Thursday June 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Audit the Fed, Then End It! - (Ron Paul at www.house.gov) I have been very pleased with the progress of my legislation, HR 1207, which calls for a complete audit of the Federal Reserve and removes many significant barriers towards transparency of our monetary system. This bill now has nearly 170 cosponsors, with support from both Republicans and Democrats. Senator Bernie Sanders has introduced a companion bill in the Senate S 604, which will hopefully begin to gain momentum as well. I am very encouraged to see so many of my colleagues in Congress stand with me for greater transparency in government. Some have begun to push back against this bill, and I am very happy to address their concerns. The main argument seems to be that Congressional oversight over the Fed is government interference in the free market. This argument shows a misunderstanding of what a free market really is. Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money – the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, Constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters. Instead, Congress has abdicated this responsibility to a cabal of elite, quasi-governmental banks who, instead of stabilizing the economy, have destabilized it. It took less than two decades for the Federal Reserve to bring on the Great Depression of the 1930’s. It has also inflated away the value of our currency by over 96 percent since its inception. It has invisibly stolen from the poor and given to the rich through this controlled inflation, and now openly stolen through recent bank bailouts. It has predictably exacerbated the very problems it was meant to solve. Detractors have also argued that the Fed must remain immune from the political process, and that that more congressional oversight would distort their very important decisions. On the contrary, the Federal Reserve is already heavily entrenched in the political process, as the Fed chairman is a political appointee. High level officials routinely make the rounds between positions at the Fed, member banks, Treasury and back again, taking care of friends and each other along the way. As far as the foolishness of placing complex monetary policy decisions in the hands of politicians – I couldn’t agree more. No politician or central banker, no matter how brilliant, is smart enough to know more than the market itself. The failure of central economic planning has been witnessed over and over. It is frankly beyond me why we ever agreed to try it again. To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have. They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability. Thus the loudest arguments against greater transparency are likely to come from those friends, and understandably so. However, it is the responsibility of every member of Congress to represent the interests of the people that sent them to Washington and find out what has been happening with our money. As the branch of government with the power of the purse, we really have no other reasonable choice when the economy is in the shape it is in.

Malls to Ghost Towns - (online.wsj.com) Malls, those ubiquitous shopping meccas that sprang up in the 1950s, are dwindling in number, with many struggling properties reduced to largely vacant shells. On the low-income east side of Charlotte, N.C., the 1.1-million-square-foot Eastland Mall recently lost a slew of key tenants, including a Dillard's and, next month, a Sears. Sales per square foot at the venue fell to $210 in 2008 from $288 in 2001. As the recession alters American spending habits, traditional shopping malls like Eastland Mall are deteriorating at an accelerating pace. The Metcalf South Shopping Center in Overland Park, Kan., is languishing after plans to redevelop it into an open-air shopping district fizzled. The stretch of shops that connects the two largest tenants -- a Sears and a Macy's -- stands mostly vacant, patrolled by security guards. With their maze of walkways and fast-food courts, malls have long been an iconic, if sometimes unsightly, presence in the American retail landscape. A few were made famous by their sheer size, others for the range of shopping and social diversions they provided. But the long recession is helping to empty out the promenades. Some analysts estimate that the number of so-called "dead malls" -- centers debilitated by anemic sales and high vacancy rates -- will swell to more than 100 by the end of this year. In the 12 months ended March 31, U.S. malls collectively posted a 6.5% decline in tenants' same-store sales, according to Green Street Advisors Inc., a real-estate research firm. The recent slump was led by an average 7.3% sales drop at Simon Property Group Inc., the operator with the largest number of mall locations. The industry's woes are worsening. Thinning customer traffic, and subsequent hits to tenants' sales and profits, prompted Standard & Poor's Corp. last month to lower the credit ratings of the department-store sector. That knocked Macy's Inc. and J.C. Penney Co. into junk territory and pushed others deeper into junk. Sears Holdings Corp., a cornerstone tenant at many malls, is expected to close 23 stores this month and next. General Growth Properties, which owns more than 200 U.S. malls, filed for bankruptcy protection April 16, due mainly to its failure to refinance billions of dollars of debt coming due. While the real-estate investment trust has said the filing will have no impact on its mall business, analysts say a prolonged bankruptcy proceeding could make retailers nervous about sticking around once their leases expire. The severity of the recession is turning some malls that were once viewed as viable into potential casualties. "Any mall that's sitting on life support is probably going to get its plug pulled" as the economy stalls, says Michael Glimcher, chairman and CEO of Glimcher Realty Trust, which owns 23 U.S. properties, including Eastland Mall in Charlotte.

