Sunday May 10 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

4,820 CalPERS Retirees Rreceive Annual Pensions In Excess Of $100,000 - (www.flashreport.org) We have a lot to worry about these days. We’re worried that we may lose our jobs, that we may lose our healthcare insurance and that we won’t have sufficient retirement savings. We realize that without jobs we can’t make our mortgage payments; we know that our homes have dropped in value resulting in little or no equity, so we can’t afford to stay in or sell our homes. In California there is one lucky group that doesn’t have those worries: state and local government retirees. As of May, 2008, there were 4,820 CalPERS retirees receiving annual pensions in excess of $100,000. That didn’t include government retirees in 80 other plans in California—judges, UC, STRS, charter cities, and 1937 Act counties. About half of these retirees were public safety workers: cops, firefighters, prison guards. The remaining half includes former city managers, assistant managers, county executives, district attorneys, engineers, finance officers, personnel directors, computer scientists, and physicists. Since May 2008, more than 120 new retirees have joined the “$100,000 Club” – each month - every month. That’s been going on for the last 12 months – more than 1,500 have joined that well-paid retirement group ; this rate of increase will accelerate as droves of retired public safety workers who are now in the $90,000 to $100,000 range receive annual cost of living increases. Led by labor unions, this group has profited tremendously. When the dot com boom artificially inflated stock prices (giving pension funds surplus assets) those union representatives convinced former Senator Deborah Ortiz to carry SB 400 to give pension fund surpluses to government workers by increasing retirement benefits while lowering retirement ages. When real estate values exploded, developers’ fees, property taxes and sales taxes increased and labor negotiators demanded that those higher revenues be spent on higher worker salaries. The combination of generous formulas, lower retirement ages, and higher salaries (used in new formulas) means that career cops, among others, now receive pensions that exceed their final year’s wage, and for more years in retirement than they ever worked. These guaranteed generous pensions come at a terrible price. Even before the stock market crash, unsustainable pension and retiree health costs forced the City of Vallejo to declare bankruptcy. The state, cities, and counties were struggling to pay pension costs before the market crash. Today they are ill equipped to take on any new spending as they brace for much higher pension plan contributions in 2010 - just when the market crash in pension funds will fully impact their budgets. It’s ironic that we are seeing layoffs of active police and firefighters in order to pay benefits for retirees.

Auto Makers Will Now Be Eligible for TARP Funds - (www.cnbc.com) In yet another expansion of the TARP program, Treasury Secretary Timothy Geithner plans to use part of the $700 billion financial bailout fund to buy up debt from the troubled auto industry. In a letter to Senate Finance Chairman Max Baucus, Geithner said that "debt obligations issued by companies engaged in the manufacturing of automotive vehicles" can be purchased by the TARP program "to promote financial market stability." The letter, which was was obtained by CNBC, does not name any auto companies that might be eligible for TARP funds. Earlier this month, the Treasury decided that insurance companies that own banks or thirfts could also receive TARP money. The decision comes as two of the three Detroit car companies struggle for survival. Chrysler is expected to become a partner with Italian automaker Fiat Group on Thursday, sources said, the last piece of a huge restructuring plan needed to keep Chrysler alive. Chrysler faces a Thursday government deadline to cut labor costs, slash debt and take on a partner.

