Saturday May 16 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Trump Baja project is turning into a legal battle of Trump proportions - (www.latimes.com) To angry buyers, the heart of the dispute over the failed luxury vacation home complex is this: If Donald Trump is identified as a project's builder, is he liable if the actual builder fails? Reporting from Tijuana -- Waves crash against a rocky shore while a couple stroll hand in hand on the beach. Poolside, a bartender is mixing up a batch of margaritas. Then comes Donald Trump, smooth and confident, singing the praises of the new Trump Ocean Resort Baja Mexico north of Rosarito Beach, an area he touts as "the next Cabo." "I'm very proud of the fact that when I build, I have investors that follow me all over," he says in the eight-minute marketing video produced for potential buyers. "They invest in me. They invest in what I build, and that's why I'm so excited about Trump Ocean Resort. "This is going to be something very, very special." So special that 80% of the first phase sold within hours in a 2006 presale. Many of the buyers were Southern California residents looking for affordable oceanfront vacation property. But three years later, the only progress is a gigantic hole in the ground and a heap of dirt. Instead of a 525-unit luxury vacation home complex with pools and tennis courts, this project is shaping up to be a legal battle of Trump proportions. Dozens of angry buyers have sued Trump for failing to complete the project. He, in turn, sued the Los Angeles-based builders, saying he had only lent his name to the project, and it was the developers who allowed the project to fail. To the buyers, the heart of the dispute is this: If Trump is identified as a project's builder, is he liable if the actual builder fails? Yes, says Hamed Hoshyarsar, a Northridge accountant who bought one of the units. "That's the reason why we went with this project: Trump's name was on it," said Hoshyarsar, 30. "If we would have known he just licensed his name and he wasn't the developer, then we wouldn't have bought it." Now he changes the channel when Trump appears on television. "I can't believe a person with the reputation of Donald Trump and all that he represents on 'The Apprentice,' that he let this happen to us," Hoshyarsar said. "It's unbelievable." Trump said in an interview that sales contracts made it clear that he was not the developer. He said he licensed his name because the developer had a "good reputation" and had been a reliable partner in a similar project on Waikiki Beach. "The documents state very clearly that we were not the developer," Trump said. "We're looking into the whole situation, because it doesn't make me happier than it makes them. I don't like to see people lose money."

Housing crunch becomes literal in Victorville - (www.latimes.com) A bank cuts its losses on a failed 16-unit project by having the homes demolished. Curtis Forrester moved into a brand-new house in Victorville last week, but there was little time to enjoy the Jacuzzi and designer kitchen. He was there only to see it destroyed. Just a few days after his arrival, the two-story residence and three other luxurious model homes were crushed and hauled off for scrap, the latest fallout from Southern California's real estate crash. The homes were part of a planned 16-unit project in this community 100 miles north of Los Angeles. The Texas bank that owns the failed development decided to demolish the houses, a cheaper alternative to completing and selling them. Forrester was hired to keep thieves away and help sell off the fixtures. "All my life I've been building things," said the 59-year-old construction worker. "It's kind of fun tearing them down." The Victorville demolition is one of the most dramatic ends to a bad bet made during the housing boom, but abandoned developments have become an all-too-common sight in California. Nearly 250 residential developments totaling 9,389 homes have been halted across the state, according to one research firm. The developer of the Victorville project had hoped to sell the houses for more than $300,000 as they were being built last year, Forrester said. But reality quickly diverged from that vision. Home prices have tanked faster in San Bernardino County than any other Southern California county during the downturn. In March, the median home sale price for the county was $160,000, down 43% in a year, according to the San Diego-based research firm MDA DataQuick. Officials of Guaranty Bank of Austin, Texas, which took over the development last year, were unavailable for comment. But Victorville city spokeswoman Yvonne Hester said the bank decided not to throw good money after bad. "It just didn't pencil out for them," she said. "They'd have to spend a lot of money to turn around and sell the houses. They just made a financial decision to just demolish them." The development was in a part of town remote even for Victorville, a wind-swept high desert city of about 100,000 residents. A dozen of the homes were in various stages of construction. Some had frames erected, and a few others had drywall hung, said Jorge Duran, Victorville's code enforcement manager. The four finished homes, however, were richly appointed with granite countertops, whirlpool bathtubs and dual-pane windows. Building permits were issued in September 2007, Hester said. Home prices were already falling, but in San Bernardino County, the median price that month was still a robust $325,000, according to DataQuick, enough to keep fueling hope -- or denial. Construction halted in the summer of 2008, and the homes became a nuisance, attracting vandals and squatters, Hester said. The city first cited the developer for failing to maintain the property in July, Hester said. "People were taking sinks, the air conditioners. For someone who wanted to do no good, it provided an opportunity," she said.

