Sunday May 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Senator Urges Discount For Retail Cash Payments - (www.nytimes.com) Democratic Senator Richard Durbin plans to introduce a measure allowing retail stores and restaurants to offer discounts to customers who pay with cash instead of a credit card. The measure is expected to be introduced in the Senate during debate on credit card reform legislation offered Monday by Senate Banking Committee Chairman Christopher Dodd. Legislative efforts are aimed at stopping credit card companies from imposing certain late fees, restricting retroactive rate increases, as well as other questionable billing practices and marketing to minors. With the backing of the committee's top Republican, Richard Shelby of Alabama, the full Senate is expected to pass Dodd's bill that allows credit card issuers to raise rates on balances that are 60 days late. The controversial issue centers on fees, called "interchange" fees, charged to merchants by banks for using the payment system provided by Visa Inc and MasterCard Inc. American Express Co provides merchants with its own payment system. It is at the heart of long-running dispute between banks and merchants who pay on average a 2 percent fee on credit card transactions. Durbin, an Illinois Democrat, said an establishment should be allowed to offer a discount if a customer pays by cash, check or a debit card to counter what he called a "hidden inflaters" in the cost of products paid by credit cards. "I don't think that's unreasonable," Durbin said on the Senate floor.

Chrysler bankruptcy may take up to two years: report - (www.reuters.com) Chrysler's bankruptcy may take as long as two years, instead of the two months that President Barack Obama suggested as a target, Bloomberg said, citing an administration official. The 60 days projected by Obama at an April 30 press conference announcing Chrysler's bankruptcy only applies to a sale of the automaker's best assets to a new entity, the official told the news agency. Creditors would then fight over unwanted factories and other assets to recover money, the news agency cited lawyers as saying. Chrysler has received bankruptcy court approval to proceed with a rapid sale of most of its assets to a new company held by Italy's Fiat SpA, a United Auto Workers union-aligned trust and the U.S. and Canadian governments.

Car dealers fight rapid closures; 180,000 workers could lose jobs - (www.usatoday.com) Car dealers from around the nation will be in Washington Wednesday to urge President Obama's automotive task force to let the economics, not the government, decide which car dealers should shut down, and when. The task force has been pushing General Motors(gm) to trim its dealer ranks faster than the several years originally planned as part of its overall restructuring. Speeding up that process will only dump 180,000 more workers onto unemployment rolls in a recession, the dealer group argues. John McEleney, president of the National Automobile Dealers Association, says he understands that fewer dealerships are needed. But since dealers are independent business owners and get little financial support from the automaker, he argues, they aren't adding to GM's financial problems. "We understand the realities of the marketplace, but we just think this is the worst time to be doing this," says McEleney, who says the delegation will include about 150 dealers. "By forcing the issue, it's going to have some real negative consequences in many communities, where dealers are the biggest private employers and are involved in the local communities supporting charities." GM, which is operating on $15.4 billion in U.S. loans, now plans to cut 2,600 of its 6,200 U.S. dealers in 18 months. In its original plan released in February, GM said it would cut 400 dealers a year until 2012. The administration said that was not fast enough. The task force also has pressed Chrysler to quickly trim its storefronts from 3,200 outlets, and that process now is being worked out in bankruptcy court. In filings with the court, Chrysler said about 50% of its dealers make up 90% of its sales. John Bowis, president of Chevy Chase Cars in Bethesda, Md., recently sent a letter to customers saying he would no longer sell Chevrolet vehicles, and instead will sell Nissans along with his current Acuras. The move was his decision, and gave him time to find a new automaker to work with. "I feel very fortunate that I got out when I did, because I'm very worried about my friends who are GM dealers," Bowis says. "It's going to be a tough road for them." Many dealers are looking at their options, trying to sign new franchise agreements, selling their stores or finding a way to wind down operations slowly, Bowis says. Forcing them to close too fast could create more problems than the auto task force anticipates, he says.

Medicare, Social Security Funds Worsen in Recession - (www.bloomberg.com) The financial health of Social Security and Medicare, the two main safety nets for American retirees and the elderly, is declining as the recession cuts payroll-tax contributions just as the baby-boom generation begins to retire. The Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast, the trustees said today. Spending on Medicare, the health insurance plan for the elderly, will reach a legal limit by 2014, the same year predicted in 2008, the trustees’ report said. The deteriorating position of the two funds puts pressure on Congress and President Barack Obama to come up with ways to cut costs and boost revenue for both. Obama yesterday said fixing the nation’s health-care system is an “imperative for America’s economic future.” “After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security,” Treasury Secretary Timothy Geithner said today in a statement. The trustees’ annual report also estimated that Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago.

