Monday May 11 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

YouTube - VICTORVILLE MODEL HOMES DEMOLISHED - SHOCKING VIDEO: Part 5 - (www.youtube.com) The housing collapse is taking a literal form for one bankrupt housing development. Four model homes and 12 nearly finished spec homes at Bear Valley Road and Highway 395 are being demolished. The developer filed bankruptcy about 18 months ago and the foreclosed property went to Guaranty Bank in Irvine. A Guaranty Bank official, Real Estate Officer Dean Smith, said they were facing daily fines from the city of Victorville if they didn’t do something with the homes and property that not up to code. He said it was a choice of pumping their own money into property site improvements and additional money to bring the home up to code or tear down the 16 homes. Smith said the bank is not in the building or land development business and because of the current housing market does not see anything happening with the property for at least five years. Our only option is to either proceed with putting more than a million bucks into the land, which we've already taken a huge hit on and lost a lot of money, or, we tear down the houses, Smith said. He said the builder put up the homes before completing the site improvements and failed to have enough money to finish roads, walls, and other improvements that bring the community into code. Everything just fell apart at that point and we can’t sell homes that are not up to code, Smith said. He said the city of Victorville fined the bank once because the home are out of code and would have faced daily fines if Guaranty didn't do something with the vacant houses. There are still substantial dollars that need to be put into the land before the city of Victorville will give certificates of occupancy on the houses and the bank isn't willing to put forward that amount of money, Smith said. He said the homes are a liability to Guaranty and that all of them are heavily vandalized inside and out with broken glass everywhere. Our projections are that those houses would sit the way they are for at least five years, what would they be worth then? Smith said. He said once the homes are demolished the property will be put on the market again. Calls to the developer were not returned.

SHOCKING: EXTREME HOME MAKEOVER-DEPRESSION EDITION PART 4 - (www.youtube.com) Guaranty Banks Holding Corporation received guess what? TARP money, that’s right, YOU the tax payer paid for the demo. When you think of all the people currently living in tent cities in southern cali - it's disgraceful. Those houses are large enough to hold 2 families at least. I guess some bureaucracy decided they had to get their piece of the TARP bailout by assessing code violations against the bank after they took over... wonder if it was for not filing the right paperwork, or not completing within permit period, or lack of landscaping, or what. I'm sure they came up with all kinds of stuff to try to pull some money into their budget. Backfired, didn't it. And what a waste.

Rep. Barney Frank in 2005: What Housing Bubble? - (www.youtube.com) A speech by Barney Frank on the House Floor in 2005 where he refutes any concern about a housing industry bubble and advocates for the government to continuing expanding home ownership. Scary that this is coming from House Financial Services Committee Chairman Barney Frank. Frank. This guy proves he can’t be trusted to run the financial services committee and should not even be allowed to stay in office. In 1990, The House Ethics Committee recommended Frank be reprimanded because he "reflected discredit upon the House" by using his congressional office to fix 33 of Steve Gobie's parking tickets. Frank confirmed that he paid Gobie for sex, hired him with personal funds as an aide and wrote letters on congressional stationery on his behalf to Virginia probation officials, but Frank said he fired Gobie when he learned that prostitution clients were visiting the apartment.

Sen. Dick Durbin: Banks Frankly Own The Senate - (www.huffingtonpost.com) Sen. Dick Durbin (D-Ill.) has been battling the banks the last few weeks in an effort to get 60 votes lined up for bankruptcy reform. He's losing. On Monday night in an interview with a radio host back home, he came to a stark conclusion: the banks own the Senate. "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place," he said on WJJG 1530 AM's "Mornings with Ray Hanania." Progress Illinois picked up the quote.

Paycheck: $80,000. Hours working: 0 - (money.cnn.com) Some large law firms are putting their incoming associates on hold until the economy picks up, in return for a stipend of up to $80,000. As many Americans are struggling to find a job, some are getting paid as much as $80,000 a year not to work. A number of third-year law students on the brink of graduation are being asked by their future employers to stay home for now - with pay. Over 100 large firms, or firms with 200 or more attorneys, have delayed the start date for at least a portion of their incoming first-year associates, according to Above the Law, a blog covering the legal industry. The majority of those firms have delayed start dates into 2010, and provided some financial assistance to those on standby, Above the Law said, a move that doesn't come cheap. Some students have been offered hefty stipends of up to $80,000, and even full benefits in some cases.