Bank lending terms keep squeeze on consumers - (www.ft.com) Banks tightened lending standards further in the three months to April, adding to the credit squeeze on households and businesses, the Federal Reserve’s senior loan officers survey said on Monday. However, the proportion of banks setting tougher standards in a number of loan categories fell relative to January, suggesting the tightening process could be abating. In each category, more than 70 per cent of US banks said the quality of their loan portfolio was likely to deteriorate this year. Meanwhile, demand for all loans other than prime mortgages eligible for securitisation by Fannie Mae and Freddie Mac, the mortgage finance giants, declined substantially. Indeed, the survey suggests that the main cause of low or declining loan volume going forward may be weak demand for credit rather than problems supplying it. However, some analysts think the banks responding to the survey may be shaping their answers to try to create this impression.

Fed Stress Test Results May Show 10 U.S. Banks Need Capital - (www.bloomberg.com) The Federal Reserve plans to deliver results of stress tests on U.S. banks to executives today that may show about 10 companies need additional capital to weather a deeper recession, people familiar with the matter said. Banks are formulating plans for filling their capital requirements, much of which would likely come from conversions of preferred shares, the people said. Many of the 19 lenders under review and the government are set to discuss publicly the examinations after markets close May 7, the people said. Financial shares jumped the most in almost a month yesterday on optimism about the tests. The Treasury and regulators have presented different options for the banks to shore up their books without taking taxpayer money, including selling assets, seeking private capital and converting previous government investments from preferred to common shares. “Maybe the capital that’s required from these tests is going to be smaller than the market had been anticipating,” said Blake Howells, an analyst at Becker Capital Management, which oversees $1.7 billion in Portland, Oregon, and owns shares of U.S. Bancorp and KeyCorp, referring to the stock rally. Still, “for the stress test to have any sort of legitimacy, some of the banks are going to have to raise capital,” he said.

Ross: Obama's Tax Changes Are a 'Huge Mistake' - (www.cnbc.com) Wilbur Ross, chairman & CEO WL Ross & Co., says President Obama's proposed tax changes that target U.S.-based global companies, will be a huge mistake, as they will hurt U.S. corporations dependent on overseas growth and sales. "Well, we don't know the full details of them just yet, but apparently what he's trying to do is to curb what he views as inappropriate measures taken to limit taxation," Ross told CNBC. In part, Ross explains, this is to stop large financial institutions from helping American citizens evade their U.S. taxes through a variety of offshore accounting methods. "The part that's more complicated is about the corporations. And it almost sounded as though he was intending to be punitive on corporations that had extensive overseas operations. To the degree that that's true I think it would be a huge mistake, because one of the reasons that many of the U.S. corporations are prospering is in fact their participation in the more rapidly growing markets overseas. And I think that's a very dangerous slope," Ross said. Obama, intends to raise $210 billion over a decade by revising a tax policy that lets companies defer income earned abroad, and by closing a loophole that administration officials say lets firms hide foreign subsidiaries. David Roche, global strategist at Independent Strategy, thinks the reason why Obama is pursuing this so aggressively is very simple-money.