Flying Pigs, Tamiflu and Factory Farms - (www.financialsense.com) The reporters add, ‘It was confirmed on Monday (April 27 2009-w.e.) that Edgar was the first known sufferer of swine flu, a revelation that has put La Gloria (in Veracruz, Mexico) and its surrounding factory pig farms and ‘manure lagoons’ at the centre of a global race to find how this new and deadly strain of swine flu emerged.’6 That’s quite interesting. They speak of ‘La Gloria and its surrounding factory pig farms and ‘manure lagoons.’’ Presumably the manure lagoons around the LaGloria factory pig farm of Smithfield Foods are the waste dumping place for the feces and urine waste from at least 950,000 pigs a year that pass through the facility. The Smithfield’s Mexico joint venture, Norson, states that alone they slaughter 2,300 pigs daily. That’s a lot. It gives an idea of the volumes of pig waste involved in the concentration facility at La Gloria. Significantly, according to the Times reporters, ‘residents of La Gloria have been complaining since March that the odour from Granjas Carroll’s pig waste was causing severe respiratory infections. They held a demonstration this month at which they carried signs of pigs crossed with an X and marked with the word peligro (danger).’7 There have been calls to exhume the bodies of the children who died of pneumonia so that they could be tested. The state legislature of Veracruz has demanded that Smithfield’s Granjas Carroll release documents about its waste-handling practices. Smithfield Foods reportedly declined to comment on the request, saying that it would ‘not respond to rumours.’8 A research compilation by Ed Harris reported, ‘According to residents, the company denied responsibility for the outbreak and attributed the cases to ‘flu.’ However, a municipal health official stated that preliminary investigations indicated that the disease vector was a type of fly that reproduces in pig waste and that the outbreak was linked to the pig farms.’9 That would imply that the entire Swine Flu scare might have originated from the PR spin doctors of the world’s largest industrial pig factory farm operation, Smithfield Foods. The Vera Cruz-based newspaper La Marcha blames Smithfield’s Granjos Carroll for the outbreak, highlighting inadequate treatment of massive quantities of animal waste from hog production.10 Understandably the company is perhaps more than a bit uncomfortable with the sudden attention. The company, which supplies the McDonald’s and Subway fast-food chains, was fined $12.3 million in the United States 1997 for violating the Clean Water Act. Perhaps they are in a remote tiny Mexican rural area enjoying a relatively lax regulatory climate where they need not worry about being cited for violations of any Clean Water Act.

Home Vacancies Rise in U.S. to Record Amid Recession - (www.bloomberg.com) A record 19.1 million homes stood unoccupied in the first quarter and the U.S. homeownership rate fell as the recession sapped demand for real estate. The number of vacant homes, including foreclosures, properties for sale and vacation properties, jumped from 18.6 million a year earlier, the U.S. Census Bureau said in a report today. Households that own their own residence declined for the third straight quarter to 67.3 percent. The U.S. financial crisis and falling home prices have shattered the confidence of homebuyers. The percentage of people who said they plan to buy a home in the next six months dropped to a 26-year low in March, according to the Conference Board in New York. Job losses will continue to erode real estate demand, according to an April 23 report by Mark Fleming, chief economist for First American CoreLogic Inc. in Santa Ana, California. “We expect home prices to continue to decline into 2010 as economic conditions and excess housing inventories dampen prices,” Fleming said in the report. “Decreases are now being driven by rising unemployment and a high volume of distressed home sales.” The percentage of all U.S. homes empty and for sale, known as the vacancy rate, fell to 2.7 percent in the first quarter. It hit an all-time high of 2.9 percent in the first and fourth quarters of 2008, the Census Bureau said.

Chrysler teeters on brink of bankruptcy - (www.ft.com) Chrysler slid on Wednesday to the brink of bankruptcy as it negotiated with debtholders and the US government in an attempt to prevent filing for protection from creditors as early as Thursday. People involved in last-minute talks between Chrysler and the government, which has demanded a workable restructuring plan from the carmaker by Thursday, said the negotiations were fluid and there remained a chance Chrysler would avoid bankruptcy. But the Obama administration could also announce as early as Thursday that Chrysler will file for bankruptcy protection in order to restructure its remaining debt and shrink its auto dealer network to become a viable partner for Fiat, the Italian carmaker. Chrysler and the government spent Wednesday trying to persuade the carmaker’s final few debtholders to accept concessions and determining how to merge or wind down Chrysler Financial, a lender to Chrysler’s dealers and custo mers, without decimating its value. The Treasury on Wednesday sweetened its offer for holders of Chrysler’s $6.9bn of debt by $250m to $2.25bn in cash to try to win over recalcitrant debtholders, said one person familiar with the negotiations. The results were unknown after the 6pm deadline to decide on Wednesday.

