Saturday May 2 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Macklowe Lender to Seize 1330 Tower as Empire Shrinks - (www.bloomberg.com) A 40-story office tower next to New York’s Museum of Modern Art is set to be taken over tomorrow by a unit of Canada’s largest pension fund in the second foreclosure auction of a U.S. skyscraper in less than a month. The pending seizure of 1330 Avenue of the Americas is another step in the dismantling of New York developer Harry Macklowe’s property empire. The building, between 53rd and 54th Street, is topped by a peach “FT” logo signifying the Financial Times newspaper published by tenant Pearson Inc. The auction follows the March 31 sale of Boston’s John Hancock Tower to Normandy Real Estate Partners and Five Mile Capital Partners. The foreclosures are being triggered by defaults on mezzanine loans, a type of property financing that proliferated during the takeover boom that ended in 2007. More auctions may follow as mezzanine lenders foreclose on borrowers that relied on short-term debt to pay for acquisitions, said Daniel Rubock, a senior vice president at Moody’s Investors Service. “Mezzanine loans are the front guard of the capital stack and they’re the ones that are going to be vulnerable first,” Rubock said. “We’re going to see more of these mezzanine loans have problems.”

Lenders Battle Lawmakers Over Letting Courts Modify Mortgages - (www.washingtonpost.com) As lenders begin to implement the Obama administration's foreclosure rescue program, Senate Democrats are wrangling with the financial services industry over a key part of the plan that would permit bankruptcy judges to cut the principal owed by mortgage borrowers. Congressional and industry officials said progress is being made, but no deal has been struck. Major lenders, including Bank of America, Wells Fargo and J.P. Morgan Chase, negotiated with Sen. Richard J. Durbin (D-Ill.), who is leading the effort in the Senate, through the recent two-week recess, officials said. The banks declined to comment. "We're certainly making progress but have yet to reach an agreement," said Max Gleischman, Durbin's spokesman. Under the proposal, a bankruptcy judge could change the terms of a distressed homeowner's mortgage to make it more affordable, including lowering the principal balance or interest rate, a process known as a cramdown. The measure passed the House by a wide margin last month, but then stalled. Senate leaders hope to reach an agreement and vote by Memorial Day. The Obama administration has said the measure is an important part of its efforts to reduce foreclosures. The negotiations, which have also included the Credit Union National Association, have touched on provisions pushed by the financial services industry to blunt the impact of the change. For example, lenders want the cramdown authority to expire by 2014. There is also debate about how to make bankruptcy modification the last resort for borrowers.

BNY Mellon Net Falls 51% as Fees Decline With Equity Markets - (www.bloomberg.com) Bank of New York Mellon Corp., the world’s biggest custody bank, cut its dividend as first-quarter earnings fell short of analysts’ estimates because of a drop in recordkeeping and money-management fees. BNY Mellon fell as much as 15 percent in New York trading after reducing its quarterly dividend to 9 cents a share from 24 cents. Net income dropped 51 percent to $370 million as fees tumbled 28 percent, the New York-based company said today in a statement. Falling equity markets drove a 16 percent year-over-year drop in custody assets to $19.5 trillion, while money managed for clients fell 20 percent to $881 billion. The average value of the MSCI World Index, which reflects the returns of stocks in developed and emerging markets, declined 44 percent in the first quarter from a year earlier. The company “has a number of challenges as fees are under pressure,” Mark Fitzgibbon, an analyst with Sandler O’Neill & Partners LP in New York, said in an interview before the results were announced. Excluding some costs, BNY Mellon earned 53 cents a share, missing the 63-cent average estimate of 15 analysts surveyed by Bloomberg. Per-share earnings were 28 cents after preferred dividends BNY Mellon paid to the U.S. government bank-rescue fund.

IMF Says Global Losses From Credit Crisis May Hit $4.1 Trillion - (www.bloomberg.com) Worldwide losses tied to distressed loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and credit crisis exact a higher toll on financial institutions, the International Monetary Fund said. Banks will shoulder about 61 percent of the writedowns, with insurers, pension funds and other nonbanks assuming the rest, the Washington-based lender said in a report released today on the state of the global financial system. The fund forecast $2.7 trillion in losses from U.S.-originated loans and assets, compared to its estimates of $2.2 trillion in January and $1.4 trillion in October. Without fiscal stimulus and other government action, banks will probably curtail lending in coming months, worsening the most severe global slump in six decades, the IMF said. Even with forceful state policies, “the deleveraging process will be slow and painful”, the fund said. “Stabilizing the financial system remains a key priority and, although progress is being made, further policy efforts will be required,” the fund said in its report. “Without a thorough cleansing of banks’ balance sheets of impaired assets, accompanied by restructuring and, where needed, recapitalization, risks remain that banks’ problems will continue to exert downward pressure on economic activity.” The $4.1 trillion estimate is the first by the IMF to include loans and securities originating in Europe and Japan. Pension funds and insurance companies are also exposed to such losses.