India’s Economy Is Suddenly Starved for Investment - (www.nytimes.com) Sumit Sapra is a member of that ambitious, impatient generation of young Indians who rode the crest of the global economy. In five years, he changed jobs three times, quadrupling his salary along the way. Even when satisfied with his position, he kept his résumé posted on job sites, in case better offers came along. And he splurged. In three years, he bought three cars, moving up a notch in luxury each time. For weekend jaunts, he bought a motorcycle. Mr. Sapra’s last and best-paying job was at the Indian headquarters of the financial services arm of General Electric, investing western money in Indian energy projects. But last December, foreign money dried up and Mr. Sapra, with a prestigious degree, was laid off. “Earlier it was money chasing a few projects,” Mr. Sapra, 30, said of the change that seemed to come virtually overnight. “Now it’s the other way around.” Not long ago, Indian leaders confidently predicted this country would emerge largely unscathed from the global economic crisis. It is now becoming clear that that view was too optimistic, nowhere more so than in this city south of New Delhi that was once the symbol of India’s economic boom. A few short years ago, construction sites here buzzed 24 hours a day, crews working through the night, cramming down food from onsite trucks during breaks in the twilight. Now real estate sites lie fallow. The once-booming art market has slowed to a crawl. And charmed professionals with coveted degrees, like Sumit Sapra, are unemployed or taking pay cuts to hold on to their jobs. India’s phenomenal growth of the last five years was powered in large part by huge injections of cash and investment. Investment accounted for about 39 percent of the country’s gross domestic product in fiscal year 2008, up from 25 percent five years ago. At its peak, more than a third of investment came from abroad, according to Credit Suisse. But in the last three months of last year, foreign loans and direct investment fell by nearly a third, to their lowest level in more than two years.

Georgia leads the nation in bank failures - (www.usatoday.com) The banner above FirstCity Bank still reads "Celebrating 100 Years of Service," but the 690 residents of this rural community aren't in the mood — not since government regulators locked the door, emptied the vault and closed the only bank within nearly 20 miles. Georgia leads the nation in bank failures, with nine banks shut down in the past year. Still, few in tiny Glascock County suspected the financial meltdown driven by toxic real-estate loans would scuttle the place they deposited paychecks earned from sawmills and row-crop farming, their local lender for buying tractors and pickups. "We need a bank, definitely," says 70-year-old Charles Usry, who fits cars with brakes and tires at his small auto parts store across Main Street from the now-empty FirstCity. "If you don't have a bank, eventually people are going to go somewhere else. The towns are going to die." Eleven Georgia banks, most surrounding Atlanta, have been shuttered by regulators, followed by nine in California and four in Florida. Experts predict more could be closed in Georgia in the future. But what propelled Georgia to No. 1 in bank failures is complicated. Experts say it's a combination of an antiquated state law that favored a plethora of smaller community banks over multi-branch giants; a population explosion in metro Atlanta that fueled massive suburban real estate development and a crush of new banks formed to cash in on the Atlanta boom shortly before the market tanked.

