Tuesday April 21 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

‘Surgical’ Bankruptcy Possible for G.M. - (www.nytimes.com) The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend. Members of President Obama’s automotive task force spent last week in meetings and on conference calls with G.M. officials and its advisers in Detroit and Washington. Those talks are expected to continue this week. The goal is to prepare for a fast “surgical” bankruptcy, the people who had been briefed on the plans said. G.M., which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently. The preparations are aimed at assuring a G.M. bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in G.M. and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders. President Obama, who was elected with strong backing from labor, remained concerned about potential risk to G.M.’s pension plan and wants to avoid harming workers, these people said.

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."

States Slashing Social Programs for Vulnerable - (www.nytimes.com) Battered by the recession and the deepest and most widespread budget deficits in several decades, a large majority of states are slicing into their social safety nets — often crippling preventive efforts that officials say would save money over time. Skip to next paragraphstimulus package is helping to alleviate some of the pain, providing large amounts of money to pay for education and unemployment insurance, bolster food stamp programs and expand tax credits for low earners. But the money will offset only 40 percent of the losses in state revenues, and programs for vulnerable groups have been cut in at least 34 states, according to the Center for Budget and Policy Priorities, a private research group in Washington. Perhaps nowhere have the cuts been more disruptive than in Arizona, where more than 1,000 frail elderly people are struggling without home-care aides to help with bathing, housekeeping and trips to the doctor. Officials acknowledge that some are apt to become sicker or fall, ending up in nursing homes at a far higher cost. Ohio and other states face large cutbacks in child welfare investigations, which may mean more injured children and more taken into foster care. Despite tax increases, California has ended dental coverage for adults on Medicaid, all but guaranteeing future medical problems. “There’s no question that we’re getting short-term savings that will result in greater long-term human and financial costs,” said Linda J. Blessing, interim chief of the Arizona Department of Economic Security, expressing the concerns of officials and community agencies around the country. “There are no good options, just less bad options.”

Construction of downtown Portland high-rise is halted by tight credit - (www.oregonlive.com) Tom Moyer, one of Portland's most successful real estate developers, will halt work Monday on his 32-floor tower now under construction in downtown Portland. Moyer's decision to pull 350 workers off the Park Avenue West is a stunning sign that no city, no person and no block is spared from this recession. Moyer is one of Oregon's wealthiest developers, and the Park Avenue West is anchored on prime downtown land, in a city that one company ranks as having the country's second most stable office market. The building, originally scheduled to open in 2011, already was more than half leased by a law firm and a Nike store. In other words, if anyone in this town could get a loan, it would be this guy on this project. "Construction financing does not exist right now," said Vanessa Sturgeon, president of TMT Development, Moyer's company, which is building Park Avenue West. Moyer's financial woes show that even though the U.S. Treasury pumps billions of dollars into banks, that cash is not landing in the hands of the people who need it. Moyer, who has been in real estate since the 1950s, may be able to withstand the pain. But at the end of the line, lenders' reluctance means construction workers may not receive a paycheck, finding it harder to make the mortgage and buy new shoes for their kids. Even though the banks are under pressure to improve their own health, borrowers remain frustrated by their unwillingness to lend. "I get a little bit mad about it," said Bart Eberwein, vice president at Hoffman Construction Co., general contractor on the project. "The banks are getting the money, but they're not lending it out. Until private lending picks up, we are going to be in a prolonged slump." The Park Avenue West was designed to be a new icon in the city skyline, rising 350 feet on a sliver of land along the historic South Park Blocks alignment. It falls just a few blocks from Moyer's previous downtown tower, the Fox Tower and the 1000 Broadway building. Moyer finished the Fox Tower in the teeth of the dot-com bust, but it still became one of Portland's most notable buildings, attracting high-end retailers.