Lifestyle Liquidation - Estates of the Fabulously Rich – Auction a Spectacular Failure - (Mish at http://globaleconomicanalysis.blogspot.com) It's not easy to go minimalist when you owe far more on your toys than anyone is willing to pay for them. Please consider Estates of the Fabulously Rich, Gilded Era Is Going, Going, Gone. VERO BEACH, Fla. -- Richard and Amanda Peacock spent five years building their dream home, a 10,000-square-foot, orange mansion overlooking the ocean here. They filled it with leopard-skin chairs, pinball machines, antique Coca-Cola signs and six sports cars. It had a room full of 100 hunting trophies -- including a hyena and the head of an elephant -- and an aviary out back housing eight rare parrots. On a recent Saturday, they held a one-day auction to try to sell it all. "Four million, do I hear four and a half?" shouted auctioneer Dean Kruse, as he took bids for the mansion. "Come on, people -- the good Lord stopped making oceanfront property a long time ago." Frank Burden, a local landscaper, picked up Mr. Peacock's Pennzoil sign for $75. Bidding on the scarlet Ferrari, with only 5,000 miles, reached $110,000, a steal compared with its $207,000 purchase price. Marie Davis, a Florida vacationer, picked up several exotic hunting trophies. "I got a wildebeest for $250!" she said. "What a deal." Mr. Peacock's auction marked a new moment in the fall of the latest Gilded Age. Fire-sale auctions of mansions, yachts, sports cars and other trappings of wealth have become increasingly common as the rich become less rich. But Mr. Peacock is in the vanguard in attempting to downsize in just one day. The event was less an auction than a lifestyle liquidation, a clearance sale on a decade's worth of conspicuous consumption. Mr. Peacock's selloff is among the most unusual. A 60-year-old commercial real-estate developer with a mustache and a dark tan, he built his fortune building and owning retail space in Miami's Coconut Grove area. They bought a piece of oceanfront property for $4 million and spent the next four years, and another $4 million, building the mansion. It has six bedrooms, seven-and-a-half baths, a gym and a barbershop and salon. Outside there's a waterfall, tiki bar and aviary. The couple designed much of the furniture themselves, including the gold and leopard-skin dining-room chairs. "Richard likes leopard skin, and I like gold, so it was the perfect match," says Mrs. Peacock. The sprawling "trophy/game room" is stocked with dozens of antique road signs, life-size statues of Muhammad Ali and Green Bay Packers quarterback Bart Starr, antique gas pumps and a cigar-store Indian. Stuffed hunting trophies spill throughout the house, including the fang-baring baboon in the guest room. Mr. Peacock says he doesn't hunt. Their fortunes began to turn last fall. Mr. Peacock was diagnosed with cancer. His commercial real-estate business, with 30,000 square feet of retail space in Miami, is facing rising vacancies. He also had to shut down his Vero Beach construction company, which was working on residential projects. The couple now has a $2.2 million mortgage on their mansion, Mr. Peacock says, and a $1 million mortgage on a four-bedroom oceanfront home nearby that they used while building the mansion. Maintaining the house is also costly: $50,000 a year in taxes, $25,000 for insurance and more than $100,000 a year for indoor and outdoor maintenance. That's not to mention the upkeep on their other home. Mr. Peacock says he is now cancer-free. He says it was the health scare, not financial problems, that inspired him to scale back. "We don't need all this stuff anymore," he says, adding that the couple plans to buy a cabin in the Blue Mountains. "It's time to simplify." On the morning of Mr. Peacock's auction, more than 100 bargain-hunters flocked to the auction tent along with dozens more bidding live online. The bids started strong, with the metal signs and animals selling. An online bidder bought the elephant head for $6,750. A bright yellow Honda motorcycle went for $9,500, and a 2003 Country Motor Coach fetched $150,000 -- far less than the $600,000 Mr. Peacock paid for it or the $200,000 he owes on it. When the six cars came on the block, however, the sale stalled. Only one -- a cloned 1970 Plymouth Hemi Cuda convertible -- reached Mr. Peacock's asking price. The Peacocks didn't accept the bids on the others, including the