Thursday April 23 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

HUD's "Dollar Houses" feed taxpayer cash to private investors - (www.latimes.com) Jerry and Carol Ptacek bounced from one cramped apartment to another most of their adult lives, so they could hardly believe their luck when they were able to buy a San Bernardino house for the bargain price of $63,000. Nine years later, they are renters again -- a testament to the failure of the federal government's Dollar Homes program. Congress launched the program in 1998 to clear the Department of Housing and Urban Development's books of foreclosures and provide affordable housing. Local governments would buy the homes for $1, fix them up and resell them at a discount to poor families, who would get a chance to put down roots in the community.At least that's how it was supposed to work. A Times investigation has found that the Dollar Homes program has helped housing contractors and investors, but there is no evidence that it has provided any lasting benefit to people like the Ptaceks. The findings offer a cautionary tale as the Obama administration works to craft similar efforts to help communities ravaged by the housing slump. "This is bad for taxpayers on both sides of the transaction," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. More than 2,300 homes have been sold by HUD for $1 each nationwide, with 326 in California. Nearly half of the homes in California were bought by companies or individuals who typically resold them at a much higher price. Only 15% were sold to nonprofit housing groups such as Habitat for Humanity, records show.

Wells Fargo May Need $50 Billion in Capital, KBW Says - (www.bloomberg.com) Wells Fargo & Co., the second- biggest U.S. home lender, may need $50 billion to pay back the federal government and cover loan losses as the economic slump deepens, according to KBW Inc.’s Frederick Cannon. KBW expects $120 billion of “stress” losses at Wells Fargo, assuming the recession continues through the first quarter of 2010 and unemployment reaches 12 percent, Cannon wrote today in a report. The San Francisco-based bank may need to raise $25 billion on top of the $25 billion it owes the U.S. Treasury for the industry bailout plan, he wrote. First-quarter net income rose 50 percent to about $3 billion, Wells Fargo said last week in announcing preliminary results that topped the most optimistic Wall Street estimates and sparked a 32 percent jump in the stock. The bank attributed the profit to a surge in mortgage originations and revenue from Wachovia Corp., acquired in December. Full results are scheduled for April 22. “Details were scarce and we believe that much of the positive news in the preliminary results had to do with merger accounting, revised accounting standards and mortgage default moratoriums, rather than underlying trends,” wrote Cannon, who downgraded the shares to “underperform” from “market perform.” “We expect earnings and capital to be under pressure due to continued economic weakness.”

Ireland is ECB's sacrifical lamb to satisfy German inflation demands - (www.telegraph.co.uk) Ireland is ECB's sacrifical lamb to satisfy German inflation demands. Put bluntly, Ireland is being forced to roll back the welfare state and tighten fiscal policy in the midst of a savage economic contraction in order to uphold the deflation orthodoxies of Europe's monetary union. If Ireland still controlled the levers of economic policy, it would have slashed interest rates to near zero to prevent a property collapse from destroying the banking system. The Irish central bank would be a founder member of the "money printing" club, leading the way towards quantitative easing a l'outrance. Irish bond yields would not be soaring into the stratosphere. The central bank would be crushing the yields with a sledge-hammer, just as the Fed and the Bank of England are crushing yields on US Treasuries and gilts. Dublin would be smiling quietly as the Irish exchange rate fell a third to reflect the reality of trade ties to Sterling and the dollar zone. It would not be tossing away its low-tax Celtic model to scrape together a few tax farthings – supposedly to stop the budget deficit exploding to 13pc of GDP this year, or 18pc says Barclays Capital. If the tax raises were designed to placate rating agencies, they made no difference. Fitch promptly booted Ireland from the AAA club anyway. Above all, Ireland would not be the lone member of the OECD club to compound its disaster by slashing child benefit and youth unemployment along with everything else in last week's "budget from Hell".

Most Harvard Grads Go Into Finance Fraud - (www.nytimes.com) “I am pronouncing the depression over!” declared CNBC’s irrepressible Jim Cramer on April 2. The next day the unemployment rate, already at the highest level in 25 years, jumped yet again, but Cramer wasn’t thinking about the 663,000 jobs that disappeared in March. He was thinking about the market. Mad money. Fast money. Big money. The Dow, after all, has rallied in the weeks since Timothy Geithner announced his bank bailout 2.0. Par-tay! On Wednesday, Cramer rang the opening bell at the New York Stock Exchange, in celebration of the 1,000th broadcast of his nightly stock-tip jamboree. Given Cramer’s track record on those tips, there’s no reason to believe he’s right this time. But for the sake of argument, let’s say he is. (And let’s hope he is.) The question then arises: What, if anything, have we learned from this decade’s man-made economic disaster? It wasn’t just trillions of dollars of wealth that went poof in the bubble. Certain American values also crumbled and vanished. Making quick killings by reckless gambling in the markets — rather than by investing long-term in new products, innovations, technologies or services that might grow and benefit America and the world — became the holy grail in the upper echelons of finance.

Commercial real estate loan defaults skyrocket - (www.businessweek.com) With loan defaults rising, analysts say the struggling commercial real estate industry is poised to fall into the worst crisis since the last great property bust of the early 1990s. Delinquency rates on loans for hotels, offices, retail and industrial buildings have risen sharply in recent months and are likely to soar through the end of 2010 as companies lay off workers, downsize or shut their doors. The commercial real estate market's fortunes are tied closely to those of the sinking economy, especially unemployment, which hit 8.1 percent in February. "Until jobs start coming back and industry starts doing better we don't see performance increasing" among landlords, said Christopher Stanley, an associate with research firm Reis Inc.While the commercial real estate industry's woes led to the recession of nearly 20 years ago, this time the industry is "the victim of the economic and financial crisis," said Hessam Nadji, managing director at Marcus & Millichap Real Estate Investment Services in Walnut Creek, California.