Democrats wallow in a 'culture of corruption' - (www.latimes.com) Some days you have to ask yourself, my God, what if these people were Republicans? Democrats took back Congress in 2006 and the presidency in 2008 in no small part because of their ability to bang their spoons on their high chairs about what they called the Republican "culture of corruption." Their choreographed outrage was coordinated with the precision of a North Korean missile launch pageant. And, to be fair, they had a point. The GOP did have its legitimate embarrassments. California Rep. Randy "Duke" Cunningham and lobbyist Jack Abramoff were fair game, and so was Rep. Mark Foley, the twisted Florida congressman who allegedly wanted male congressional pages cleaned and perfumed and brought to his tent, as it were. Of course, it wasn't as if Democrats were without sin. Louisiana Rep. William Jefferson was indicted on fraud, bribery and corruption charges in 2007, after an investigation unearthed, among other things, $90,000 in his freezer. Then-New York Gov. Eliot Spitzer was busted in a prostitution scandal. But that's all yesterday's news. Let's look at the here and now. Barack Obama, who vowed he'd provide a transparent administration staffed with disinterested public servants with the self-restraint of Roman castrati, appointed an admitted tax cheat to run the Treasury Department -- and he's hardly the only one in the administration. New York Rep. Charles Rangel, chairman of the House Ways and Means Committee, is under investigation for, among other things, failing to report income from his Caribbean villa. Meanwhile, Sen. Christopher Dodd, chairman of the Senate Banking Committee, got sweetheart deals from subprime lender Countrywide and has yet to adequately explain his too-good-to-be-true deal on his million-dollar "cottage" in Ireland, which he may have gotten in exchange for finagling a pardon (from President Clinton) for a felon. Oh, Dodd also secretly protected those AIG bonuses that raised such a ruckus last month. Rep. Jack Murtha of Pennsylvania, Nancy Pelosi's moral authority on military matters during the Iraq war, has been revealed as a kleptomaniac of sorts, delivering as much of the federal budget as possible to various cronies and lobbyists. John Edwards, who had an affair even as he was scoring Oprah-points as the supportive husband during his wife's battle with breast cancer, is being investigated by the feds for the improper use of campaign funds. It looks like the silky haired champion of the little guys may have used their donations to bribe the alleged "baby mama" into silence. And it would be a shame to let it pass that Obama's Senate seat was put up for sale by the then-Democratic governor of Illinois, Rod Blagojevich, and Illinois Rep. Jesse Jackson Jr. is under investigation for trying to buy it. But you know what? We ain't seen nothing yet. For starters, the real corruption isn't what the media are ignoring or downplaying as isolated incidents. It's what the media are hailing as bold, inspirational leadership. The White House, as a matter of policy, is rewriting legal contracts, picking winners (mostly labor unions and mortgage defaulters) and singling out losers (evil "speculators") while much of the media continue to ponder whether Obama is better than FDR. If a Republican administration, staffed with cronies from Goldman Sachs and Citibank, was cutting special deals for its political allies, I suspect we'd be hearing fewer FDR analogies and more nouns ending with the suffix "gate." Take Obama's "car czar," Steven Rattner. According to ABC's Jake Tapper, Rattner is accused of threatening to use the White House to smear a Chrysler creditor if it refused to back the administration's bankruptcy plan. He's also connected to a massive pension fund scandal involving the investment firm he used to run. One allegation is that conspirators used investments in the low-budget movie "Chooch" to expedite their alleged chicanery. Chooch, by the way, is Italian slang for "jackass," which just happens to be the Democrats' mascot. More to the point, political corruption is inevitable whenever you give hacks -- of either party -- too much discretion over public funds. Businesses look to Washington for profits instead of to the market. The thing is, this has become the governing philosophy of the Democratic Party, from banking and cars to healthcare and now student loans. The federal government is taking over, and the culture of corruption inevitably trickles down. That in itself should be a scandal.

