Sunday April 19 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

U.S. government to waste $285 million on 17,600 American-made autos - (Mish at globaleconomicanalysis.blogspot.com) In yet another foolish attempt to stimulate the economy, President Obama says the Government Will Buy 17,600 American-Made Autos. President Barack Obama said the U.S. government will buy 17,600 new, fuel-efficient vehicles from ailing American automakers by June 1. The president made the announcement Thursday in a statement issued by the White House, saying the General Services Administration will spend $285 million of Recovery Act Funds to purchase the vehicles for the government fleet. All purchases will be made from manufacturers with an existing contract with the GSA, which are General Motors Corp. (GM), Chrysler LLC and Ford Motor Co. (F). This includes the purchase of 2,500 hybrid sedans that will be ordered by April 15. “This is the largest one-time purchase of hybrid vehicles for the federal government fleet in history,” according to the statement. The decision was made to buy the vehicles on the short timetable to help give a boost to the economy, as well as demonstrating the Obama administration’s support of the U.S. auto industry. “This is only a first step, but I will continue to ensure that we are working to support the American auto industry during this difficult period of restructuring." The scariest part of the announcement is "This is only a first step."

White House ponders: Are some hedge funds too big to fail? - (www.marketwatch.com) Expect regulatory battle over who would pay to unwind hedge funds, buyouts: When the $9.2 billion Connecticut hedge fund Amaranth Advisors collapsed in 2006, securities attorneys jumped all over each other to express gleefully how the markets absorbed such a mega-fund failure. In fact, the markets did soak up the implosion fairly well. However, two and a half years later, policymakers aren't so sure the volatile and fragile markets of 2009 could handle another mega-hedge fund collapse. 'Why should taxpayers pay for hedge-fund failures?' — Professor Vikas Agarwal, Georgia State University Business School. In an effort to limit the fallout from any future major hedge fund collapse -- or private equity implosion -- Treasury Secretary Timothy Geithner proposed on March 26 a framework for regulatory reform that not only included registration of hedge funds managers, but also called for new rules for buyout shops, venture capital and insurance companies. Nevertheless, Geithner's proposal leaves more questions than answers. "Why should taxpayers pay for hedge-fund failures?" asked Georgia State University Business School Professor Vikas Agarwal who argues that already disgruntled taxpayers and legislators are sure to take issue with a government bailout of a major hedge fund. New regulation of hedge funds would require legislation from Capitol Hill, or new rules from the Securities and Exchange Commission. Geithner made it clear he believes that a group of large non-bank investment firms are systematically significant and need to be regulated more thoroughly than they are now because their collapse could have a catastrophic impact on the markets overall. Such regulation would likely involve limits on leverage, lending, access to credit, as well as restrictions on investment activities, such as how much investing these firms can do in the unregulated over-the-counter market.

Congressional Panel Suggests Firing Managers, Liquidating Banks - (www.bloomberg.com) A congressional panel overseeing the U.S. financial rescue suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis. The Congressional Oversight Panel, in a report released yesterday, also said the Treasury may be relying on too rosy an economic scenario to guide its $700 billion bailout, and declared that the success of the program after six months is “mixed.” Three of the group’s members disagreed with at least some of the findings. “All successful efforts to address bank crises have involved the combination of moving aside failed management and getting control of the process of valuing bank balance sheets,” the panel, headed by Harvard Law School Professor Elizabeth Warren, said in its report. Treasury Secretary Timothy Geithner has revamped the Troubled Asset Relief Program to focus on injecting capital into banks and removing up to $1 trillion in illiquid securities from their balance sheets via public-private investment partnerships. The government is also working to unfreeze credit markets through a Federal Reserve program that provides loans to investors in some asset-backed securities. Warren, in an interview on Bloomberg Television, said yesterday that while “things may be getting a little better” under Geithner, the Treasury still needs to be more transparent about how it is spending the taxpayers’ money. “We still have a long way to go, a very long way,” she said. Depth of Downturn: In the report, Warren’s panel said “it is possible that Treasury’s approach fails to acknowledge the depth of the current downturn and the degree to which the low valuation of troubled assets accurately reflects their worth.” The group said it was offering an examination of “potential policy alternatives” for the Treasury and not endorsing any shift at this time. Still, it said a bank liquidation would be “least likely to sap the patience of taxpayers” and “provides clarity relatively quickly” to the markets. “Allowing institutions to fail in a structured manner supervised by appropriate regulators offers a clearer exit strategy than allowing those institutions to drift into government control piecemeal,” the report said. The report also said that past successful financial rescues were accompanied by governments’ “willingness to hold management accountable by replacing -- and, in cases of criminal conduct, prosecuting -- failed managers.” Separate Findings: Two of the panel members, New York State Superintendent of Banks Richard Neiman and former New Hampshire Senator John Sununu, issued separate findings. “We are concerned that the prominence of alternate approaches presented in the report, particularly reorganization through nationalization, could incorrectly imply both that the banking system is insolvent and that the new administration does not have a workable plan,” the two wrote. Sununu and the five-member panel’s other Republican appointee, Representative Jeb Hensarling of Texas, dissented from the entire report. The oversight panel was set up under the rescue law passed in October. It has three members appointed by Democrats and two by Republicans. The group’s reports are required by the legislation.