Honk If You Need Land - (www.costar.com) appears that vacant auto dealerships may soon join obsolete enclosed malls and the growing inventory of empty big-box stores on the list of former robust retail properties in need of an alternative use. Already at overcapacity, automakers have been trying to reduce the number of dealerships for years with mixed success. The recession will likely do what the automakers could not -- bring the number of dealerships in line with demand. President Obama's call for more extreme turnaround measures for both General Motors and Chrysler is only expected to add to the number of un-needed dealerships. Auto Dealership Closures: According to the National Automobile Dealers Association (NADA), approximately 900 dealerships closed and 200 dealerships opened in 2008, for a net loss of 700 dealerships, leaving the country with approximately 20,000 franchised auto dealers. According to Detroit-based research and advisory firm, Urban Science, 2008's decline in auto dealership count is the largest the firm has recorded since it started collecting data in 1991. For 2009, the NADA forecasts a net loss of 900 additional dealerships. According to CoStar Property Professional, 5.4% of auto dealership properties across the country are vacant and another 3.7% are available for lease, bringing total availability to 9.1%, or 1,023 "spaces" for lease; this compares to 3.5% vacancy about one year ago. Additionally, CoStar COMPS data shows that there are currently 1,861 auto dealership properties actively listed for sale across the country.
North Carolina, Colorado Banks Shut as 2009 Failures Reach 23 - (www.bloomberg.com) Banks in Colorado and North Carolina were shut as rising unemployment and a loss of jobs shrinks household wealth in the deepest recession in a quarter century, pushing the toll of U.S. bank failures to 23 this year. New Frontier Bank in Greeley, Colorado, with $2 billion in assets and $1.5 billion in deposits, and Cape Fear Bank in Wilmington, North Carolina, with $492 million in assets and $403 million in deposits, were shut today by state regulators. The Federal Deposit Insurance Corp., named receiver, gave New Frontier depositors 30 days to transfer accounts, and arranged to have Cape Fear’s assets to be assumed by First Federal Savings and Loan Association of Charleston in South Carolina. “All insured depositors of New Frontier are encouraged to transfer their insured funds to other banks,” the FDIC said in a statement. In North Carolina, the agency said: “Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relations to retain their deposit insurance coverage.” The U.S. has lost about 5.1 million jobs since the recession began in late 2007 and unemployment jumped to 8.5 percent in March, the highest since 1983, according to the U.S. Labor Department. Home prices in 20 cities fell 19 percent in January from a year earlier, the fastest drop on record, a private survey showed. The Obama administration has taken steps to help the economy, including a $787 billion stimulus package aimed at creating or saving 3.5 million jobs.

The Vanishing Shopping Mall - (www.theweek.com) Enclosed shopping centers, long the cathedrals of American consumerism, are closing their doors by the hundreds as the recession continues to clobber retail sales. Is America’s love affair with the mall over? Are malls dying? The vital signs are not good. Even before the recession hit, consumers had developed mall fatigue, and the classic enclosed shopping mall was in decline. More than 400 of the 2,000 largest malls in the U.S. have closed in the past two years. The last new major mall in the U.S. opened in 2006, and only one big mall is scheduled to open this year—the troubled Xanadu mega-mall in Rutherford, N.J. (See below.) With some 150,000 retail stores projected to fail in the U.S. this year, more mall closings are imminent. Mall mainstays such as Mervyn’s department stores, Linens ’n Things, and KB Toys have already disappeared into bankruptcy, and mall vacancy rates topped 7 percent last year, the highest level since 2001. “It’s an absolute disaster,” says Howard Davidowitz, an investment banker specializing in retailers. “What a mall represents is discretionary spending, and discretionary spending is in a depression.” Is it really that bleak? The data suggests that it is. For decades, American consumers could always be counted on to spend more than they did the year before—the only question was, by how much. But in the past 12 months, retail sales in the U.S. have dropped an unprecedented 9.8 percent. The economic collapse has landed especially heavily on the old-line department stores, such as Sears and JCPenney, that anchor many malls. As their sales and profits have tanked, they’ve been pulling out of malls, to the distress of the smaller merchants that depend on the larger stores to feed them traffic. The Turfland Mall in Lexington, Ky., recently lost Dillard’s as an anchor tenant, setting off a cascade of closings. “We have no choice but to leave now that Dillard’s is leaving,” says Bill Parker, who just closed his shoe store.