Global Pension Tension? - (www.nakedcapitalism.com) - All around the world, pension tension is growing. You're only beginning to see what I've been predicting for a long time. It's one huge mess. Here is a small sampling of global pension tension: Insolvent AbitibiBowater Inc. had no right to unilaterally rescind pension benefit improvements that had been negotiated in a collective agreement prior to the newsprint giant entering bankruptcy protection, a judge ruled today. Air Canada said on Monday it was seeking support from its unions for 'a moratorium and other conditions on funding' its pension deficit, which is more than C$3 billion ($2.5 billion). Connecticut Treasurer Denise Nappier said on Monday the state is terminating its investment agreement with Dallas-based private equity firm Aldus Capital LLC, after it was caught up in the criminal and civil probe of the New York State pension fund. Teacher pension tsunami is expected across Pennsylvania. A bubble in the number of teachers expected to retire in the next decade and a 30 percent drop in the total value of the Pennsylvania Public School Employees' Retirement System's (PSERS) assets last year in the souring economy means districts contribute more to the teachers' retirement fund. Minnesota teachers are asking state lawmakers for a $223 million bailout for their pension fund. The Education Minnesota teachers' union, their retirement association and other groups are asking the state Legislature for between $207 million and $223 million over four years to put their pension fund on sound footing. The protracted economic downturn has chewed up nearly a quarter of the value of Ohio's five public pension plans, forcing their leaders to more seriously consider unpopular options such as dialing back cost-of-living increases and even raising retirement ages. Many Rhode Island cities and towns are struggling with the increasing burden of pension costs. A new study by the business-backed Rhode Island Public Expenditure Council reports that the amount of money communities spend on pensions has increased nearly 50 percent in the past five years, to $149 million in the fiscal year that ends June 30. Detroit's public pension trustees approved trips last year to more than 100 conferences around the globe, even as the city's two pension funds were losing billions. New York City is proposing a Tier 5 pension plan for city employees that would result in an immediate savings of $200 million for the city in the coming year. By 2030, the Tier 5 pension plan would save the city an estimated $7 billion. This pension tier would need to be created through state law. More than 100 retired government employees who worked for surrounding cities and Solano County -- nearly half of them from Vallejo -- are receiving annual pensions of $100,000 or greater. Massachusetts Governor Deval Patrick said yesterday that he wants the state to rescind the special pensions given to 10 former legislators because it appeared that those pensions were improperly awarded……. Americans with shrunken nest eggs are feeling nostalgic for pensions. About half of those without a pension (55 percent), say the old-fashioned retirement plan would ease their money worries, according to a National Institute on Retirement Security survey. However, not all workers with pensions are sleeping soundly. Only about 65 percent of Americans with a pension are confident that the payout will be there at retirement.




OTHER STORIES:

Stress Test Results Changing Daily - (www.ml-implode.com) - ``The problem with this exercise is it’s very clearly not an honest appraisal of banks’ true health. Nor was it intended to be....
Goldman Connection Puts NY Fed Official In Tight Spot - (www.ml-implode.com) - "When Goldman Sachs became a bank holding company late last year, New York Fed official Stephen Friedman inadvertently found him...
Rape vs. 'Enhanced Interrogation' - (www.theatlantic.com) Bernanke: Hopeful Signs, But No Quick Recovery - (www.nytimes.com)Fed Stress Tests Show 10 Banks Need Capital - (www.bloomberg.com)Wages Contract in US, UK, Japan - (Mish at globaleconomicanalysis.blogspot.com) Number of Children in Japan Declines for 28th Straight Year - (finance.yahoo.com)Ron Paul's Son Rand Ready to Run for KY Senate - (www.chron.com)

Ten Banks Need More Capital After Stress Tests: Source - (www.cnbc.com)
'Too-Big-To-Fail' Banks May Be Next Hot-Button Issue - (www.cnbc.com)
Banks Are Now Bulldozing Foreclosed Homes - (www.cnbc.com)
Short-Sale Rules Will Be Priority: SEC Chairman - (www.cnbc.com)

U.S. Stocks Retreat on Concern Over Government Stress Tests - (www.bloomberg.com)
Oil lingers above $54 on economic recovery hopes - (finance.yahoo.com)
World stocks steady after recent big gains - (finance.yahoo.com)

European Producer Prices Decline 3.1%, Biggest Drop in 22 Years - (www.bloomberg.com)
Number of children in Japan slides to new low - (finance.yahoo.com)
Mexicans see swine flu as Mexico City's problem - (news.yahoo.com/s/ap)
Service Industries in U.S. Contract at Slower Pace - (www.bloomberg.com)
Where Home Prices Crashed Early, Signs of a Rebound - (www.nytimes.com)
Wells asked to raise capital after stress test - (www.sfgate.com)
Major Banks Get Stress Test Results Today - (www.washingtonpost.com)
UBS Posts Loss, Sees Higher Loan Provisions as Economy Worsens - (www.bloomberg.com)
GMAC posts wider loss but points to signs of recovery - (www.marketwatch.com)
A Final Bargain at Filene’s: The Stores, in Bankruptcy - (www.nytimes.com)