SEC Weighs Short-Sale Curbs Amid Lawmaker Pressure - (www.bloomberg.com) The U.S. Securities and Exchange Commission is weighing multiple rules to dictate when traders can bet shares will fall, after lawmakers and business groups said short-sellers fed the financial crisis by targeting banks. The agency’s five commissioners today voted unanimously to seek feedback from investors, brokerages and companies on five rules, including a measure similar to the so-called uptick rule that House Financial Services Committee Chairman Barney Frank urged the agency to reinstate. Another option is a temporary ban on short-selling stocks that have fallen at least 10 percent. “The practice of short-selling has both strong supporters and detractors,” SEC Chairman Mary Schapiro said at a public meeting in Washington. The agency is initiating “what will be a thoughtful and deliberative process to determine what is in the best interest of investors.” The vote moves the SEC a step closer to imposing new constraints on bets against stocks even though the agency lacks evidence that short-selling contributed to a 39 percent drop in the Standard & Poor’s 500 Index in the past year. Morgan Stanley Chief Executive Officer John Mack and former Lehman Brothers Holdings Inc. CEO Richard Fuld said short-sellers attacked their firms. The SEC isn’t aware of any “empirical evidence” showing the elimination of the uptick rule contributed to “volatility” in U.S. stock prices, Schapiro said. Still, “many members of the public have come to associate short-selling with that volatility and with a loss of investor confidence,” she said. Hedge Funds: Hedge-fund managers oppose trading restrictions, arguing that banks’ excessive risk-taking and over-concentration in mortgage securities drove down share prices. Financial companies worldwide have reported more than $1.2 trillion of write-downs and credit losses since 2007. “Re-building investor confidence should be the primary objective of any regulatory effort and it is not clear that today’s proposals will meet that simple goal,” said James Chanos, founder of New York-based Kynikos Associates Ltd. and head of the Coalition of Private Investment Companies, a hedge- fund trade group. The SEC’s action was praised by the American Bankers Association and the Financial Services Roundtable, which represent financial companies. The proposal resembling the uptick rule would bar short- selling of a stock until it brings a price at least one penny higher than the preceding trade. The SEC scrapped the almost 70-year-old provision in July 2007 after studies determined the rule wasn’t relevant in markets dominated by fast-paced electronic trading.

Treasury To Delay Reporting Bank Stress Test Results - (Mish at globaleconomicanalysis.blogspot.com) Lies, coverups, distortions, and no transparency are the norm for the Treasury Department and the Fed, so it should come as no surprise that Bank Stress Test Results Delayed For Earnings. The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction, a source familiar with Treasury's discussions said Tuesday. The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said. The source, speaking anonymously because the Treasury has not made a final decision on what to disclose, said officials do not want any test results released before the earnings season wraps up for most U.S. banks on April 24. The tests are designed to determine the depth of banks' capital holes if conditions deteriorate further. After the tests are completed, the banks will have six months to either raise private capital to compensate, or accept government funds. But officials are worried about how the market will react to the stress test results if there is not a clear recovery path for a bank that is deemed to have a large capital need. The last thing Treasury wants to do is set off a panic, the source said.