College graduates struggle to repay student loans - (www.usatoday.com) Thousands of college graduates are facing a student loan crisis. The job market is shrinking, and the sour economy is preventing employers, parents and relatives from helping those who are behind on payments. Student loan defaults are at their highest rate since 1998, and likely will go higher. And though federal student loans offer some payment modification options, private loans are far more onerous, because even filing for bankruptcy rarely wipes out the debt. Congress might tackle bankruptcy law reform again this year, but it decided as recently as last year not to allow student loans to be easily discharged through bankruptcy filings. Without such an option, many college grads are saddled with debt and unable to buy a home or obtain other credit. That can leave them in some cases unable to pursue the careers they studied for because they must take low-paying jobs just to try to keep up. But lawmakers should move carefully on any reform, banking industry officials say. "If private student debt can be discharged in bankruptcy, that creates risk, and the result will increase the cost of tuition," says Scott Talbott, chief lobbyist for the Financial Services Roundtable. The cost of going to college or graduate school is rising. On average, the public college experience cost a student $6,585 this school year, up 6.4% from last year. Private tuition costs $25,143 on average, up 5.9%. Help for gamblers, but not for students: FinAid.org, a financial aid information source, says that two-thirds of four-year undergraduates leave college with debt. Graduate and professional students borrow $27,000 to $114,000. Bankruptcy law allows for discharges of credit card debt, car loans and even gambling debt, but not student loans. A student loan debtor must try to claim an "undue hardship" to seek bankruptcy protection — a claim that is successful at best about 50% of the time. Unlike a traditional bankruptcy filing, a hardship filing requires debtors to file a lawsuit against creditors. That pits the student against corporate lawyers and defense teams, and often requires an expert witness, which can cost the graduate thousands of dollars to arrange. "We're talking about people who are in bankruptcy because they don't have money," says Rafael Pardo, associate professor of law at Seattle University and co-author of a recent research report about undue hardship litigation. "Yet we're asking them, 'If you want relief, you have to find a way to pay for a full-blown lawsuit.' "

Obama may eliminate evil debt-mongers Fannie and Freddie! - (www.bloomberg.com) Options for overhauling Fannie Mae and Freddie Mac, the government-run mortgage-finance companies, may eventually include liquidating their assets, according to an analysis released today by the Obama administration. The Office of Management and Budget also projected today in its budget analysis for fiscal 2010 that the companies, which have received or requested $78.8 billion in aid since their federal takeover in September, will need at least $92.2 billion more. The Treasury Department doubled an emergency capital commitment for each company in February to $200 billion. The 2010 fiscal year ends Sept. 30, 2010. Alternatives range from “a gradual wind-down of their operations and liquidation of their assets,” to returning the two companies to their previous status as government-sponsored enterprises that seek to maximize shareholder returns while pursuing public-policy goals, according to OMB’s analysis of President Barack Obama’s proposed federal budget. “The last entities that are going to be set free will be Fannie and Freddie because they’re so key to the housing market,” said Bradley Hintz, an analyst at Sanford C. Bernstein & Co. in New York, in a phone interview today. The companies are coming under increasing strain as the Obama administration leans on them to help refinance and modify loans at risk of foreclosure amid the worst housing market since the Great Depression, Fannie Mae and Freddie Mac have said in securities filings. The government-sponsored enterprises pose a risk to the economy, though the federal takeover and Treasury backing have “substantially reduced” that threat, OMB said.