Lehman Shock Fuels New Wave of Homeless in Osaka, Japan - (www.bloomberg.com) Within two months of losing his job packing shelves at a cold-storage company in Osaka, Toshiyuki Miki says, he was homeless. “Lehman Shock” turned his life upside down, he says. Lacking the 60,000 yen ($600) a month he needs to pay rent, Miki, 40, sleeps in cardboard boxes under the elevated Hanshin expressway in Umeda, Osaka’s central business district. It’s his home as the global recession triggered by the implosion of Wall Street banks batters Japan. About 460,000 people have lost their jobs since the Sept. 15 collapse of Lehman Brothers Holdings Inc., according to government data. “I never realized it would affect me in this way,” said Miki, who picked up the Japanese phrase “Lehman Shokku” from the pages of discarded newspapers. “Before, I could always find some kind of job, but now there’s nothing.”

Cities Turn to Fees to Fill Budget Gaps - (www.nytimes.com) After her sport utility vehicle sideswiped a van in early February, Shirley Kimel was amazed at how quickly a handful of police officers and firefighters in Winter Haven, Fla., showed up. But a real shock came a week later, when a letter arrived from the city billing her $316 for the cost of responding to the accident. Skip to next paragraphA couple of months after being in a car accident, Shirley Kimel received bills in the mail for the response of firemen and police. Her insurance company advised her not to pay, and so she has not paid the bills. “I remember thinking, ‘What the heck is this?’ ” says Ms. Kimel, 67, an office manager at a furniture store. “I always thought this sort of thing was covered by my taxes.” It used to be. But last July, Winter Haven became one of a few dozen cities in the country to start charging “accident response fees.” The idea is to shift the expense of tending to and cleaning up crashes directly to at-fault drivers. Either they, or their insurers, are expected to pay. Such cash-per-crash ordinances tend to infuriate motorists, and they often generate bad press, but a lot of cities are finding them hard to resist. With the economy flailing and budgets strained, state and local governments are being creative about ways to raise money. And the go-to idea is to invent a fee — or simply raise one. Ohio’s governor has proposed a budget with more than 150 new or increased fees, including a fivefold increase in the cost to renew a livestock license, as well as larger sums to register a car, order a birth certificate or dump trash in a landfill. Other fees take aim at landlords, cigarette sellers and hospitals, to name a few.

Goldman Sachs hires law firm to shut blogger's anti-Goldman site - (www.telegraph.co.uk) Goldman Sachs is attempting to shut down a dissident blogger who is extremely critical of the investment bank, its board members and its practices. The bank has instructed Wall Street law firm Chadbourne & Parke to pursue blogger Mike Morgan, warning him in a recent cease-and-desist letter that he may face legal action if he does not close down his website. Florida-based Mr Morgan began a blog entitled "Facts about Goldman Sachs" – the web address for which is goldmansachs666.com – just a few weeks ago. In that time Mr Morgan, a registered investment adviser, has added a number of posts to the site, including one entitled "Does Goldman Sachs run the world?". However, many of the posts relate to other Wall Street firms and issues. According to Chadbourne & Parke's letter, dated April 8, the bank is rattled because the site "violates several of Goldman Sachs' intellectual property rights" and also "implies a relationship" with the bank itself. Unsurprisingly for a man who has conjoined the bank's name with the Number of the Beast – although he jokingly points out that 666 was also the S&P500's bear-market bottom – Mr Morgan is unlikely to go down without a fight.





OTHER STORIES:

Obama Auto Team Said to Eye GM Loan-to-Equity Swap - (www.bloomberg.com)
Genworth Plunges on Failure to Qualify for U.S. Aid - (www.bloomberg.com)
Manufacturing, Retail Reports May Disappoint - (www.washingtonpost.com)
With Shoppers Pinching Pennies, Some Big Retailers Get the Message - (www.nypost.com)
Why We're Not at the Beginning of the End, and Probably Not Even At the End of the Beginning - (robertreich.blogspot.com)
Why We're Not at the Beginning of the End - (www.robertreich.blogspot.com)
It's Now a Renter's Market - (www.businessweek.com)
Lawyer's legal detail may stop NJ foreclosures - (www.blog.nj.com)

Owners demand lower house valuations, unless talking to buyers - (www.reuters.com)
Easy lending hurts young buyers in Australia - (www.theaustralian.news.com.au)
Fraud "talent" metastasizing from Wall Street to elsewhere - (www.nytimes.com)
Copy of $237,602 FDIC job listing - (www.patrick.net)
Bad Economy Compared to What? - (www.archinect.com)
Moody's Downgrades The Whole Country - (www.businessinsider.com)
No Return to Normal - (www.washingtonmonthly.com)
Socialism has failed. Capitalism is bankrupt. What's next? - (www.guardian.co.uk)
Who owns the land in America? - (www.patrick.net)
The Top 10 Signs You Are Living in a Banana Republic - (www.thebarricadeblog.com)
Chinese Drywall, When Ground Up, Makes A Fine Infant Formula Too! - (www.nytimes.com)
They shoot real estate agents, don't they? - (www.salon.com)