Ferrari. An Italian speedboat and a pair of jet skis also failed to sell. Bids on the house ground to a halt at $5.5 million. The Peacocks decided they couldn't let it go for that. Since they didn't want to live in an empty mansion, they pulled the other items, including the parrots, off the block. In all, 500 items sold for about $300,000. About $200,000 went to pay the auctioneer and other expenses. Both houses are still on the market. "Nobody's spending money right now," said Mr. Peacock, sitting under the tent with his head buried in his hands. "I guess we'll try to just keep hanging on." Auction a Spectacular Failure: Fittingly, the auction was a spectacular failure. The WSJ article mentioned two other auction failures if I can take the liberty of calling the sale of a $13 million estate for $3.5 million a failure. Mr. Peacock has more toys than he needs or can afford. Amazingly, he had a bid of $5.5 million for the house and only owed $2.2 million on it. That was enough to pay off his other oceanfront house and still have $2 million left over. By attempting to "hang on" the Peacocks risk losing it all. I suspect he will. In the meantime how the heck can he possibly get by without that wildebeest head?
Bush's "Hope for Homeowners" a failure by virtually every metric - (www.propublica.org) The Hope for Homeowners program [1] was created by Congress last summer to help an estimated 400,000 homeowners avoid foreclosure. But it could more aptly be called the Hope for A Homeowner program, given that just one has used it successfully since its October launch. But silver linings are hard to come by these days, so we might as well point out that she is one satisfied customer. “What a relief!” the lucky homeowner from Litchfield Park, Ariz., wrote to her mortgage bank, NationsChoice, in February. “An extra $542 in monthly savings and a $100,000+ principal reduction sure is a relief. Thank you!” Hope for Homeowners was designed to give people who couldn’t afford their mortgage payments a chance to refinance into a 30-year, fixed-rate loan insured by the Federal Housing Administration, even if they owed more than their home was worth. But the lender would need to reduce the amount the borrower owed before the FHA, a division of the Department of Housing and Urban Development, would insure the loan. The program has been a flop. But Congress and the administration are trying to rescue it, envisioning it as a key component of the government’s campaign to curb foreclosures. On Wednesday, President Obama signed a bill [2] that includes improvements to the program. Some think this is a mistake. “Hope for Homeowners has been a failure by virtually every metric,” Rep. Spencer Bachus (R-AL), ranking member on the House Financial Services Committee, said in a February press release [3]. “And rather than cut taxpayer losses, this legislation aims to fix a fundamentally unfixable program.” (Congress allotted the program $300 billion, but none of it has been spent since FHA hasn’t paid out any insurance claims.) Analysts think the fixes may not be effective. Guy Cecala, publisher of Inside Mortgage Finance Publications, says the program is salvageable only with “some major, wholesale changes, since no one is using it at all.” The legislative changes are “essentially patches,” he says, but combined with new efforts from the administration, they may help. Whether they’ll be enough to entice borrowers and lenders to participate is still unclear. He notes, however, that a refinancing program for underwater borrowers is something everyone is eager to see. An ‘Unusable’ Program: So why exactly has Hope for Homeowners been such a failure? According to Cecala, “One of the basic problems is it was designed by Congress. And they put in so many restrictions it was unusable.” Meg Burns, the director of FHA Single Family Program Development, points out some of these flaws. One, when all the different eligibility requirements are taken into account, “you’ve narrowed the pool of eligible borrowers to a handful,” she says. It’s also expensive for borrowers, who have to pay FHA a 3 percent fee upfront and another 1.5 percent annually. And if they ever decide to sell their homes, even 50 years down the road, they’ll owe the government at least half [4] of the equity created by the refinance. They’ll also have to fork over half of however much their home has appreciated in value since then.