Auto sales plunge to near 30-year lows - (www.reuters.com) U.S. auto sales fell 34.4 percent in April as the industry held near the lowest levels in nearly 30 years and closed out the month with Chrysler LLC filing for bankruptcy protection. The talk of bankruptcy surrounding Chrysler and General Motors Corp, which faces similar pressures, only spooked consumers last month and led to weaker-than-expected industry results, executives and analysts said. "Clearly, the uncertainty, the bankruptcy talk, has really affected the entire industry," GM chief sales analyst Mike DiGiovanni said on a conference call, adding retail sales had hit a wall in the last week of April. U.S. auto sales came in at a 9.32 million seasonally adjusted annual rate in April, according to Autodata Corp, below the 9.8 million rate that analysts had expected. The annualized rate of U.S. auto sales is a closely watched indicator of economic activity. That marked the 18th consecutive month of year-over-year declining sales and a drop from 9.86 million in March.

Desperate car dealers get useless loans - (money.cnn.com) Starting early next week, larger businesses will temporarily be eligible to apply for loans backed by the Small Business Administration, a move aimed at getting help to besieged auto dealers and industry suppliers. Through September 2010, the SBA will raise the size standard of what counts as a "small" business, allowing slightly bigger companies to participate in its flagship 7(a) lending program. Typically, auto dealers haven't qualified for the program because most have annual sales in excess of $29 million, the SBA's cap for that industry. But from now through the end of the 2010 fiscal year, the SBA will disregard the revenue cap and use other criteria for eligibility. Companies with less than $3 million in annual income and a net worth of less than $8.5 million will qualify for the loans. Though this new criteria is aimed at auto dealerships, the SBA anticipates that more than 70,000 small businesses nationwide from a variety of industries will now qualify for its 7(a) loans. But it's not clear whether the new eligibility rules will actually make significant new financing available for auto businesses in need. There are a few hitches. First, auto dealerships typically rely for their financing needs on automotive financing entities such as Ford Motor Credit Corporation, General Motors Acceptance Corporation (GMAC) and Chrysler Financial. None of the major automotive financiers are currently on the list of lenders certified by the SBA to make agency-backed loans. Also, the most common type of loan an auto dealership takes out is what's known as "floorplan" financing, which allows the dealer to borrow money to buy vehicles from a manufacturer and repay the loan as the cars sell. The SBA's 7(a) loans are strictly for working capital and can't be used for vehicle inventory financing. The National Automobile Dealers Association is lobbying President Obama's administration to lift that constraint.

Silverton Bank in Atlanta Seized by Regulator Amid Recession - (www.bloomberg.com) Banks in Georgia, New Jersey and Utah were seized by regulators today, boosting the tally of failed lenders in the U.S. this year to 32 and tapping more than $1.4 billion of the federal government’s deposit-insurance fund. Silverton Bank of Atlanta, a commercial bank, was shut by the Office of the Comptroller of the Currency. Citizens Community Bank in Ridgewood, New Jersey, and America West Bank of Layton, Utah, were seized by state regulators. The Federal Deposit Insurance Corp. was named receiver for all three. Silverton Bank is the largest failure since Downey Financial Corp. was shut in November at a cost to the FDIC of about $1.37 billion. The FDIC’s deposit-insurance fund, which is supported by fees on insured banks, plummeted 45 percent in the fourth quarter to $18.9 billion as 25 banks were closed in 2008. The U.S. economy contracted at a 6.1 percent annual rate from January through March, the weakest performance since 1957-1958. Silverton Bank didn’t take consumer deposits, the FDIC said today in a statement. It provided services to about 1,400 banks in 44 states. The FDIC set up a bridge bank to take over the operations of Silverton Bank, with about $4.1 billion in assets and $3.3 billion in deposits. The cost to the insurance fund related to Silverton bank was about $1.3 billion.

