Tuesday April 28 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Should the U.S. bail out California too? - (www.latimes.com) California, always a place of fresh ideas, has a big one for Uncle Sam: Treasurer Bill Lockyer wants a federal guarantee on the massive short-term borrowing the cash-strapped state must undertake this summer. Just as with a federally insured bank savings certificate, a U.S. backstop of California's debt would assure investors that their money was completely safe. In theory, that would mean the state could get away with paying a much lower interest rate on the debt -- saving California taxpayers a bundle. Lockyer doesn't just want a federal guarantee for California's IOUs. He thinks the U.S. should do the same for all states, counties, cities and other municipal entities that need help getting through the recession. This is exactly what it sounds like: a call for a major expansion of the federal bailout of the nation's financial system -- but this time ostensibly to buttress Main Street, not Wall Street. The populist argument is a slam-dunk. If the government can save Citigroup and American International Group, why can't it extend a hand to California? In terms of who's truly deserving of help, "We think California taxpayers stack up pretty well compared with Wall Street firms," said Tom Dresslar, Lockyer's spokesman. The treasurer has an ally in Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee. Frank will hold a hearing May 5 as a prelude to drafting legislation that could create a federal insurance program for municipal debt.

How a Personal Finance Columnist Got Caught Up in Fraud - (www.nytimes.com) On Sunday, I returned from vacation, picked up the mail and found a disturbing letter from Charles Schwab & Company. It said that it had discovered unauthorized money transfers out of accounts associated with the financial planning firm I use. The situation was even worse than I had feared. It was my own planner, who was under investigation for siphoning off what appeared to be millions of dollars from client accounts. And, as Schwab’s note helpfully suggested, it might be a good idea to take another look at my statements for the last few years. In case it is not glaringly obvious, I write a personal finance column for a living. I am also the kind of person who derives joy from reading the fine print on bank statements and runs spreadsheets on my credit card spending. I thought I knew what I was doing. So if I can get mixed up in something like this, trust me, it can happen to anyone. So how did this happen? It starts, oddly enough, with one of my old articles. In 2003, when I was at The Wall Street Journal, I did a sort of secret shopper column on seeking financial advice. My wife and I had a couple of questions that we needed to answer, and we put them to five different types of advisers. One of them was Matthew Weitzman, who had started AFW Asset Management (now known as AFW Wealth Advisors) a few years earlier with his high school friend Jay Furst. We liked Mr. Weitzman’s advice and demeanor. His disciplinary record was clean and he had gone to good schools (Cornell undergraduate, Columbia M.B.A.). While we didn’t talk to him much over the next six years, his advice was always wise, and he was willing to work with us even though we had less money than his other clients. Fast-forward to last weekend and cue my jaw hitting the floor as I realized what the note from Schwab was implying. Sure enough, the next day AFW sent me an e-mail message — which another planner there said I should have received before the Schwab letter arrived — offering a bit more detail. According to AFW’s note, there were “certain irregularities in a limited number of client accounts.” The firm said it believed that less than 5 percent of client assets were missing but added that it might find more accounts that were short some money. Within 24 hours of learning of the problem, AFW said, it notified the Securities and Exchange Commission, the United States attorney’s office and the Federal Bureau of Investigation. The first two declined to confirm or deny that there was any investigation, and an F.B.I. spokeswoman did not return my calls. AFW also said that “in a related matter,” Mr. Weitzman was now on leave, was not expected to return (ever) and would have “no further contact with any client accounts.” It is too early to say exactly what happened and who is responsible. Mr. Weitzman did not respond to my repeated attempts to speak with him this week. But his lawyer, Marc Mukasey, who leads the white-collar criminal defense practice at Bracewell & Giuliani in New York, called me back. “Matt Weitzman has not been charged with a crime or any violations,” he said. “We’re looking forward to a resolution of this matter that satisfies everybody.”