Democrats Block Solar Farms, Wind Farms, and Guantanamo Shutdown Showing Many are All Talk, No Action and Part of NIMBY Crowd (not in my back yard):
· Feinstein Seeks To Block Solar Power From California Desert Land - (www.huffingtonpost.com) California's Mojave Desert may seem ideally suited for solar energy production, but concern over what several proposed projects might do to the aesthetics of the region and its tortoise population is setting up a potential clash between conservationists and companies seeking to develop renewable energy. Nineteen companies have submitted applications to build solar or wind facilities on a parcel of 500,000 desert acres, but Sen. Dianne Feinstein said Friday such development would violate the spirit of what conservationists had intended when they donated much of the land to the public. Feinstein said Friday she intends to push legislation that would turn the land into a national monument, which would allow for existing uses to continue while preventing future development. The Wildlands Conservancy orchestrated the government's purchase of the land between 1999-2004. It negotiated a discount sale from the real estate arm of the former Santa Fe and Southern Pacific Railroad and then contributed $40 million to help pay for the purchase. David Myers, the conservancy's executive director, said the solar projects would do great harm to the region's desert tortoise population. "It would destroy the entire Mojave Desert ecosystem," said David Myers, executive director of The Wildlands Conservancy. Feinstein said the lands in question were donated or purchased with the intent that they would be protected forever. But the Bureau of Land Management considers the land now open to all types of development, except mining. That policy led the state to consider large swaths of the land for future renewable energy production. "This is unacceptable," Feinstein said in a letter to Interior Secretary Ken Salazar. "I urge you to direct the BLM to suspend any further consideration of leases to develop former railroad lands for renewable energy or for any other purpose." In a speech last year, Republican Gov. Arnold Schwarzenegger complained about environmental concerns slowing down the approval of solar plants in California.
· Ted Kennedy says, Alternative Energy? Not in my Backyard ... - (www.americaswatchtower.com) Liberals have a way of telling people how they should live their lives for the betterment of the common good. However when it comes to these same liberals living the lifestyle they want us to lead that is another story. Speaking of another story, that leads me to this story. Liberals, such as Ted Kennedy are constantly talking about alternative energies, about renewable energies. They are telling us we need to invest in these energies as a country to reduce our dependency on foreign oil. We could reduce our dependency on foreign oil by drilling for more domestic oil, but liberals like Ted Kennedy can’t have that. We could put up wind-farms off shore, that sounds like a great idea to me. However I don’t live next to the ocean so the building of these farms will have no profound effect on my lifestyle. Do you know who does live on the ocean front where the wind-farms are supposed to be built? Ted Kennedy, who is for alternative, and renewable energy. So you would think he would be happy that an alternative energy source would be built so close to his house, wouldn’t you? He can lead by example. WRONG. Ted Kennedy suffers from the not-in-my-backyard mentality that he opposes when it doesn’t affect him. Sen. Ted Kennedy and many residents who own coastal property from where they could see the wind turbines on a clear day oppose the project. Ted Kennedy is a hypocrite. I thought he, and his other liberal friends have been telling Americans that we need to sacrifice in order to relieve America from her burden on foreign oil. This is the perfect opportunity for Ted Kennedy to lead by example and sacrifice a little bit by giving up some of his ocean view for the betterment of the common good. Isn’t that what he has been saying? Why should we listen to him when he tells us to sacrifice when he is unwilling to sacrifice himself? The wind-farms would help America become less dependent on foreign oil but Ted Kennedy is too worried his view might become obstructed.