Bonds Show 'Terrifying' Economic Weakness - (www.cnbc.com) The recent rise in stocks and talk about green shoots in the markets are optimistic assumptions, as the world downturn "still has a way to run," Hugh Hendry, Chief Investment Officer at Eclectica, told CNBC Tuesday. World gross domestic product looks overestimated, because global consumption has been based on debt, and this cannot continue, Hendry told "Squawk Box Europe." "In the last five weeks we had a rally in risk. Big deal," he said. "I am fearful of the surplus countries, like China and Germany. I think GDP has been overstated," Hendry added. "My notion was, you had Bernie Madoff doing US GDP accounting." China "built capacity to serve a world that doesn't exist. We're drowning in capacity. The idea to propose we build more… that ain't a remedy," he explained.

Mounting strains in commercial property - (www.economist.com) Disaster looms in yet another asset class. GENERAL GROWTH PROPERTIES (GGP) and the Great Basin Bank do not have a lot in common. One is America’s second-largest mall owner, the other a small bank in Elko, Nevada. But both shut their doors within a day of each other this month because of their exposure to commercial property, the most threatening in a line-up of suspect asset classes. GGP filed for Chapter 11 bankruptcy protection on April 16th. Its assets, which include the Fashion Show Mall in Las Vegas (pictured) and South Street Seaport in New York, are high-quality and continue to generate decent income. Its financing structure is what got it into trouble. GGP found that it simply could not roll over its debts because of a lack of liquidity. GGP’s difficulties were not unexpected. It was carrying lots of debt, principally because of a big acquisition in 2004, and much of it was short-term. But its failure still sends two shock waves. First, by including several properties that back commercial mortgage-backed securities (CMBS) in its Chapter 11 filing, GGP has unnerved investors who expect such assets to be ringfenced in a bankruptcy.The second shock wave is that GGP’s bankruptcy underlines a pervasive refinancing risk for the industry. Foresight Analytics, a research firm, reckons that $594 billion of commercial mortgages will mature in America alone between 2009 and 2011. Many of these borrowers will have a big problem when their loans mature. Just as in residential property, the financing terms that were available to property and construction firms got ever laxer as the bubble inflated. Loan-to-value ratios of 85-95% were common in 2006 and 2007. These have now tightened to 60-65% and below for new lending.





OTHER STORIES:

Economy in U.S. Shrank at 6.1% Rate in First Quarter - (www.bloomberg.com)
A Reality Check for Economic Optimism - (www.washingtonpost.com)
U.S. Home Prices Continued to Decline in February - (www.nytimes.com)
Insider Selling Jumps to Highest Level Since 2007 - (www.bloomberg.com)
Profits mask coming storm - (www.atimes.com)
A period of weak or falling house prices ought to be welcome - (www.economist.com)
Beware Mainstream Media: Columnists or Real Estate Salesmen? - (www.examiner.com)

Real estate bubble? Been here before - (www.citizen-times.com)
Not Just The Poor Are Uninsured - (www.lasvegassun.com)
Builders lunch, learn how to exploit poor-credit buyers - (www.masterbuildersinfo.com)
US toxic-asset plan stirs fears - (www.latimes.com)
Wall Street Gets Money for Nothing - (www.nytimes.com)
Stripping GM for Parts? - (www.reallyfkedhomeowner.com)
Geithner, Member and Overseer of Finance Club - (www.nytimes.com)
The Tyranny of Experts: It's ok to say 'They Wuz Wrong!' - (www.thebarricadeblog.com)
Another interview with Prof Bill Black - (audio – www.ianmasters.org)
Deepening woes for the Imperial Valley - (www.latimes.com)
CA budget fixes on May 19 ballot are mostly shams and frauds - (www.latimes.com)
Madoff investment scam victims in California seek tax refunds - (www.latimes.com)
Santa Clara Co. Prices vs. Foreclosures - (www.viewfromsiliconvalley.com)
House Vacancies Rise in US to Record Amid Recession - (www.bloomberg.com)
FBI - Mortgage Fraud Press Room - (www.fbi.gov)
People forced from foreclosures take fixtures, leave messes - (www.lvrj.com)