Bartering Services to Combat the Recession - (Mish at globaleconomicanalysis.blogspot.com) A new trend of bartering services or simply offering good deeds without pay to others less fortunate is catching on. Please consider Trading Good Deeds At Estonia's Bank of Happiness. To become a client [of the Bank of Happiness], an Estonian must register online, listing the useful things that he can do for others (eg, grocery shopping, walking a dog, fixing cars) and those that he would like done unto him (eg, having a suit darned or windows cleaned). “We call it a bank because we want to bring forth a new set of values”, says Tiina Urm, a 26-year-old who helped to think up the idea and is the closest thing that the Bank of Happiness has to a manager. “We just want to create a network where people don’t pay for what they need but get it from each other. It’s a way of allowing people, especially those who have lost their jobs, to keep doing what they do — and to bring people together.” The Bank of Happiness is not necessarily peddling reciprocation — a teenager might fetch a weekly shop for an elderly neighbour, even if the neighbour would be unable to do much in return. Instead, a stranger who has seen the good deed listed by the neighbour online will step in to help the teenager.

Nationwide Tax Revolt Is Coming - (Mish at globaleconomicanalysis.blogspot.com) Cities, states, and municipalities have a huge budget problem. That problem is caused by too much spending. The sensible thing to do would be to reduce expenditures. Instead Cities Turn to Fees to Fill Budget Gaps. 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. “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.


OTHER STORIES:

AIG in spotlight over derivatives - (www.ft.com) Financial products body ignores overhaul
Greenberg joins critics of AIG's banks pay-out - (www.ft.com)
AIG aircraft unit seeks $5bn Fed credit line - (www.ft.com)
Thailand balanced on edge of chaos - (www.ft.com)
Asean summit cancelled amid protests - (www.ft.com)
Tarp investigator seeks evidence of book fiddling - (www.ft.com) Inspector hopes banks did not ‘cook books’ to get funds

Crude Oil Falls on Demand Concerns After IEA Lowers Forecast - (www.bloomberg.com)
Asian Stocks Advance on Japan Stimulus, China Money Supply - (www.bloomberg.com)
Crisis Altering Wall Street as Big Banks Lose Top Talent - (www.nytimes.com)
Showdown Seen Between Banks and Regulators - (www.nytimes.com)
US market rally could trip over the bottom line - (finance.yahoo.com)
China Slows Purchases of U.S. and Other Bonds - (www.nytimes.com)
China Loans, Money Supply Jump to Records on Stimulus - (www.bloomberg.com)
Thailand balanced on edge of chaos - (www.ft.com)

China Central Bank Pledges Sufficient Liquidity - (www.bloomberg.com)
Asia Summit Cancelled By Thai Protestors - (www.cnbc.com)
Massive Stimulus Packages Add to Japan's Pile of Debt - (www.washingtonpost.com)
China, Kazakhstan May Sign $10 Billion Accord for Oil - (www.bloomberg.com)
Japan Producer Prices Fall at Fastest Pace Since 2002 - (www.bloomberg.com)
Steinbrueck Drafts German ‘Bad Bank’ Financial Rescue Plan - (www.bloomberg.com)
China foreign exchange reserves at $1.954 trillion - (www.cnbc.com)
Restore Order and Win a Financial War - (www.nytimes.com)
With Shoppers Pinching Pennies, Some Big Retailers Get the Message - (www.nytimes.com)
U.S. retail sales to fall 2.4 pct in Q2: ShopperTrak - (www.cnbc.com)
Recession Pain, Even in Palm Beach - (www.nytimes.com)

Chrysler Creditors Disagree on U.S. Plan to Cut Carmaker's Debt - (www.washingtonpost.com)
So Botox Isn’t Just Skin Deep - (www.nytimes.com)
Boeing Long-Term Credit Ratings May be Cut by Standard & Poor’s - (www.bloomberg.com)
He Doesn’t Let Money Managers Off the Hook - (www.nytimes.com)
How to avoid a short squeeze - (www.marketwatch.com)
Today’s Financial Distress Gets a Dictionary, Almost - (www.nytimes.com)
With Finance Disgraced, Which Career Will Be King? - (www.nytimes.com)