Wednesday April 1 Housing and Economic stories

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TOP STORIES:

Six Flags May Be Headed For Bankruptcy - cbs5.com - (www.cbs5.com) Shares of Six Flags Inc. fell Friday on growing speculation that the theme park operator may be forced to file for Chapter 11 bankruptcy protection after the company said it could not meet a looming financing obligation. Six Flags shares, which have traded under $1 since last September, lost 3 cents, or 16.8 percent, to 16 cents in morning trading. The stock has traded between 16 cents and $2.50 during the past 52 weeks. In its annual report on Wednesday, the company, which owns Great America in Santa Clara and Discovery Kingdom in Vallejo, said a Chapter 11 filing is possible if the New York-based company cannot reach a deal to restructure its debt. In its fourth-quarter earnings report on Tuesday, Six Flags said it does not expect to have enough cash to redeem its preferred income redeemable shares, or PIERS, when they mature on Aug. 15. The shares, known as PIERS, must be redeemed for $287.5 million plus accrued and unpaid dividends, which may total up to $31.3 million.

Ron Paul: Believer in small government predicts 15-year depression - (www.ft.com) Pension trustees and insurance company portfolio managers look away now. Your increased commitment to government bond holdings in recent times is about to blow up spectacularly. At least, that is the view of Ron Paul, the US congressman who ran against John McCain in last year’s Republican Party presidential nomination. His is a minority view. Yields on government bonds worldwide have been falling fast over the past few months and in the UK, the commencement of “quantitative easing” this month sent bond prices soaring. But the credibility of both western governments and their currencies is waning, and has been ever since the gold standard was abandoned in 1971, says Mr Paul. And that means even “safe” investments are far from safe, he claims. “People will start to abandon the dollar as current and past economic policies create a steep rise in interest rates,” Mr Paul says. “If you are in Treasuries, you will need to be watchful and nimble to time your escape.” Unfortunately, cashing out will not protect the value of investments, he insists, because “fiat” currencies will all decline over the coming years as measures to try to haul the world economy out of recession fail. “The current stimulus measures are making things a lot worse,” says Mr Paul. “The US government just won’t allow the correction the economy needs.” He cites the mini-depression of 1921, which lasted just a year largely because insolvent companies were allowed to fail. “No one remembers that one. They’ll remember this one, because it will last 15 years.” At some stage – Mr Paul estimates it will be between one and four years – the dollar will implode. “The dollar as a reserve standard is done,” he says. He sees little hope for other currencies where central banks have also created too much liquidity dating right back to the early 1970s. “Europe and the US will both have to fundamentally change their money systems,” he adds. And don’t even mention shares to Mr Paul: “The last place you want to be is in the stock market,” he says. “It may not bottom out for 10 years – just look at Japan.”

California unemployment hits 10.5% in February - (www.latimes.com) Reporting from Sacramento -- California employers led the nation in mass layoffs in February as the state's unemployment rate hit 10.5%, the highest level since April 1983, state and federal labor agencies reported Friday. The reductions cascaded across all areas of the Golden State's economy, hitting major corporations that included Circuit City Stores Inc., Yahoo Inc., JPMorgan Chase & Co. bank, Ralphs Grocery Co. and the Los Angeles law firm of Latham & Watkins, among others. Big companies, which must file mandatory government reports every time they lay off at least 50 employees, gave pink slips to 45,557 Californians last month. Nationally, mass layoff events reached a record high in February, affecting 295,477 jobs in all industries tracked by the Bureau of Labor Statistics. The biggest portion, about a third, were in manufacturing, followed by retail trade and transportation and warehousing. California's losses were far higher than Illinois', with 19,469 jobs lost. Pennsylvania and Wisconsin were third and fourth. But the mass layoffs were only a modest portion of the damage done to the Golden State's economy because the bulk of jobs are at small and medium-size businesses. In all, California lost 116,000 jobs in February, bringing the 12-month total to 605,900. Layoffs began 18 months ago in residential construction and moved to finance and wholesale and retail trade. Now, the state numbers show that cutbacks are hitting the once-secure bastions of healthcare, education and government services, sending new waves of unemployed workers to job-hunting centers.

Goldman Insists It Would Have Lost Little if A.I.G. Had Failed - (www.nytimes.com) Hoping to reduce a swirl of speculation over its role in the bailout of the American International Group, Goldman Sachs reiterated Friday that its direct losses would have been minimal if A.I.G. had failed. Skip to next paragraphGoldman also described how, as early as July 2007, it began to have “collateral disputes” with A.I.G. as the companies disagreed on the value of the mortgage-backed securities that were the basis of multibillion-dollar contracts between them. David A. Viniar, Goldman’s chief financial officer, walked reporters through a thicket of numbers Friday in a conference call that the company held to “clarify certain misperceptions” about its positions with A.I.G. While Mr. Viniar acknowledged that Goldman’s relationship with A.I.G. raised what he called a complex set of issues, he was adamant that, because of the collateral Goldman held and hedging trades with third parties, it would not have been damaged directly if A.I.G. had been allowed to collapse.

