Saturday April 18 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Economic Crisis Sweeps Eastern Ukraine - (www.nytimes.com) Few areas of Europe have taken such a body blow from the world economic crisis as the industrial heartland of eastern Ukraine, home to giant enterprises in the steel and metals industry in which orders have dried up nearly completely and prices have plummeted. In the Donetsk region, home to 4.6 million people, around 80 percent of the economy is tied to the metals industry. In January, when industrial production dropped by a precipitous one-third throughout Ukraine as a whole, in Donetsk it fell by half against the previous year. Small wonder, then, that Sergei Yeryomin is looking for some place to vent his rage and despair. Mr. Yeryomin, his wife, Tatyana, and thousands of others lost their jobs at the giant Kirov Metallurgicals Factory in this city on Jan. 1. “If we had a leader to lead us out on the streets, we would go,” he said, sitting in his living room and wondering how to support his wife; his son, Anatoli, 15; and his daughter, Ekaterina, 8. “In Makeevka, everyone was connected to the factory. If it wasn’t the father, then the son worked there.” In the absence of a galvanizing voice rallying the workers, or a politician in the Ukrainian capital, Kiev, to marshal the popular anger, Mr. Yeryomin and many others are focusing their unhappiness on the borders of this part of Europe, sliced and diced in countless wars through the centuries. “I look with pride at Russia,” said Mr. Yeryomin, who lived in Russia as a child and counts himself among the 40 percent of inhabitants of the Donetsk region who are considered ethnically Russian. “We should cut Ukraine in two, and give half to Poland and half to Russia.”

Ireland Sets Up Its 'Bad Bank' Agency – (online.wsj.com) Ireland will take commercial-property assets off the books of six of its biggest lenders and house them in a new state agency, a plan it hopes will restore international confidence in the nation's financial system. If necessary, the state will take majority stakes in Ireland's two main banks. Irish Finance Minister Brian Lenihan said Wednesday that all land and development loans of Ireland's major banks will be housed in the new National Asset Management Agency. On Tuesday, the government announced plans to establish the agency, removing from the banks loans with a book value of €80 billion ($106 billion) to €90 billion. The move makes Ireland the first nation in the euro zone to use an industrywide, government-sponsored "bad bank" to remove toxic assets from the banking system. The assets will include both healthy and impaired loans, ranging from undeveloped land to residential and commercial developments. Governments have generally balked at the bad-bank approach because of the difficulty of putting a value on hard-to-sell assets.The U.K. has opted instead to insure some £600 billion ($884 billion) in banks' assets against losses.

Ratings cut drives bank volatility in Ireland – (www.miamiherald.com) Shares of Ireland's three leading banks plunged and then rebounded in volatile trading Wednesday after ratings agency Moody's cut the credit-worthiness of 12 banks operating in the country, citing growing exposure to tens of billions' worth of bad property loans. Analysts said bank stocks also were slumping because of the government's announcement Tuesday that it plans to establish a government-controlled ''bad bank'' that will absorb 80 billion to 90 billion euros ($105 billion to $110 billion) in loan-defaulting assets, chiefly unsold property and land held by debt-ridden developers. Moody's said it expected real estate prices to keep slumping in Ireland, driving more developers into bankruptcy and leaving banks with losses exceeding their current projections. It dropped the financial-strength grades of six domestic and six foreign-owned banks in Ireland, mostly from C to D.

Ireland sees possible spike in debt from bad bank plan – (uk.reuters.com) - Ireland's debt levels could rise to 88 percent of gross domestic product this year from a previously forecast 59 percent if Dublin had to issue 50 billion euros ($66.20 billion) in bonds to finance a "bad bank" plan, the country's debt management agency said on Wednesday. In a statement, Ireland's National Treasury Management Agency (NTMA) said the calculation was only for illustrative purposes. The NTMA said Ireland's national pension fund had a value of 15.5 billion euros at the end of March.

