Street Whoppers - (www.seekingalpha.com)
Houses versus stocks - (www.economist.com)
Fears grow as more consumers just a paycheck or two from ruin - (www.marketwatch.com)
California median house price down 40 percent - (www.sfgate.com)
Repo sales continue to drive Sacramento house market - (www.sacbee.com)
George Soros interview: A very good crisis - (theaustralian.news.com.au)\

AIG's Counterparties Should Pay Us Back for Bonuses - (www.minyanville.com)
Is AIG Bailout a Smokescreen? - (dadtalk.typepad.com)
The Real AIG Conspiracy - (www.counterpunch.org)

Housing Starts Rebound: Don't Get Too Excited - (www.seekingalpha.com)
Don't Count on Manhattan RE as an Inflation Hedge - (www.urbandigs.com)
South CA median house price falls to $250,000, down 39% - (www.latimes.com)
Actual Sales Prices Only Half of Asking Prices - (www.patrick.net)
Discuss Specific Addresses - (www.patrick.net)
"The floodgates could open." Right. - (themessthatgreenspanmade.blogspot.com)

US Bailouts Add to Risk of Depression - (www.bloomberg.com)
Look up your bank - (banktracker.investigativereportingworkshop.org)
Banks Ignore Obama Plan - (www.youwalkaway.com)
Social investors could take over and reform corporations - (knol.google.com)
Frugality is back in fashion - (www.thestar.com)
Scenes from the recession - (www.boston.com)