Credit Unions With $57 Billion in Assets Seized; 3 Banks Fail - (www.bloomberg.com) Two corporate credit unions, with combined assets of $57 billion, were seized by the National Credit Union Administration yesterday to stabilize a system used by 90 million customers amid a worldwide financial crisis. Three U.S. banks failed, bringing this year’s total to 20. U.S. Central Corporate Federal Credit Union, in Lenexa, Kansas, and Western Corporate Federal Credit Union in San Dimas, California, were put into conservatorship, the regulator said in a statement. The credit unions failed so-called stress tests that found an “unacceptably high concentration of risk” from mortgage-backed securities, the agency said. “Most of the bad assets that we’ve seen in the corporate world reside at these two institutions,” NCUA spokesman John McKechnie said in a telephone interview. “We will be able to resolve them in a more efficient way.” The U.S. has 28 corporate credit unions, which make loans and provide other services for the retail credit unions that cater to the public. This is the first time a corporate credit union was seized since 1995, when NCUA took control of Capital Corporate, based in Landover, Maryland. U.S. Central has about $34 billion in assets and serves 26 retail credit unions. Earlier this year, it was granted a $1 billion federal injection in an effort to shore up public confidence. Western Corporate has $23 billion in assets and about 1,100 retail credit union members, the NCUA said. Yesterday’s two seizures may cost the agency’s insurance fund about $1.2 billion, McKechnie said.

The fiesta is over in recession-stricken Spain - (news.yahoo.com/s/ap) In the good old days of a very recent past, construction worker Antonio Montoya could afford two cars and a nice duplex for his family of six, with a sunny patio and pet canaries singing away. Spanish real estate was booming, jobs were abundant, and as Montoya would drive past the unemployment office, he felt like he was gazing at another planet. "I would say to myself, I'd never be in that situation." Now, once a month, Montoya goes to that same office, catching a bus to save on gasoline, and joins the sullen, ever-growing line. He sniffs out job offers, signs for his 750-euro ($970) monthly benefit and goes back home, often to meals of leftovers. "Imagine now, here I am at age 54, without a job," Montoya says in disgust. "I don't know how long I will be able to hold on." Almeria Province, a bone-dry patch of coastal southeast Spain, was once the setting for spaghetti westerns such as "The Good, the Bad and the Ugly." Later it became a place to make fortunes building sun-drenched vacation homes and golf courses. High-tech greenhouses sprang up, offering Europe a year-round source of fruit and vegetables. Now, two years after the real estate bubble burst, the province is one of the gushing wounds in Spain's recession-plagued economy. Almeria's unemployment rate of 25 percent is one of Spain's highest, and makes the nationwide figure of 13.9 percent — already the highest in the European Union — seem mild. As the global meltdown worsens, it offers a glimpse of where Spain may be heading. The government says unemployment nationally will reach 16 percent this year, and some forecasters say it may approach 20 percent. In many ways Almeria mirrored the nationwide model of construction serving a key engine of more than a decade of solid and sometimes robust economic growth, until mortgage rates rose and credit conditions tightened. At first glance, as in much of Spain, not much seems to be wrong in Almeria, the provincial capital. At midday, bars fill with people sipping a pre-luncheon glass of vermouth or beer, restaurants are packed and movie theaters do a decent business. But "for sale" signs hang from apartment balconies. Many storefronts are shut and their windows whitewashed. Construction sites stand half-finished and abandoned. On the outskirts of the city lies one particularly grim example: idle cranes next to the skeletons of two high-rise apartment buildings that were to be part of a huge subdivision with the chirpy name Pueblo de Luz, or City of Light. Its developer ran out of money. Antonio Rosal, an official of the Spanish labor federation Comisiones Obreras, says his office in Almeria simply cannot keep up with all the mass-layoff cases his office is negotiating with Spanish companies. Under Spanish law, talks with unions on severance terms are mandatory.

State unemployment office's call center swamped - (www.sfgate.com) An unprecedented rise in the number of jobless Californians has swamped Employment Development Department call centers, frustrating those who can't get through to a person while costing the state millions of dollars not to answer their pleas. VP adviser: AIG bonus tax may go too far 03.22.09 About 1.95 million Californians were jobless in February, compared with 824,000 at the same time in 2008, and those numbers have mushroomed in the last few months, putting pressure on every aspect of the unemployment system. Former EDD commissioner Michael Bernick, now an attorney in San Francisco, said the onset of the current joblessness is unlike anything the state has experienced before. "We've had periods of unemployment of 9 and 10 percent but what's different here is the speed of the increases," Bernick said. "A lot of new people have come into the system very suddenly and it's just been overloaded by the volume." The incredible congestion on the EDD's help lines shows how the jobless surge has taxed the resources of the state's unemployment insurance system. In January, EDD counted more than 50 million attempts to reach its call centers. In February, jobless Californians dialed for help more than 26 million times. EDD officials say most of those calls came from benefit seekers who had to redial between 20 and 30 times on average until a state worker answered the line.

