Sunday April 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Silverado figure, Neil Bush Associate and perpetual criminal Michael Wise leaps to his death – (www.bizjournals.com) Michael R. Wise, onetime chairman of Denver's failed Silverado Banking Savings & Loan who later pleaded guilty to defrauding investors in Aspen, has killed himself by jumping from an airport garage, according to news reports. Wise and Silverado loomed large in the savings-and-loan scandals that rocked the financial world in the 1980s and cost taxpayers billions. Wise, 64, who recently had been living in Clearwater, Fla., leaped from the top level of a parking garage at Tampa International Airport on April 8, the Tampa Tribune reported. The leap was witnessed by a few people nearby, the Tribune said. Wise was taken to a nearby hospital, where he was pronounced dead. The local medical examiner's office ruled the death a suicide. Wise's link to Silverado and a separate Colorado fraud case did not emerge until Tuesday, when a reporter at the Emporia Gazette in Kansas, where he had once lived, linked him to the earlier events. Wise ran Denver-based Silverado, one of the S&L industry's biggest failures, having lost $1 billion. Silverado collapsed in 1988. Neil Bush -- son of former President George H.W. Bush and brother of former President George W. Bush -- sat on Silverado's board. Federal authorities charged Wise with using $500,000 of a Silverado loan for his own expenses. He was acquitted in 1993, but was banned from the banking industry for life. Later, however, Wise founded Cornerstone Private Capital Corp. of Aspen, a real-estate lending firm. He later was accused of stealing $8.7 million from Cornerstone investors during the late 1990s. He pleaded guilty to wire fraud in 1999, and was sentenced to 3-1/2 years at the Leavenworth federal penitentiary in Kansas, according to a 2002 Denver Business Journal report. He was released in 2002. Wise later joined CFIC Home Mortgage of St. Petersburg, Fla., owned by Nations Holding Co. of Kansas, the Wall Street Journal reported. CFIC shut down in 2007 after word came out of Wise's involvement in the company, the Journal said.
Wise's son was killed in a car wreck in 1997 and his wife died the following year.

S&P: Life Insurers Face “Unprecedented Stress” - (www.bloomberg.com) - U.S. life insurers, a group led by MetLife Inc. and Prudential Financial Inc., face “unprecedented stress” on holdings in bonds and commercial mortgages in the next 18 months, Standard & Poor’s said. “The U.S. is in the midst of perhaps its longest recession in a generation, and our economists believe it is just entering its most difficult phase,” the ratings firm said today in a statement. Life insurance stocks have lost more than half their market value in the past 12 months as declines in fixed-income holdings drained capital. Losses and profit declines have discouraged investors in the industry’s stocks and bonds and left life insurers waiting for a response from the Treasury on requests for federal bailout funds. MetLife, the biggest U.S. life insurer, has dropped 53 percent in the last 12 months of New York Stock Exchange composite trading, while No. 2 Prudential is down 64 percent over the same period. The 11-company S&P Supercomposite Life & Health Insurance Index has fallen 60 percent. “Insurers have been prevented from accessing the debt markets for additional liquidity,” S&P said. North American insurers posted more than $190 billion of writedowns and unrealized losses tied to the collapse of the housing market since the beginning of 2007. The industry lost $32 billion in surplus last year, according to Moody’s Investors Service. This year, carriers including New York-based MetLife, Prudential and Hartford Financial Services Group Inc. have been buffeted by ratings downgrades.

Foreclosure halted, but no one told the owner - (www.nctimes.com) Countrywide Financial, one of the nation's largest mortgage lenders, stopped foreclosure proceedings last year in hopes of modifying the loan for a small Escondido condominium after a national settlement with several states' attorneys general. On the surface, it sounds like a success story in the wake of massive, multibillion-dollar efforts to stem foreclosures. But there's one problem: The condo has been vacant for eight months. Instead of success, this condo illustrates the difficulties lenders face in keeping track of thousands upon thousands of foreclosures and the frustration many borrowers experience when they try to save their homes. The homeowner, Elba Coronado, received a notice of default ---- the first step in foreclosure ---- in June last year and moved out in August because she didn't want to go through the embarrassment of eviction. Since then, she has been renting a Vista apartment. At some point, Countrywide halted the foreclosure process. Coronado said Countrywide never told her she would be eligible for a modification of her loan. A Countrywide spokesman says Coronado never told them she had given up on the loan. "I don't know, maybe they don't have my number," said Coronado, who added that she would like to move back into the condo but didn't think it was possible after being laid off from her second job in advertising sales. Since she holds just one job, Coronado said the mortgage payment would need to come close to her rent payment of $845 per month. That's a tall order. Even if Countrywide reduced the interest rate on her mortgage, which initially carried a balance of $275,000, to 2.5 percent ---- the lowest level mentioned in the attorney general's settlement ---- Coronado's payment would exceed $1,000 per month.