Spain’s Falling Prices Fuel Deflation Fears in Europe - (www.nytimes.com) Faced with plunging orders, merchants across this recession-wracked country are starting to do something that many of them have never done: cut retail prices. Prices dipped everywhere, from restaurants and fashion retailers to pharmacies and supermarkets in March. Hoping to increase sales, Fernando Maestre reduced prices by a third on the video intercoms his company makes for homes and apartment buildings. But that has not helped, so, along with many other Spanish employers, he is continuing to fire workers. The nation’s jobless rate, already a painful 15.5 percent, could soon reach 20 percent, a troubling number for a major industrialized country. With the combination of rising unemployment and falling prices, economists fear Spain may be in the early grip of deflation, a hallmark of both the Great Depression and Japan’s lost decade of the 1990s, and a major concern since the financial crisis went global last year. Deflation can result in a downward spiral that can be difficult to reverse. As unemployment rises sharply and consumers cut spending, companies cut prices. But if sales do not pick up, then revenue can decline further, forcing more cuts in workers or wages. Mr. Maestre is already contemplating additional job and wage cuts for his 250 employees.

Stress Test Results: Most Banks Likely to Pass - (www.time.com) onsumers and investors have been waiting for weeks for the results of the Treasury Department's "stress tests" of the nation's 19 largest banks. And it won't be until May 4 that we get definitive results. But a senior Administration official says the Treasury Department has indicated that there is substantial value in the banks tested and that there are no big shocks coming. (See TIME's "25 People to Blame for the Financial Collapse.") That likely means no big bank will be deemed too stressed to survive. The official says the Treasury does believe some of the banks will need additional capital to make them stronger, and in all likelihood the government will identify those banks. (See TIME's photos of the G-20 protests.) The bank stress tests are considered one of the key components of Treasury Secretary Tim Geithner and President Barack Obama's plan to fix the financial system. They are designed to determine which banks would fail and which would survive if the economy worsens, as some economists expect. But when they were announced in mid-February it was not clear what the government would do with the information collected. Would it shut down a troubled bank? At first, the Treasury Department said it might not release the specific bank results. Observers assumed that Treasury officials were nervous that if a bank failed the test customers and investors would flee. But in the past few weeks the Obama Administration has started to believe that the market is doing a good job of differentiating between good banks and problem banks, according to the Administration official. That belief, the official says, gives the Treasury the confidence that it can release individual results of the stress tests without disrupting the market, or unduly forcing a bank out of business.

Let Insolvent Financial Firms Fail: Fed's Hoenig - (www.cnbc.com) Insolvent financial firms must be allowed to fail regardless of their size, and sheltering such "too big to fail" institutions risks making the financial crisis worse, a top Federal Reserve official said Tuesday. In blunt criticism of the government and his fellow central bankers, Federal Reserve Bank of Kansas City President Thomas Hoenig also said that the design of a $700 billion bank bailout last year had created uncertainty and slowed recovery. "The United States currently faces economic turmoil related directly to a loss of confidence in our largest financial institutions because policymakers accepted the idea that some firms are just 'too big to fail.' I do not," Hoenig told the Joint Economic Committee of the Congress in prepared remarks. "Yes, these institutions are systemically important, but we all know that in a market system, insolvent firms must be allowed to fail regardless of their size, market position or the complexity of operations," said Hoenig, who will be a voter on the Fed's policy-setting committee next year. The biggest 19 U.S. banks are being subjected to a battery of so-called stress tests to restore confidence in their soundness, with guidelines on the process due on Friday and the results on May 4.




OTHER STORIES:

Darling to Agree on Guarantee for U.K. Mortgage Bonds - (www.bloomberg.com)
Audit Cites $900 Million Loss on Citigroup Assets - (www.ml-implode.com)
Company Touts Real Estate Feedback System - (www.ml-implode.com)
Junk Bonds Posting Big Gains on Recovery Hopes - (www.cnbc.com)
Geithner: Bank Rescue Plan Has Right Balance - (www.cnbc.com)
TARP Inspector General Calls For Greater Transparency - (www.cnbc.com)

Roubini: 'Suckers Rally' to Fade Amid Economy Woes - (www.cnbc.com)
U.S. Stocks Fluctuate as BNY Mellon Retreats, Yahoo Rallies - (www.bloomberg.com)
Oil languishes near $46 as stock markets sink - (finance.yahoo.com)
Geithner Says Most U.S. Banks Have Enough Capital - (www.bloomberg.com)
Regulators Give Greater Weight to Loan Quality in U.S. Tests - (www.bloomberg.com)
Hedge Fund’s Book May Have Fallen 75%, FRM’s Tomlinson Says - (www.bloomberg.com)
Bank Aid Programs Are Seen as Open to Fraud - (www.nytimes.com)
Stanford Points Fingers in Fraud Case - (www.nytimes.com)
Sweden slashes interest rates, more cuts expected - (finance.yahoo.com)
India central bank cuts rates by 0.25 points to 4.75% - (www.marketwatch.com)
German Investor Sentiment Increases to Two-Year High - (www.bloomberg.com)
Choosing alternatives to layoffs - (www.latimes.com)
Caterpillar Posts 1st Loss in 16 Years, Cuts Forecast - (www.bloomberg.com)
DuPont Cuts 2009 Profit Forecast as Weak Demand Cuts Sales - (www.bloomberg.com)

IBM Sales Miss Estimates Amid Slump, Currency Changes - (www.bloomberg.com)
Citigroup’s Shareholders Wondering When Treasury Ousts Board - (www.bloomberg.com)