· Senate rebukes Obama, blocks Guantanamo shutdown – (news.yahoo.com/s/ap) In a rare, bipartisan defeat for President Barack Obama, the Senate voted overwhelmingly Wednesday to keep the prison at Guantanamo Bay open for the foreseeable future and forbid the transfer of any detainees to facilities in the United States. Democrats lined up with Republicans in the 90-6 vote that came on the heels of a similar move a week ago in the House, underscoring widespread apprehension among Obama's congressional allies over voters' strong feelings about bringing detainees to the U.S. from the prison in Cuba. The president readied a speech for Thursday on the U.S. fight against terrorism, at a time when liberals have chafed at some of his decisions. Obama has vowed to close the prison by January 2010, and the Senate's vote was not the final word on the matter. It will be next month at the earliest before Congress completes work on the legislation, giving the White House time pursue a compromise that would allow the president to fulfill his pledge. But Obama's maneuvering room was further constrained during the day when FBI Director Robert Mueller told a congressional panel that he had concerns about bringing Guantanamo Bay detainees to prisons in the United States. Among the risks is "the potential for individuals undertaking attacks in the United States," said Mueller, who was appointed by President George W. Bush in 2001 and is serving a 10-year fixed term in office. Additionally, U.S. District Judge John Bates ruled this week that some prisoners — but not all — can be held indefinitely at Guantanamo without being charged, thus increasing the pressure on the administration to develop a plan for the men held there. After the Senate vote, White House press secretary Robert Gibbs said, "The president understands that his most important job is to keep the American people safe and that he is not going to make any decision or any judgment that imperils the safety of the American people."
· Kerry foe rips his anti-wind-farm stand; Windbags should pipe down on wind energy – (www.capecodtoday.com) Kerry foe rips his energy bidOgonowski: Senator's dragged heels on renewable resources. "Wind power can power Senator Kerry when he windsurfs or sails, but he's not sure he wants wind power to power a generator," quipped Ogonowski. Republican senatorial candidate Jim Ogonowski is calling opponent Sen. John Kerry a johnny-come-lately when it comes to his support of alternative energy. Ogonowski says Kerry has shown little leadership on alternative energy in his 24 years in the Senate. "Senator Kerry can't even take a position on Cape Wind," said Ogonowski, who unsuccessfully challenged Nikki Tsongas for the Fifth Congressional District seat last year and now is running against Kerry. Ogonowski was reacting to a speech Kerry gave to Greater Boston Chamber of Commerce members yesterday. The state's junior senator called on Massachusetts to take the lead in alternative energy development, an increasingly common theme among Bay State politicians. "We've got the ability in this state to create the next new thing and if it comes out of Massachusetts, we will benefit," said Kerry. "And we have to do this, because we have no alternative." Ogonowski has thrown his support behind Cape Wind, a $900 million project in Nantucket Sound, which would be the first offshore wind-energy plant in the United States... Herald.



OTHER STORIES:

Job Losses Push Safer Mortgages to Foreclosure - (www.nytimes.com)
US Jobless Rate Likely to Pass Europe's - (www.nytimes.com)
Housing Bust Leaves Most Sellers at a Loss - (www.washingtonpost.com)
Only 30% of foreclosures currently on the market nationwide - (features.csmonitor.com)
The Housing Hurricane Will Howl Again - (online.barrons.com)
Recession suddenly humbles high-tech sector - (finance.yahoo.com)
Is Living in a High-End Suburb Worth It? - (www.businessweek.com)
Still Overpriced By $200,000 In Capitola, CA - (www.patrick.net)
Record German GDP Contraction Led by Exports - (www.cnbc.com)
Lehman US, UK Units at Odds over Bankruptcy: Report - (www.cnbc.com)
Crunch Time Looms for GM - (www.cnbc.com)
Down 30% to 52% in Miami - (www.miamiherald.com)
Have I got a skyscraper for you - (www.msnbc.msn.com)
California: State of Paralysis - (www.nytimes.com)
House price increases merely transfer wealth from the young to the old - (www.theherald.co.uk)
Fed's Vice Chairman Admits Fed Has No Exit Strategy - (Mish at http://globaleconomicanalysis.blogspot.com)

Dalls Fed President: Don't Monetize the Debt - (www.online.wsj.com)
Geithner Vows to Cut US Deficit on Fear of US Government Default - (www.bloomberg.com)
Inflation Could Be Coming To A Dollar Near You - (www.cbsnews.com)

Rio Tinto Agrees to 33% Cut in Iron Ore Price - (www.cnbc.com)
GE's Immelt Sees Growth Harder to Achieve - (www.cnbc.com)
Japan Sets Up $3 Billion Cash Lifeline for Small Firms - (www.cnbc.com)
Austrian Business-Cycle Theory - (www.mises.org)
Hell and the Credit-Card Lobby - (www.slacktivist.typepad.com)
The MBA vs The Crazy Old Witch - (www.dilbert.com)