Update: End of an Era for CFIC - (www.ml-implode.com) Update - 2009-04-15: The St. Petersburg Times reports that Michael R. Wise, the purported "head" of CFIC and former chairman of Denver's failed Silverado Banking, committed suicide on April 8, 2009. Security video caught Wise pacing on the 9th floor of a parking garage at the Tampa Bay International Airport before he "stepped off the side" as noted in the Denver Post. Authorities at the airport "ruled out any foul play or accident." Update, Sept 14.: This article points out that Michael Wise, the man running CFIC, was a convicted felon from the S&L bubble era. Apparently he embezzled $8 million+ from Silverado Banking and did 3 years in Leavenworth. But we understand--it must have been hard to find mortgage lending execs without a felony-level criminal record (in the financial services industry) a few years ago. The article also discusses how the company has fudged Wise's job title to avoid regulations--he is not listed as an officer of the company in Florida, for example.

US Treasury Spews $10 Bln More For Banks, Not People - (www.reuters.com) Six large U.S. banks could pocket nearly $10 billion in federal subsidies if they modify troubled home loans and are able to save homeowners from foreclosure, the Treasury Department said on Wednesday. The mortgage speciality arms of Citigroup (C.N), JPMorgan Chase (JPM.N) and Wells Fargo & Co. (WFC.N) would each earn over $2 billion for modifications that have long-lasting success, according to the Treasury's formula. The money is available through a $50 billion program to encourage mortgage servicers to ease the terms on troubled loans. Many more mortgage servicers will be eligible for the subsidies, the Treasury said.

The crisis is likely to make traders take riskier decisions to avoid losing money - (www.economist.com) IT HAS long been known in financial markets that people are so reluctant to lose money that they will take big risks to avoid it. If you give the average person a 90% chance of winning a little money or a 10% chance of winning a lot, he will most likely take the option that offers him at least a little bit of cash. But offer him a 90% chance of losing a little money or a 10% chance of losing a lot, and he will opt for the latter. A recent study finds that stress exacerbates this. Anthony Porcelli and Mauricio Delgado, psychologists at Rutgers University in New Jersey, set out to analyse the sorts of financial risks people were willing to take when calm or stressed. They knew finance could be stressful at the best of times. Stockbrokers, for instance, make important financial decisions in split seconds in conditions that are sometimes noisy, hot and socially tense, they noted in Psychological Science, a journal. Does this affect their judgment? The experiment involved students playing a gambling game. To stimulate stress, for part of the game half had their main hand in very cold water. The students faced financial decisions that varied in both the degree of risk and the amount of money that could be won or lost. They could choose between, say, an 80% chance of losing 75 cents and a 20% chance of losing $3 or an 80% chance of winning 75 cents and a 20% chance of winning $3. They could keep anything they won.

Goldman Accounting Gimmicks - (optionarmageddon.ml-implode.com) Lots of interesting things to report regarding Goldman Sachs today. In this post: accounting gimmickry, higher leverage (tangible assets/tangible common equity calculated below), and silence regarding AIG payments. In the next post: Goldman raises $5 billion in a sale of stock, which is good news. Accounting Gimmicks and Tangible Common Equity. With respect to their Q1 earnings announcement, it appears Goldman may have one-upped Wells Fargo in the accounting shenanigans department. As Floyd Norris blogged this morning, they ditched an entire month… Where’s December?: Goldman Sachs reported a profit of $1.8 billion in the first quarter, and plans to sell $5 billion in stock and get out of the government’s clutches, if it can. How did it do that? One way was to hide a lot of losses in not-so-plain sight. Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s earnings statement, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ended in February. The orphan month featured — surprise — lots of write-offs. The pretax loss was $1.3 billion, and the after-tax loss was $780 million. Would the firm have had a profit if it had stuck to its old calendar, and had to include December and exclude March?

Bankruptcy filings reach 10-year high - (www.signonsandiego.com) These days, it is one of the busiest offices in downtown's swank Emerald Plaza office tower. And one of the saddest. Day after day, and hour after hour, a relentless stream of debtors files through Room 630 to attend a first meeting with their creditors. On one day last month, there were 95 such meetings, nicknamed the “341 meeting” after the section of the bankruptcy code that requires it. For Brad Acevedo, 21, and his mother, Barbara Young, 48, their meeting was short and anything but sweet. The pair got into financial trouble after Young's boyfriend moved out and no longer contributed income to their El Cajon household. Acevedo juggled two part-time jobs and college, while Young worked an $11-an-hour job at Circuit City, but it wasn't enough to cover the $1,000 rent and other bills. Soon, mother and son were trying to cover expenses by taking cash advances on their credit cards. They got trapped in a cycle of payday loans, taking expensive cash advances on paychecks at triple-digit interest rates. Then Young lost her job at Circuit City, which filed for bankruptcy in November and ultimately closed its stores. “You had to take out a payday loan to pay the previous loan and it just snowballed,” said Young, who filed individual Chapter 7 bankruptcy, as did her son, to wipe out a collective $20,000 in credit card and loan debt. “It was a terrible, emotional decision for me to file bankruptcy, and terrible to have to watch my son do it at such a young age. But it was the only way we could survive,” she said. Before the end of the year, thousands of local consumers such as Young and Acevedo are expected to find their way to Room 630.