Red Flags That Muni Investors Can’t See - (www.nytimes.com) Hammered by turbulent stock prices, investors have retreated in recent months to the relative safety of good old municipal bonds. Trading in this $2.7 trillion market rose 22 percent in 2008. Unfortunately, investor protection in this arena is so spotty that there is potential for much mischief. Full disclosure, that bedrock of fair securities markets, is the heart of the problem facing municipal investors. Indeed, municipal issuers often fail to file the most basic reports outlining their operating results or material changes in their financial conditions. Even though hospitals, cities and states that borrow money are required by their bond covenants to make such filings, nondisclosure among the nearly 65,000 issuers is common, municipal market authorities say. One out of two issuers is more than a year late in its filings, according to DPC Data, a company in Fort Lee, N.J., that collects information on municipal securities transactions. One out of four is chronically delinquent, by three years or more. You may not be surprised to learn why better disclosure falls through the cracks in the muni bond market: lax regulation. For example, legislation from the 1970s restricts the Securities and Exchange Commission from going after issuers that do not make required disclosures; the commission can spring into action only if fraud is suspected.





OTHER STORIES:

Administration Seeks Increase in Oversight of Executive Pay - (www.nytimes.com)
Obama defends Geithner, focuses on passing budget - (news.yahoo.com/s/ap)
U.S. May Revamp Credit Unions After Seizing 2 Corporate Lenders - (www.bloomberg.com)
Washington Mutual sues FDIC for over $13 billion - (www.reuters.com)
Goldman Insists It Would Have Lost Little if A.I.G. Had Failed - (www.nytimes.com)

Geithner Puts Finishing Touches on Plan to Revive U.S. Banks - (www.bloomberg.com)
Credit Unions With $57 Billion in Assets Seized; 3 Banks Fail - (www.bloomberg.com)
Toxic Asset Plan Foresees Big Subsidies for Investors - (www.nytimes.com)
Treasury Presses Ahead With Plan For Toxic Assets - (www.washingtonpost.com)
Fed Gets $4.7 Billion in Loan Requests for Debut of TALF Plan - (www.bloomberg.com)
Credit union victim of soured mortgage market - (www.reuters.com)
New supply of 'jumbo' financing in pipeline - (www.latimes.com)
California readying first bond sale in 9 months - (www.sfgate.com)
China’s Stimulus Spending to Help Growth Reach Target - (www.bloomberg.com)

Long & Foster Leader to Get Top FHA Post: Sources - (www.cnbc.com)
Activists Take AIG Bonuses Fight to Executives' Homes - (www.cnbc.com) Connecticut's attorney general says the newly revealed number will "further fuel the justified anger and revulsion that people feel."
Spring Sale: Home Sellers May Flood the Market Soon - (www.cnbc.com)
Obama Indicates Budget Compromises Possible - (www.cnbc.com)
Geithner's Job at Treasury Safe, Obama Says - (www.cnbc.com)
WaMu parent sues FDIC over bank-unit sale, seeks $13 bln damages - (www.marketwatch.com)
Data may show nice surprises as recession rolls into next phase - (www.marketwatch.com)
Obama tells '60 Minutes' that Geithner's job is safe - (www.marketwatch.com)
Five warnings to heed if you're trying to buy a short-sale house - (www.marketwatch.com)

Obama Uneasy About Tax on Bonuses - (www.nytimes.com) The White House said instead that it would assess the bill’s potential effect on efforts to stabilize the financial system.
Young and Old Are Facing Off for Jobs - (www.nytimes.com) The young argue that employers favor older workers, who in turn say they are being discriminated against.
High yields in California bond sale could tempt investors - (www.latimes.com) California may be forced to pay some rich yields next week to sell $4 billion in tax-free general obligation bonds. That could present an opportunity for income-hungry investors in mid- to upper-income tax brackets. As of Thursday, the talk in the market was for annualized yields of about 4% on the five-year bond in the deal and about 5% on the 10-year issue, just to give two examples. Because that interest is exempt from state and federal income tax for California residents, the yields are equivalent to much higher interest rates on taxable investments, such as corporate or U.S. Treasury bonds, depending on your tax bracket. For a married couple filing a joint return, taxable income of about $71,000 puts you in the 31% combined federal and state marginal tax bracket. A 4% tax-free yield in that bracket is equivalent to a 5.8% fully taxable yield.
Fannie Mae's tighter condo loan rules could hurt distressed areas - (www.latimes.com)
Treasury Notes Post Biggest Weekly Gain This Year on Fed Plan - (www.bloomberg.com)
Toxic Asset Plan Foresees Big Subsidies for Investors - (www.nytimes.com)
Repayment begins sooner for new college loans - (www.latimes.com) Students who borrow from Sallie Mae must make interest-only payments while still...
Home builder Lennar seeks to regain some or all of Newhall Ranch stake - (www.latimes.com)