KeNo's Housing and Economic Portal: Monday June 15 Housing and Economic stories

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Retirees' income dried up when foolish mortgage investments crashed - (www.lvrj.com) LIFE AFTER WORK: Retirees' income dried up when high-flying investments crashed. High-interest earnings from hard money lenders attracted investors. A couple of years ago, Bonnie and Clyde Petersen were living the good life. The retirees were pulling down $150,000 in interest payments yearly on $1 million invested with hard-money lender OneCap Mortgage. Today, the Petersens, who are now divorced but remain friends, expect to lose their separate homes. Clyde Petersen, a 79-year-old chemist who owns several patents, is struggling to live on $14,400 a year in Social Security benefits. His ex-wife, 67, returned to work, becoming an airline ticket agent to supplement her $8,400 in yearly Social Security benefits. They are among many local retirees who are struggling to cope with personal financial problems after Southern Nevada and the nation slipped into recession. Like people who are still working, retirees have seen the values of their homes plunge. Their investment holdings have grown tiny and the yields on their bank savings and certificates of deposit have shrunk. Unlike workers, however, retirees often cannot replenish their investment holdings with savings from earned income. And many retirees are wondering if they will live long enough to see their stock and other investment holdings regain previous highs. Investment analysts say there are no simple, pain-free ways to deal with the worst economic slump in decades; but they say retirees and those nearing retirement can take steps to protect their remaining investments and to prepare for future financial security. With few exceptions, the recession has stung people at almost every income level."I don't think anyone has avoided this recession," said Russell Price, director of private banking at Nevada State Bank. Low-income retirees struggle to pay bills for electric power, health care and other essentials, said Barbara Grostick, Clark County's senior advocate program supervisor. "We're getting more and more folks saying they are facing foreclosure and they don't know what to do," she said. Price said his clients range from individuals with $1 million in investments to those who once were on the Forbes 400 list of wealthiest Americans. "I've advised clients to mothball the private jets that they own," Price said. The banker doesn't recommend selling the aircraft in the current environment, because prices are depressed, but he suggests their owners fly commercial to save money. Price often suggests clients who are near retirement consider working longer and saving more. Others have come to the same conclusion. William Corney, a 65-year-old divorced man, originally planned to retire this year. Not anymore. With the financial markets in turmoil and the economy struggling, Corney said he will work until the economy stabilizes, maybe a couple of years, maybe longer. "I like teaching. I'm going to keep on teaching," said the professor of management at the University of Nevada, Las Vegas.

How Congress Betrayed Investors to Help Banks - (www.ritholtz.com) This morning’s outrage comes to us via the WSJ, and it discusses how our elected representatives rolled over for their overlords, the bankers, in grateful genuflection to their largesse: Huge heaps of lobbying monies: “Not long after the bottom fell out of the market for mortgage securities last fall, a group of financial firms took aim at an accounting rule that forced them to report billions of dollars of losses on those assets. Marshalling a multimillion-dollar lobbying campaign, these firms persuaded key members of Congress to pressure the accounting industry to change the rule in April. The payoff is likely to be fatter bottom lines in the second quarter . . . The rule change angered some investor advocates. “This is political interference on a major issue, and it raises questions about whether accounting standards going forward will have the quality and integrity that the market needs,” says Patrick Finnegan, director of financial-reporting policy for CFA Institute Centre for Financial Market Integrity, an investor trade group.” There was little surprise that FASB, like so many other organizations in the current mess, failed to show any testicular fortitude whatsoever. They rolled over in the face of intense lobbying and congressional pressure, so their masters could rub their bellies. What else should we have expected from a group of neutered accountants?

Chrysler dealers getting axe correlated with RNC contributions? - (www.wnd.com) WND reviewed the list of Chrysler's 789 closing franchises and databases of political donors and found that of dealership owners making contributions in the recent election, less than 10 percent gifted to Democrats while 90 percent gave substantial sums to Republican candidates. The following dealers are scheduled to lose their Chrysler franchise designation. Based on available records and databases, each of them contributed to political campaigns during the 2008 election. Many of the dealers who donated to Republican campaigns last year also contributed additional thousands to George W. Bush's presidential 2004 campaign and to campaigns to elect GOP representatives. Those donations are not included in this list. The listed franchise owners contributed at least $450,000 to Republican presidential candidates and the GOP in the recent election while only $7,970 was donated to Sen. Hillary Clinton's campaign and $2,200 was given to Sen. John Edwards' campaign. Of all political contributions from dealers on the list of closing facilities, President Obama received a combined total of only $450 toward his election.

