Wednesday April 29 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Biggest Real Estate Bankruptcy In History - (www.bloomberg.com) General Growth Properties Inc. filed the biggest real estate bankruptcy in U.S. history after amassing $27 billion in debt during an acquisition spree that turned it into the second-largest shopping mall owner. The owner of Boston’s Faneuil Hall and the South Street Seaport in New York City ended a seven-month effort today to refinance its debt. The company listed $29.5 billion in assets and debts of about $27.3 billion in the Chapter 11 filing. General Growth will continue operating its more than 200 properties. “We intend to emerge as a leaner company,” General Growth President Thomas Nolan said in an interview today. “We want to come out as a less leveraged company. Our business model remains strong.” General Growth collapsed after spending $11.3 billion to buy commercial-property developer Rouse Co. in 2004 only to get caught in the credit crunch and a U.S. recession that has cut spending and property values. Banks have reduced lending amid mortgage-related writedowns. Commercial real estate prices in the U.S. dropped 15 percent last year, according to Moody’s Investors Service. Retail sales in the U.S. fell in March as soaring job losses forced consumers to pull back. The filing lists Eurohypo AG, a unit of Commerzbank AG, as General Growth’s largest unsecured creditor with claims totaling $2.59 billion under two loans. Only 10 percent of the loans are held by Eurohypo, and the company is the administrative agent for a group of more than 175 creditors, the Eschborn, Germany- based company said in an e-mailed statement today. Noteholders are owed about $4 billion. Simon Gains? The bankruptcy may remake the nation’s mall business and allow General Growth competitors including Simon Property Group Inc. to buy properties and strengthen its position as the No. 1 mall owner, said Dan Fasulo, managing director at real estate research firm Real Capital Analytics. “I think Simon’s going to be able to pick up some of these assets on the cheap,” Fasulo said in an interview. Some of General Growth’s malls would be a good fit for Simon Property, based in Indianapolis, Simon Chief Financial Officer Stephen E. Sterrett said in a telephone interview today. “It’s a very good portfolio,” Sterrett said. “They have some very good assets. Some of them would probably fit very well in our portfolio, but now is probably not the right time to talk about that.”

When financial ruin is one misstep away - (www.latimes.com) El Segundo resident Kathy Caliup can't say for sure when it all started slipping from her grasp -- the credit card bills, the car payments, the rent. All she knows is that she looked around recently and realized her family was essentially one setback from homelessness. "It makes me physically sick," Caliup, 55, told me. "I lay awake at night wondering how I'll get by." Caliup's troubles mirror those of countless other people who have found, often through a combination of bad luck and bad decisions, that the tentacles of the recession are pulling them ever closer to financial ruin. According to the California Department of Social Services, requests for emergency food assistance have risen about 40% since this time last year. The number of food-stamp recipients is up 21% and welfare rolls have grown 9% after declining for almost a decade. "These are huge increases," said Lizelda Lopez, a spokeswoman for the agency. "There's lots of need out there." Caliup, a single mother of two, isn't what you'd call a reckless person. She's worked for just one company -- Macy's -- since she was a teenager. These days, she can be found behind one of the perfume counters at the Culver City store. Caliup came into some extra cash in 2004 when her parents passed away and she and her sister sold off their Inglewood home. Caliup used some of the proceeds to buy a new Toyota Highlander. The rest went to day-to-day expenses. Life dealt Caliup a body blow in 2005 when her then-15-year-old son was diagnosed with cancer. But the family handled the challenges and the healthcare bills, and they persevered. Her son's cancer is now in remission. Things remained relatively stable until last fall. That's when Caliup started to notice that the economy was chewing away at her commissions, leaving her with less money each month. Around this same time, the rent for her two-bedroom apartment was raised to $1,725 from $1,600. Caliup, like so many others, turned to credit cards. First one card, then another. Before she knew it, she was running balances on 12 accounts. Her total credit card debt now tops $25,000. "I don't know how it happened," Caliup said. "It just snowballed out of control." In February, she knew she'd have trouble paying the rent for her apartment. Caliup made a partial payment and contacted the property manager to explain her situation.

Time For Mankiv To Resign - (Mish at http://globaleconomicanalysis.blogspot.com/ ) On Saturday I checked my watch to verify the date. A quick check showed it was April 18. Just to be sure I asked my wife Joanne and she assured me it was the 18th. Likewise my computer said it was the 18th. For a brief moment, I thought we had flashed back in time and it was April 1. April Fool's day was the only rational explanation I could come up with for a column in the New York Times by Gregory Mankiw, professor of economics at Harvard. Please consider It May Be Time for the Fed to Go Negative. At one of my recent Harvard seminars, a graduate student proposed a clever scheme to [make holding money less attractive]. Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent. That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10. Of course, some people might decide that at those rates, they would rather spend the money — for example, by buying a new car. But because expanding aggregate demand is precisely the goal of the interest rate cut, such an incentive isn’t a flaw — it’s a benefit. Mankiw's idea is to generate inflation (in this case defined as rising prices), so that people will spend their money instead of holding on to it. Mankiw clearly thinks rising prices and borrowing no matter how much debt people have is a good thing. I will come back to that issue in a bit in a discussion about "inflation targeting" but first let's take a look at this so called "clever scheme". Flaws In The Clever Scheme: Mankiw overlooks the obvious point that currency in people's possession is but a tiny percent of money supply. Indeed some 90% or so is sitting in checking accounts, savings accounts, etc with no serial number. So the schemed is flawed from the start.