Russia Banks’ Bad Loans May Reach $70 Billion as Crisis Deepens - (www.bloomberg.com) Russian banks’ bad loans will quadruple to $70 billion this year, deepening the country’s worst financial crisis since the government’s 1998 debt default, a Bloomberg survey shows. Non-performing loans will increase to 12.8 percent of the 18.4 trillion rubles ($549 billion) owed by Russian companies and individuals by the end of this year, from 3.2 percent in March, according to the mean estimate of 17 banking analysts polled by Bloomberg in the past week. HSBC Holdings Plc, Europe’s biggest bank, expects delinquencies to reach 23 percent, Europe’s highest rate after Hungary at 25 percent. The World Bank said last week that a “silent tsunami” of bad debt threatens to stall a recovery in Russia, the world’s largest energy-exporting economy. The government may need to provide as much as $50 billion for bank bailouts, more than twice the amount already pledged to banks in this year’s budget, according to UniCredit SpA, Italy’s biggest bank. “Many small and medium-sized Russian businesses will end up defaulting and that will slow down the recovery,” said Aybek Islamov, a London-based bank analyst at HSBC. Be

How Bernanke Staged a Revolution - (www.washingtonpost.com) This chairman set out to lead as a civil servant rather than a celebrity economist. Facing a thundering financial collapse, he has reinvented the Federal Reserve. Every six weeks or so, around a giant mahogany table in an ornate room overlooking the National Mall, 16 people, one after another, give their take on how the U.S. economy is doing and what they, the leaders of the Federal Reserve, want to do about it. View Only Top Items in This StoryThen there's a coffee break. While most of the policymakers make small talk in the hallway, their chairman, Ben S. Bernanke, pops into his office next-door and types out a few lines on his computer. When the Federal Open Market Committee reconvenes, Bernanke speaks from the notes he printed moments earlier. "Here's what I think I heard," he'll say, before running through the range of views. He sometimes articulates the views of dissenters more persuasively than they did.

Short sellers unjustly Wall Street's whipping boy - (www.latimes.com) Investors who bet a stock's price will fall are also the ones who sounded early alarms about Enron, WorldCom, AIG and failing investment banks, albeit generally to a willfully deaf investment world. As doomsayers from Nostradamus to Cassandra have learned to their great distress, nobody likes a spoilsport. That seems to be the guiding principle behind the perennial complaining on Wall Street and Main Street about the practice of "short selling." The prevailing opinion can be summed up as this: Nasty creatures, those short sellers -- always looking at the dark side, raining on every parade. Gangs of corporate chief executives regularly march on Washington to demand that somebody do something about short sellers (typically when the stock market turns down). The next thing you know, the Securities and Exchange Commission is holding a meeting about the subject. Like it did Wednesday. The SEC's new chairwoman, Mary Schapiro, kicked off Wednesday's meeting by observing that in her roughly 10 weeks in office, short selling has generated "more letters from investors, brokerage firms and exchanges, more inquiries from members of Congress and more questions from reporters than any other topic." She has my sympathy. Considering that this period has encompassed such lively controversies as bank accounting irregularities, the AIG revelations and the Bernie Madoff scam, you'd think people would have better things to write letters about. But the idea that short selling is a uniquely nefarious practice never seems to go away. Wednesday's meeting closed with a unanimous vote to put a roster of anti-short-selling measures out for 60 days of public comment. If you listened in, as I did, it sounded as if the commission wasn't sure it wanted to do anything, but felt obliged to put the issue out for discussion. One cause of the persistent outcry about short selling is public ignorance of just what the practice entails. So here's a primer: In its basic form, it's selling stock that you don't own but have borrowed, with the idea of buying it back later at a lower price and pocketing the difference. Think of it as running the investment principle "buy low, sell high" in reverse -- you sell high first, then buy low.

Buffett’s Berkshire Loses Moody’s Top Credit Rating - (www.bloomberg.com) Billionaire Warren Buffett’s Berkshire Hathaway Inc. had its top-level Aaa credit rating cut by Moody’s Investors Service on the falling value of stock markets and the impact of the recession on profit. The rating was cut two levels to Aa2 on “the severe decline in equity markets over the past year as well as the protracted economic recession,” Bruce Ballentine, a Moody’s analyst, said in a statement today. The downgrade trumps a one-level cut by rival firm Fitch Ratings last month, and follows an announcement by Standard & Poor’s that it was reviewing Berkshire’s credit. Last year was the Omaha, Nebraska-based company’s worst since Buffett took over in 1965, as the company had losses on derivative bets tied to stock markets and corporate bonds. “There’s a bit of a ‘covering your backside’ mentality with the ratings firms,” said Justin Fuller, a partner at Midway Capital Research & Management who runs the buffettologist.com Web site. “The new thinking seems to be that you can’t have any companies out there with a triple-A rating anymore, but most people who deal with this company don’t have too many questions about their financial strength.”