Party Ends for Russian Rich After $230 Billion Losses - (www.bloomberg.com) Champagne and caviar are out in Moscow, and vodka and pelmeni dumplings are back in. Rich Russians, stung by the end of the biggest economic boom in their history, are tempering the opulent lifestyles that made the city of 10 million the bling capital of Europe. Demand for private jets and $500,000-a-week yachts has collapsed, while a survey by restaurant consulting group Restcon found revenue at high-end eateries has halved. Luxury-clothing boutiques selling brands such as Alexander McQueen and Stella McCartney are closing down. “A new lifestyle mentality is taking shape,” said Roman Trotsenko, 38, the millionaire founder of airport builder Novaport. “People aren’t really in the mood to party.” Moscow had 74 billionaires a year ago, more than any other city in the world. Now it has 27, according to Forbes magazine. The 25 richest Russians lost a combined $230 billion during six months last year as the value of their companies plunged along with commodity prices, according to Bloomberg calculations. The government expects the economy to shrink 2.2 percent this year after expanding about 7 percent a year since 1999. Unemployment is at a four-year high of 8.5 percent. The proportion of people who consider themselves “poor” has doubled to 14 percent in the past year, according to the All- Russian Center for the Study of Public Opinion in Moscow. “You just can’t party when others are starving,” said Boris Teterev, president of Rolls-Royce Motor Cars Moscow, which opened in 2004 to cater to Moscow’s nouveau riche.

San Diego foreclosure missing $1 million in furnishings - (www.signonsandiego.com) After a high-profile foreclosure, the county's largest and possibly most luxurious bank-owned home is missing an estimated $1 million worth of furnishings, from antique doors to top-of-the-line toilets. So far, no suspect has been named in a grand theft investigation opened by the San Diego County Sheriff's Department in March. “It's like a car up on blocks,” Sheriff's Detective Steven Ashkar said. “It's been stripped.” The 16,000-square-foot Spanish hacienda-style house on 1.24 acres is surrounded by trees on Fortuna Ranch Road in Encinitas. Decorated with 300-year-old doors from Egypt, carved teak pillars from Antigua, stained-glass windows, crystal chandeliers and handmade tiles from Mexico, the home cost $13 million to build and furnish. In February, it failed to sell at a bank foreclosure auction with a starting bid of $2.3 million. Suzy Brown, an electrical engineer who built the house, reluctantly surrendered title to the bank on Feb. 13 after not making payments for more than a year. She moved out March 22. On March 26, Capital One Bank's real estate agent, Katie Taylor, filed a police report citing missing “doors, windows, fixtures, toilets, windows, cabinets and appliances,” Ashkar said. The house has been controversial since Brown obtained a construction permit in 2004. She originally planned to operate it as a drug-rehabilitation center in a venture with alternative medicine physician Deepak Chopra and 60 unnamed investors. Neighbors dubbed it the “monster house” because of its size, and complained that Brown intended a commercial venture in a residential area. They sued Brown and filed a complaint with the state Department of Corporations. While both ultimately were dismissed, construction was delayed and the Chopra Center dropped out.




OTHER STORIES:

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)
U.S. Initial Jobless Claims Fell to 654,000 Last Week - (www.bloomberg.com)
How Bernanke Staged a Revolution - (www.washingtonpost.com)

Hawaii Neighbor Island house sales plunge - (www.honoluluadvertiser.com)
Crush of foreclosures coming to Riverside County - (www.nctimes.com)
Houston prices fall for first time in 14 years - (www.chron.com)
Mortgage delinquencies soar in the U.S. - (www.reuters.com)
Whitney expects house prices to fall another 30% - (www.cnbc.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)
As Values Fall, Property Tax Revolt Brews - (www.abcnews.go.com)
Economy Falling Years Behind Full Speed - (www.nytimes.com)

Consumer Credit Plateaus - (optionarmageddon.ml-implode.com)
Greatest Credit Card Debt Plunge Ever - (www.businessinsider.com)
Wall Street rocket scientists crash to Earth - (news.id.msn.com)
Top US economic adviser got $8M from Wall Street last year - (www.richardbradley.net)
The Banker-Government Complex Must Go - (www.naomiklein.org)
Lets Not Reinflate the Housing Bubble - (article.nationalreview.com)
Toxic debts could reach $4 trillion burden on taxpayers - (business.timesonline.co.uk)
UC Berkeley professor takes on school spending - (www.latimes.com)
Student debt and defaults surge - (features.csmonitor.com)