In State Pension Inquiry, a Scandal Snowballs - (www.nytimes.com) The inquiry into corruption at the New York State pension fund started simply enough. Alan G. Hevesi, the former comptroller, was accused of using state workers as chauffeurs for his ailing wife. But by the time Mr. Hevesi resigned his office in late 2006, investigators for the Albany County district attorney’s office were examining a more troubling problem: allegations that Mr. Hevesi’s associates had sold access to the state’s $122 billion pension fund, using one of the world’s largest pools of assets to reward friends, pay back political favors and reap millions of dollars in cash rewards for themselves. “We knew this was not going to be a case we could handle ourselves in Albany County,” recalled P. David Soares, the Albany County district attorney. In 2007, Attorney General Andrew M. Cuomo’s office and then the Securities and Exchange Commission took over the inquiry, which has ballooned into a sprawling investigation involving some of the most prominent players in New York’s political and financial worlds. Hundreds of investment firms have been subpoenaed. Three people have been criminally charged and another has pleaded guilty to a felony. And the scandal has grabbed the attention of Wall Street, as members of the investment establishment’s top tier now face scrutiny. The Carlyle Group, the politically connected private equity firm, is among the companies whose transactions are being examined. Steven Rattner, just appointed to serve as the Obama administration’s point man in the bailout of the auto industry, has emerged as a significant figure. And an investment firm that manages money for the Hunts, the prominent Texas oil family that owns the Kansas City Chiefs football team, has already settled with the S.E.C., and one of its former executives has pleaded guilty to a felony and is cooperating with investigators.

Stanford Asks Court To Release Funds for Defense - (www.cnbc.com) Accused fraudster Allen Stanford is asking a federal court to lift a freeze on $10 million of his assets to pay for his legal defense. The Texas financier was accused by the Securities and Exchange Commission in February of running a massive Ponzi scheme involving high-yielding certificates of deposit, a charge Stanford denies. Nonetheless, the SEC obtained a total freeze on Stanford's assets and those of his companies, and a criminal investigation by the Justice Department is picking up speed. In a 12-page filing in federal court on Sunday, his attorneys argue "Allen Stanford will never have resources that remotely approach the resources of the adversaries he faces." The filing contends the SEC freeze "instantaneously destroyed billions of dollars of net value of Stanford companies worldwide" by causing a run on the bank during a global financial crisis. The filing asks that $10 million be placed in an escrow account controlled by Stanford's criminal defense attorney, Dick DeGuerin of Houston. And it suggests that the cost of Stanford's defense may ultimately approach $20 million.

Empty Florida homes may return to nature - (www.latimes.com) The Georgetown apartment complex was one of this city's most coveted properties back in 2005. Now Greg Chelius and Alex Size were touring it as if examining an exotic ruin.They walked past the unmanned guardhouse and its broken windows. Size snapped photos with a digital camera. Chelius lifted the green fabric on a fence tacked with No Trespassing signs. Building after building loomed in the near distance, all of them quiet and vacant. From Chelius' vantage, it was difficult to judge their condition. "We heard they were in such bad shape they'd have to be taken down," he said. "It depends on the drywall," Size replied. "And the rot. And the mold." They walked the eastern edge of the property, stopping at a place where they could glimpse -- through a thicket of weeds and Brazilian pepper trees -- the blue water of Old Tampa Bay, lapping at the property's edge. As if on cue, a circling pelican dive-bombed for a fish."It's just outstanding," Chelius said.These two men have big plans for the Georgetown property, 160 acres on the southwest side of the Tampa peninsula. But they are not planning to build. Chelius is state director for the Trust for Public Land. Size is from the nonprofit's St. Petersburg office. Because of the steep decline in property values here, they believe they have a chance to help local government purchase and preserve this stretch of waterfront. A few months ago, it was slated to be covered with luxury condominiums, "mansion" town houses and single-family homes.