Extreme Home Makeover Depression Edition - (Mish at globaleconomicanalysis.blogspot.com) Inquiring minds are watching a pair of videos from Southern California. Allegedly, banks acquired brand new homes in foreclosure processes, the homes were not quite finished and the banks razed these homes rather than fix code violations. There you have it. Brand new nearly completed homes have a negative value because of regulations and are therefore destroyed.

A Laughably Late Conversion to the Cause of Fairness - (www.washingtonpost.com) There may be nothing more pathetic than a hedge-fund manager worked up in a moral lather, complaining that he hasn't been treated fairly. View Only Top Items in This Story
Since when did any of these guys ever worry about fairness? Certainly fairness was not an overriding concern of hedge-fund managers when they threatened to move even more of their operations to the Cayman Islands if forced to pay a regular tax rate on their exorbitant management fees. Nor do I recall receiving even a single e-mail from a hedge-fund manager complaining about how unfair it was that the government stepped in to bail out creditors and counterparties of Citigroup, Bear Stearns and AIG. But now that these hedgies are looking at the butt end of a government-imposed cramdown that would give them only 30 cents of each dollar owed by Chrysler, suddenly they're all about fairness and the rule of law. What you need to know about these vultures is that their idea of fairness is throwing 100,000 people out of work and denying retirees their pensions and their health benefits just so they can liquidate the company and maybe squeeze an extra 15 cents on the dollar from their Chrysler debt. Of course, to get that extra 15 cents, the hedge funds would probably have to fork over a penny or two to pay the army of $700-an-hour lawyers needed to spend two years working it through the bankruptcy process. Add to that another couple of cents for the battalion of $10-million-a-year investment bankers needed to sell the assets to the highest bidder. Meanwhile, every day that goes by, the value of those assets would decline a little more. And what exactly are these precious Chrysler assets that the hedge funds think would fetch them so much in liquidation? Aside from a few valuable brands, they're auto plants and machinery and large tracts of contaminated industrial land in some of the most economically depressed cities in the United States. No doubt folks would be lining up around the block for a chance to snatch up those babies.




OTHER STORIES:

Citi may need $10 billion more - report - (money.cnn.com)
Three more banks fail - (money.cnn.com)
Chrysler set to close four plants - (money.cnn.com)
Aftershocks to hit auto industry hard - (money.cnn.com)
Stocks rise on day, week - (money.cnn.com)
Bank stress test results delayed - (money.cnn.com)

It's still safe to bring home the bacon - (money.cnn.com)
Fast fixes to get your house sold - (money.cnn.com)
$10,000 deductible and other health cost woes - (money.cnn.com)

Treasuries Head for Sixth Weekly Loss as Economy Stabilizes - (www.bloomberg.com)
U.S. Stocks Gain on Improvement in Confidence, Manufacturing - (www.bloomberg.com)
Bank ‘Stress Test’ Results Due Next Thursday - (www.nytimes.com)
China's gold buy raises eyebrows for all the right reasons - (www.marketwatch.com)
Corporate Credit Markets Headed for Best Month Since December - (www.bloomberg.com)
Goodbye to Naked Shorting - (www.nytimes.com)
World Bank Bonds Show What Happens When Governments Rush Rescue - (www.bloomberg.com)
ADB plans $13bn boost to fight crisis - (www.ft.com)
Chinese Economy Gaining Steam - (www.businessweek.com)
India Exports Plunge by Record as Global Recession Hurts Demand - (www.bloomberg.com)

China Manufacturing Expands, Adding to Recovery Signs - (www.bloomberg.com)
Japan's jobless rate up, household spending down - (finance.yahoo.com)
U.S. Michigan Consumer Sentiment Index Rises to 65.1 - (www.bloomberg.com)
Carmakers' woes hitting state jobs, revenue - (www.sfgate.com)

In Chrysler Saga, Hedge Funds Cast As Prime Villain - (www.washingtonpost.com)
Chrysler U.S. Sales Fall 48%; Toyota Trails Estimates - (www.bloomberg.com)
After struggle, Chrysler succumbs to bankruptcy - (www.washingtonpost.com)
A Primer on a Chrysler Bankruptcy - (www.nytimes.com)