Hawaii foreclosures soar 503% in March - (www.honoluluadvertiser.com) Foreclosure filings in Hawai'i rose to their highest level since the present real estate market downturn began, soaring a record 503 percent to 724 from 120 in the same month last year, real estate research firm RealtyTrac reported. A decline in property values and continued constriction of home sales have made avoiding foreclosure harder for many people who can't pay or refinance their mortgage in a poor economic climate that has included widespread cuts in wages and jobs. Last month, the state's unemployment rate hit a more than 30-year high of 6.5 percent. Based on RealtyTrac's count of total filings, Hawai'i's 503 percent increase in March was second only to a 563 percent increase for North Dakota. There was one foreclosure filing for every 700 households in Hawai'i. There were 29 states with a better ratio, which sharply contrasts with the position Hawai'i consistently had enjoyed before the middle of last year — among the 10 best states. The national average was one filing per 375 households. Nationally, there were 341,180 foreclosure filings in March, up 46 percent from a year earlier.

Goldman Sachs Tries to Shut Down Financial Blogger - (www.marketoracle.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. 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. He claims he has followed all legal requirements to own and operate the website – and that the header of the site clearly states that the content has not been approved by the bank. On a special section of his blog entitled "Goldman Sachs vs Mike Morgan" he predicts that the fight will probably end up in court. "It's just another example of how a bully like Goldman Sachs tries to throw their weight around," he writes." (UK Telegraph)

US to put conditions on Tarp repayment - (www.ft.com) Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times. “Our general objective is going to be what is good for the system,” the senior official said. “We want the system to have enough capital.”

Men bear the brunt of US jobs lost - (www.ft.com) The US recession has opened up the biggest gap between male and female unemployment rates since records began in 1948, as men bear the brunt of the economy’s contraction. Men have lost almost 80 per cent of the 5.1m jobs that have gone in the US since the recession started, pushing the male unemployment rate to 8.8 per cent. The female jobless rate has hit 7 per cent.

Carlyle to stop using ‘finders’ - (www.ft.com) Carlyle, the US private equity firm, has decided to stop using placement agents to solicit money from public pension funds following the indictment of a New York state political figure to whom it paid $12m in finder’s fees. The change in policy represents the latest fallout from an investigation by the Securities and Exchange Commission and New York’s attorney-general into alleged kickbacks paid to secure money from New York’s $105bn Common Retirement Fund.

Dividing debts in divorce - (www.latimes.com) Couples in the process of divorce spend a lot of time divvying up their assets. But in today's miserable economy, experts maintain that soon-to-be-exes should take even greater care dividing up the debts. Otherwise, your former spouse's job loss could end up hitting your balance sheet -- and credit report -- years after you think the divorce is settled. "This is one of the more difficult things to do and people often forget about it," said John Ulzheimer, director of consumer education at Credit.com. "But if you don't do it, or don't do it right, it can not only cost you money, it can cost you your credit rating for a long period of time." Unfortunately, even people who think they are dividing debt often aren't dividing it legally -- despite approval from a divorce court, experts say. Couples often think that they can assign repayment of debts in the process of a divorce -- e.g., you repay the Visa; I'll take the AmEx -- said D. Michael Bush, a Newport Beach-based lawyer. But unless they got the creditor's approval -- in addition to the court's -- the assignment is not legally enforceable, he said. "There has to be an upfront agreement that includes the lender, or the lender can go where the money is -- it doesn't matter what you did in court," he said.



OTHER STORIES:

Bay Area home buyers bidding up 'bargain' properties - (www.latimes.com)
Europe’s rich rush for hedge fund exits - (www.ft.com)
House As Shelter, Or Burden? - (www.economist.com)
US Foreclosure Filings Jump as Moratoriums End - (www.cnbc.com)

General Motors Could Sell Opel Stake for No Gain - (www.cnbc.com)
Automakers Need to Keep Racing - (www.cnbc.com)
Obama To Take Aim at Credit Card Abuses - (www.cnbc.com)
Recession's Worst May Be Over, but 'Long Slog' Ahead - (www.cnbc.com)
Deflation Has Gone Global - (Mish at globaleconomicanalysis.blogspot.com)
The Real Fiscal Crisis Is Yet to Come - (knowledge.wharton.upenn.edu)
Looting Social Security - (www.thenation.com)
Wells Fargo Appraisers Lawsuit - (www.hbsslaw.com)
Is fear the cause of the business feeze? I think not - (www.examiner.com)
Unsafe Money Market Guarantees Expire in April - (www.geldpress.com)
No End Yet for Downturn in Housing, New Data Sugges - (www.nytimes.com)
Why a 50% Drop in Housing Is Not the Bottom - (Charles Hugh Smith at www.oftwominds.com)
T2 Partners Presentation - (www.scribd.com)
Yahoo plans to eliminate up to 600 jobs - (www.sfgate.com)
Unemployment Impacting S. California's Rental Markets - (www.nuwireinvestor.com)
Commercial real estate market softens - (www.sfgate.com)
On the front lines of the US meltdown - (www.macleans.ca)
Empty Florida houses may return to nature - (www.latimes.com)
Economist Predicts Future - (www.dilbert.com)