Ok, I'm Done With Being Nice - (www.market-ticker.denninger.net) The NY Times, the supposed "newspaper of record" in NYC is running the following line of crap in their Business Section: MESA, Ariz. — She had seen the advertisements for the new government program offering relief. She had heard President Obama promise that help was on the way for homeowners like her, people who had lost jobs and could no longer make their mortgage payments. But when Eileen Ulery called her mortgage company — Countrywide, now part of Bank of America — the bank did not offer to alter her mortgage. Rather, the bank tried to sell her a new loan with a slightly lower monthly payment while asking her to pay $13,000 toward the principal and a fresh $5,000 in fees. Sounds like a hitpiece on the banks, right? Well, it is. Let's keep going: Ms. Ulery, 63, is the face of the latest wave of troubled American homeowners, a surge of people in financial danger not because of reckless gambling on real estate, but because of lost income. Far from being one of those who used easy-money loans to speculate on homes proliferating across the desert soil of greater Phoenix, she has lived in the same modest, stucco-sided condo in suburban Mesa for a dozen years. She bought the two-bedroom home in 1997 for $77,500. That's a lie, and a lie that they "bust" themselves on almost immediately! Oh sure, the original purchase was quite prudent, but look at what happened NEXT! Like tens of millions of other American homeowners, she added to her mortgage balance as the value of her condo swelled, at one point exceeding $200,000. She refinanced to pay off some credit cards and settle into a 30-year, fixed-rate loan. Later, she took out a home equity line of credit to buy a new Hyundai. She refinanced again in 2007, borrowing $20,000, mostly for a new roof. Ah, so now the truth comes out! Her house is now worth $122,000, or nearly double what she paid for it in 1997, but she used it as an ATM machine to live extravagantly, running the mortgage balance up to a clean double, or $143,000. That is, this "responsible" woman spent, over ten years, more than $70,000 in excess of what she made! To which she poses her own question: What sort of deal is it for the American taxpayer? As she sees it, the same banks that generated the mortgage crisis are now getting public money to fix it, while doing little more than seeking new fees. “I don’t think the government gets it,” she said. “These are the same people you couldn’t trust before.” Oh, I get it, but neither you or The New York Times does. See, we are here because people at all levels of society, including you, Ms. Ulery, seem to think you can spend more than you make. You did it. The government, both state and federal, is doing it. The New York Times is holding you forth as a paragon of virtue, and a "victim" of the evil banking system. It sucks that you've got an employment problem Ms. Ulery, but that's not the reason you're in trouble and about to lose your house. No, the reason you're about to lose your house is because you treated your home as a permanent and inexhaustible ATM machine - a demonstrably unsafe, unsound and FRAPPING IDIOTIC act. Now you want to whine about the just and expected outcome of your choices - your credit card being paid off from that ATM machine that allowed you to live beyond your means, your new car (instead of a used, far cheaper car) and your lack of saving for that new roof (you blew the money on your credit card instead!) IMHO you, Ms. Ulery and The New York Times, are the poster children for the puerile and outrageous behavior that CREATED this mess, and your whining about it deserves to be met with derision, loud jeers and permanent unemployment - absolutely NOBODY should employ anyone who is this stupid - ever. Nor should they buy or advertise in The New York Times. I'm tired of this and IMHO it is long past the time when the honest and responsible citizens of this nation should rise up and demand that absolutely nobody, whether it be a state, local or federal government, a business or a homeowner get one thin frapping dime of "asssitance" if they have intentionally spent beyond their means and tried to play "perpetual ATM" - whether it was with a house, a commercial piece of real estate or taxpayer-funded debt offerings. 'Nuff said.

Plan to Help Banks Clear Their Books Is Halted - (www.nytimes.com) The Federal Deposit Insurance Corporationindefinitely postponed a central element of the Obama administration’s bank rescue plan on Wednesday, acknowledging that it could not persuade enough banks to sell off their bad assets. In a move that confirmed the suspicions of many analysts, the agency called off plans to start a $1 billion pilot program this month that was intended to help banks clean up their balance sheets and eventually sell off hundreds of billions of dollars worth of troubled mortgages and other loans. Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay. In a statement, the F.D.I.C. acknowledged that it had not been able to get banks interested in its so-called Legacy Loans Program. Scheduled to start later this month, the pilot program was aimed at selling off $1 billion in troubled home mortgages. F.D.I.C. officials portrayed the change as a sign that banks were returning to health on their own. “Banks have been able to raise capital without having to sell bad assets through the L.L.P., which reflects renewed investor confidence in our banking system,” said Sheila C. Bair, chairwoman of the F.D.I.C. But some analysts said the banks’ reluctance to clean up their balance sheets meant they were merely postponing their day of reckoning. Indeed, some analysts said government policies had made it easier for banks to gloss over their bad loans. “What’s happened is that the government’s programs have addressed the symptoms of thefinancial crisis, but not the cause,” said Frederick Cannon, chief equity strategist at Keefe, Bruyette & Woods, which analyzes the industry. “The patient feels better, but the underlying cause of the problem is still unaddressed.” The program was one part of the Treasury Department’s broader Public Private Investment Program to get bad assets off the books of major banks.