High-end builder bids to recoup - (www.delawareonline.com) Whether you're a home builder or a home buyer, these are times when dreams don't always match with reality. At the luxury beach community The Peninsula on the Indian River Bay, where residents are pampered with a Jack Nicklaus-designed golf course and a wave pool, the tide of recession-driven frugality has pushed one builder toward a less-opulent vision. Faced with the reality that luxury homes aren't the hot properties they once were, Virginia-based builder Miller & Smith has decided to clear the slate with a May auction, with opening bids at $200,000 for houses that once listed for $890,000 -- a 71 percent difference. The houses are expected to sell for well above that opening bid, but the auction highlights how the once-thriving resort market has had to adapt to a high-end clientele cutting costs in sync with their less-wealthy neighbors. Once its inventory of houses in the 750-acre development is cleared, the builder will continue its efforts there -- but with a mind toward a more-affordable experience. "It will probably be a little lower price point. We will probably scale down the square footage a bit," said Rhonda Ellisor, vice president of sales and marketing for Miller & Smith, about any future building. "We know that the second-home market has softened." The recession is being felt sharply in the luxury market, partly because of a sense among consumers that opulent spending is out of place in a time of struggle. It also has become more difficult to get so-called "jumbo" mortgages used to finance multimillion-dollar homes. One Colorado builder is offering a financing package that lets shoppers buy the land now and postpone the building until market conditions improve.

State unemployment rate highest since 1941 - (www.sfgate.com) The state unemployment rate soared to 11.2 percent in March, the highest since before World War II, leaving a record 2.1 million Californians out of work, according to a report issued Friday. Employment Development Department spokeswoman Patti Roberts said the March figure surpasses the 11 percent rate that occurred during the 1980s recession and brings California close to the jobless level of January 1941, when unemployment stood at about 11.7 percent. Roberts said unemployment is estimated to have been as high as 25 percent during the Great Depression. The highest reliable figure in state archives is the 14.7 percent rate in October 1940. The U.S. unemployment rate for March stood at 8.5 percent. "California's higher rate of job loss is primarily the result of greater exposure to the housing downturn," said Stephen Levy, with the Center for the Continuing Study of the California Economy in Palo Alto.




OTHER STORIES:

Summers Says Banks Must Tap Markets for New Capital - (www.ml-implode.com) - ``His comments signal that banks deemed in need of capital at the conclusion of government-run “stress tests” may not get additi...
Irrational Everything - (www.ml-implode.com) - " Much of economic theory is flawed because its models assume people act rationally when of course they don’t. And yet economis...
The Debt Class - (www.ml-implode.com) - "The stock market at least in its current form is a horrible indicator of the actual economic carnage falling upon the majority ...
Buy a toaster, get a free bank - (www.ml-implode.com) - " M just sent me this one. I’m having a tough time typing and laughing at the same time: [My apologies if this doesn't fit your...
The Subprime Bubble in Living Color - (www.ml-implode.com)
Volcker Says Fed’s Authority Probably to Be Reviewed - (www.ml-implode.com)
Mortgage Fraud Crackdown Is Gathering Steam in Florida - (www.ml-implode.com)
Jobless Rate Climbs in 46 States, With California at 11.2% - (www.ml-implode.com)
Business Grads Looking Beyond Wall Street - (www.ml-implode.com)

Bank Regulators Clash Over Endgame of U.S. Bank Stress Tests - (www.bloomberg.com)
Bank bailout plan's 'stress tests' already causing stress - (www.latimes.com)
Mortgage industry changes throw new hurdles in borrowers' way - (www.latimes.com)
Venture Capital Investment Sinks - (www.nytimes.com)
China's Wen says key currency countries need watching - (www.cnbc.com)
ECB’s Trichet Won’t Exclude Cut, Says Zero Rates Inappropriate - (www.bloomberg.com)
China's premier says economy better than expected - (news.yahoo.com/s/ap)
Fed’s Kohn, Dudley Defend Size, Scope of Emergency Loan Plans - (www.bloomberg.com)

Yellen Signals Letting Lehman Collapse Was a Mistake - (www.bloomberg.com)
Banks Shut in Missouri, Nevada, Bringing 2009 U.S. Tally to 25 - (www.bloomberg.com)
Bank Profits Mask Peril Still Lurking - (www.washingtonpost.com)
GM Chief Concedes Bankruptcy Is Possible - (www.washingtonpost.com)
When the Real Estate Game Cost $9.95 - (www.nytimes.com)