Retiree pensions are at risk - (www.detnews.com) General Motors Corp. and Chrysler LLC retirees and employees could lose $23 billion in pension benefits if the companies terminate their retirement plans in bankruptcy, the government's pension insurance agency warned Tuesday. Neither GM nor Chrysler plans to file for bankruptcy, but both are taking steps to prepare in case they are forced to do so in the coming weeks. While neither has said it plans to terminate its pension program, struggling steel companies and airlines have used bankruptcy to get out from under large pension obligations and turn them over to the government. GM and Chrysler combined provide pension benefits to about 630,000 retirees and dependents, and cover another 300,000 who haven't begun drawing benefits. The Pension Benefit Guaranty Corp. (PBGC) insures the pensions of 44 million Americans, including 1.5 million in Michigan. Its representatives have met repeatedly with the Obama auto task force on the impact of a GM or Chrysler pension plan termination, and have been making preparations for the possibility. PBGC acting director Vince Snowbarger said Tuesday that termination of either pension plan would have a major impact on retirees. "The fact is that people are going to see some reductions that obviously they hadn't planned for (if GM or Chrysler terminates its pension plan). They have had a promise made to them that is not being kept and all we can do is try to step in and help out a little bit," he said.



OTHER STORIES:

Say Hello to “Frannie”? - (www.ml-implode.com) - “It’s got to happen; we’re not going to put them back the way they were,” Whalen said of a merger. “The only way we’re going to ...
Mortgage Applications Slide Despite Lower Rates - (www.ml-implode.com) - Industry data released on Wednesday showed that mortgage application volume fell 11 percent last week, as refinance activity sli...
U.S. Program Lends a Hand to Banks, Quietly - (www.ml-implode.com) - " Banks have been benefiting from an indirect subsidy adopted by the federal government at the height of the financial crisis la...
Despite Falling Consumer Prices, Little Worry of Deflation - (www.ml-implode.com)

Bernanke’s P.R. Offensive - (www.ml-implode.com)
US suburban life coming to an end? - (www.ml-implode.com)
mortgage application volume slows for first time in six weeks - (www.ml-implode.com)
Mortgage Hedge Fund Ellington Plans IPO - (www.ml-implode.com)
Public Pension Managers Rethink Hedge Fund Ties - (www.ml-implode.com)
AIG’s Shrinking Swaps Unit Will Miss Shutdown Goal - (www.ml-implode.com)

Big Profits, Big Questions - (www.nytimes.com)
The Lessons of the Savings-and-Loan Crisis - (www.barrons.com)
U.K. Sales Fell in March Despite Tax-Cut Initiative - (online.wsj.com)
Retail and Price Data Show Continuing Economic Weakness - (www.nytimes.com)
Newspaper Ad Revenue Could Fall as Much as 30% - (www.nytimes.com)
Russia Risks Bad-Loan ‘Avalanche’ With 20% in Default - (www.bloomberg.com)
A 'Copper Standard' for the world's currency system? - (www.telegraph.co.uk)

The Coming Siege of Austerity - (www.jameshowardkunstler.typepad.com)
Goldman's Unexpected Earnings; Government's New Foreclosure Solution - (www.seekingalpha.com)
Where were the accountants? - (www.informationclearinghouse.info)
It's Lost Jobs, Not Mortgage Payments - (www.seekingalpha.com)
US Retail Sales "Unexpectedly" Drop as Jobs Evaporate - (www.bloomberg.com)
Roubini sees more job losses ahead - (www.pbs.org)
Where are the Best Cities for Job Growth? - (www.newgeography.com)
CA to enjoy housing's best price improvement, 50% off! - (www.lansner.freedomblogging.com)
Housing and Bad Assumptions - (www.patrick.net)
Tax day: Uncle Sam won't make ends meet - (www.biz.yahoo.com)
Tips for those who can't pay their taxes - (www.sfgate.com)

Solution to Chronic Homelessness Is Simple: Housing - (www.miller-mccune.com)
Irony For Dummies - (www.patrick.net)
Trillion Dollar Bailout - The Game - (www.addictinggames.com)