Pentagon preps for economic warfare - (news.yahoo.com/s/politico) The Pentagon sponsored a first-of-its-kind war game last month focused not on bullets and bombs — but on how hostile nations might seek to cripple the U.S. economy, a scenario made all the more real by the global financial crisis. The two-day event near Ft. Meade, Maryland, had all the earmarks of a regular war game. Participants sat along a V-shaped set of desks beneath an enormous wall of video monitors displaying economic data, according to the accounts of three participants. “It felt a little bit like Dr. Strangelove,” one person who was at the previously undisclosed exercise told POLITICO. But instead of military brass plotting America’s defense, it was hedge-fund managers, professors and executives from at least one investment bank, UBS – all invited by the Pentagon to play out global scenarios that could shift the balance of power between the world’s leading economies. Their efforts were carefully observed and recorded by uniformed military officers and members of the U.S. intelligence community. In the end, there was sobering news for the United States – the savviest economic warrior proved to be China, a growing economic power that strengthened its position the most over the course of the war-game.

Chrysler-UAW Negotiations on Retiree Health Fund Gain Urgency - (www.bloomberg.com) The United Auto Workers union stepped up talks with Chrysler LLC to cut funding to a health fund ahead of the automaker’s April 30 deadline to pare debt or file for bankruptcy, people familiar with the talks said. The goal is to reach an accord as soon as this week on obligations to the Voluntary Employee Beneficiary Association for retirees, said the people, who didn’t want to be named because the discussions are private. The trust is designed to pay medical bills for 125,000 past and present union workers. The union objected in February that Chrysler was asking for deeper concessions in the health-care trust than the U.S. Treasury required. Negotiations with the UAW and with Chrysler’s lenders are pivotal to the automaker’s survival under the timetable set March 30 by President Barack Obama. It must erase most debt, pare labor costs and complete an alliance with Italy’s Fiat SpA within 21 days. “There’s a dialogue; it’s productive and ongoing,” Chrysler President Jim Press said yesterday in an interview at the New York International Auto Show without giving details on any progress with the unions or banks. “I’m optimistic.” The UAW and Chrysler are working to reach an agreement, and the Obama administration is engaged in that process, an administration official said. The UAW said Feb. 17 it had preliminary agreements on cost- cutting labor agreements with Chrysler, the third-largest U.S. automaker, and General Motors Corp., the biggest U.S. carmaker, without reaching a compromise on the VEBA.



OTHER STORIES:

Party Is Over for Rich Russians Stung by $230 Billion of Losses - (www.bloomberg.com)
Russian Overdue Loans Rising 20% a Month, Sberbank’s Gref Says - (www.bloomberg.com)
China’s Stocks Decline Most in 6 Weeks; Gemdale, ICBC Slide - (www.bloomberg.com)
U.K. GDP Drops as Slump Resembles 1979, Niesr Says - (www.bloomberg.com)

Wal-Mart March Sales Fall Short of Retail Metrics Estimate - (www.bloomberg.com)
Oil rallies 5% on economic optimism, inventories - (www.marketwatch.com)
Global Stocks, Oil Gain as Treasuries Fall; Wells Fargo Rallies - (www.bloomberg.com)
U.S. Imagines the Bailout as an Investment Tool - (www.nytimes.com)
Questions Over Bailout for Insurers - (www.nytimes.com)

BOE Leaves Rate at 0.5%, Continues Pace of Bond Plan - (www.bloomberg.com)
China March Car Sales Rise 10% on Stimulus, Tax Cuts - (www.bloomberg.com)
Japan Drafts $154.4 Billion Stimulus - (www.nytimes.com)
China orders finance executives to cut pay - (finance.yahoo.com)
Australia Jobless Rate Jumps Most in 18 Years to 5.7% - (www.bloomberg.com)
U.S. Initial Jobless Claims Fell to 654,000 Last Week - (www.bloomberg.com)

Minutes Reflect Fed’s Worries About Persistent Declines - (www.nytimes.com)
U.S. Trade Gap Narrowed in February as Imports Fell - (www.bloomberg.com)
Inside the Fed's Trillion-Dollar Decision: Crisis Outweighed Inflation Fears - (www.washingtonpost.com)
Treasury Weighs Investment in Life Insurers - (www.washingtonpost.com)
Housing Slump Hits Manhattan - (www.nytimes.com)
‘New’ US shopper to emerge from crisis - (www.ft.com)
Congress Ready to Slow Pace, Face Long-Term Issues - (www.washingtonpost.com)
Wells Fargo Quarterly Profit Climbed to $3 Billion - (www.bloomberg.com)

U.S. Releases Aid To Auto Suppliers - (www.washingtonpost.com)
Banks Holding Up in Tests, but May Still Need Aid - (www.nytimes.com)