Former owners buy back foreclosed houses, much cheaper - (www.boston.com) Thomas Quinn did something that most people who lose their homes to foreclosure can only dream about: He bought back his family's Hyde Park house. Quinn, 48, a father of two teenage daughters, was forced to give up the deed to the 1920s bungalow last year after his wife died of cancer and he could no longer afford the payments on their subprime loan. But he refused to leave the property, outraged that his lender wouldn't rework the mortgage. And then, with the help of a local nonprofit, the fire pump salesman was able to repurchase his home and secure an affordable 30-year, fixed-rate mortgage nine months after the foreclosure. "I'm a happy homeowner again with a payment I can live with," he said. "It is saving me over $1,000 a month." Quinn is one of a small but growing group of former owners who are not only staying in foreclosed homes but are buying them back, with the help of nonprofit groups and housing advocates. And in some cases, they are getting their homes at significant discount the second time around, because real estate values have plunged. "We are in the process of helping a lot of people buy back their homes," said Zoe K. Cronin, a housing attorney for Greater Boston Legal Services. "There is not likely going to be another buyer. If there is someone willing to buy it back at a real value, that's probably the best option" for lenders, she said.

Ships Tread Water, Waiting for Cargo - (www.nytimes.com) To go out in a small boat along Singapore’s coast now is to feel like a mouse tiptoeing through an endless herd of slumbering elephants. Skip to next paragraphOne of the largest fleets of ships ever gathered idles here just outside one of the world’s busiest ports, marooned by the receding tide of global trade. There may be tentative signs of economic recovery in spots around the globe, but few here. Hundreds of cargo ships — some up to 300,000 tons, with many weighing more than the entire 130-ship Spanish Armada — seem to perch on top of the water rather than in it, their red rudders and bulbous noses, submerged when the vessels are loaded, sticking a dozen feet out of the water. So many ships have congregated here — 735, according to AIS Live ship tracking service of Lloyd’s Register-Fairplay in Redhill, Britain — that shipping lines are becoming concerned about near misses and collisions in one of the world’s most congested waterways, the straits that separate Malaysia and Singapore from Indonesia. The root of the problem lies in an unusually steep slump in global trade, confirmed by trade statistics announced on Tuesday. China said that its exports nose-dived 22.6 percent in April from a year earlier, while the Philippines said that its exports in March were down 30.9 percent from a year earlier. The United States announced on Tuesday that its exports had declined 2.4 percent in March. “The March 2009 trade data reiterates the current challenges in our global economy,” said Ron Kirk, the United States trade representative. More worrisome, despite some positive signs like a Wall Street rally and slower job losses in the United States, is that the current level of trade does not suggest a recovery soon, many in the shipping business say.




OTHER STORIES:

U.S. Stock-Index Futures Extend Losses After Retail Sales Slide - (www.bloomberg.com)
Treasuries Rise After Retail Sales Unexpectedly Fall in April - (www.bloomberg.com)
Sour commercial real estate loans threaten to hurt regional banks - (www.latimes.com)
US foreclosure programme may be insufficient - (www.ft.com)
OPEC Raised Oil Output for the First Time Since July - (www.bloomberg.com)
Japanese Housewives Lead $125 Billion Bet Against Yen - (www.bloomberg.com)
U.S. Considers Financial Pay Guidelines - (www.nytimes.com)
Records Show Billions Withdrawn Before Madoff Arrest - (www.nytimes.com)
European March Industrial Production Declines by Record 20.2% - (www.bloomberg.com)
ECB’s Weber Sees ‘No Need’ for Further Debt Purchases - (www.bloomberg.com)
Berlin backs toxic assets plan - (www.ft.com)
China’s Factory Output Grows Less-Than-Estimated 7.3% - (www.bloomberg.com)
U.S. Retail Sales Unexpectedly Fall for Second Month - (www.bloomberg.com)
Home Prices in U.S. Drop Most on Record in Quarter - (www.bloomberg.com)

U.S. MBA Mortgage Applications Index Fell 8.6 Percent Last Week - (www.bloomberg.com)
RealtyTrac: April foreclosures rise 32 percent - (news.yahoo.com/s/ap)
Taylor Says Fed May Not Have Much Time Before Rate Rise Needed - (www.bloomberg.com)
Prices of imported goods rise 1.6% in April - (www.marketwatch.com)
Intel hit with record $1.45 billion antitrust fine - (www.reuters.com)
Freddie Mac to Tap $6.1 Billion in Aid After Loss - (www.bloomberg.com)
Freddie Mac Loses $10 Billion for Quarter - (www.washingtonpost.com)
Health Care, a Lesson in Pain - (www.nytimes.com)
GM sinks to fresh low as Chapter 11 looms - (www.ft.com)
America’s triple A rating is at risk - (www.ft.com)