KeNo's Housing and Economic Portal: Tuesday June 30 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Suitcase With $134 Billion Puts Dollar on Edge: William Pesek - (www.bloomberg.com) It’s a plot better suited for a John Le Carre novel. Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear. Are these would-be smugglers agents of Kim Jong Il stashing North Korea’s cash in a Swiss vault? Bagmen for Nigerian Internet scammers? Was the money meant for terrorists looking to buy nuclear warheads? Is Japan dumping its dollars secretly? Are the bonds real or counterfeit? The implications of the securities being legitimate would be bigger than investors may realize. At a minimum, it would suggest that the U.S. risks losing control over its monetary supply on a massive scale. The trillions of dollars of debt the U.S. will issue in the next couple of years needs buyers. Attracting them will require making sure that existing ones aren’t losing faith in the U.S.’s ability to control the dollar. The dollar is, for better or worse, the core of our world economy and it’s best to keep it stable. News that’s more fitting for international spy novels than the financial pages won’t help that effort. It is incumbent upon the U.S. Treasury to get to the bottom of this tale and keep markets informed. GDP Carriers: Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who? These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest U.S. creditors. It makes you wonder if some of the time Treasury Secretary Timothy Geithner spends keeping the Chinese and Japanese invested in dollars should be devoted to well-financed men crossing the Italian-Swiss border. This tale has gotten little attention in markets, perhaps because of the absurdity of our times. The last year has been a decidedly disorienting one for capitalists who once knew up from down, red from black and risk from reward. It almost fits with the surreal nature of today that a couple of travelers have more U.S. debt than Brazil in a suitcase and, well, that’s life. Clancy Bestseller: You can almost picture Tom Clancy sitting in his study thinking: “Damn! Why didn’t I think of this yarn and novelize it years ago?” He could have sprinkled in a Chinese angle, a pinch of Russian intrigue, a dose of Pyongyang and a bit of Taiwan-Strait tension into the mix. Presto, a sure bestseller. Daniel Craig may be thinking this is a great story on which to base the next James Bond flick. Perhaps Don Johnson could buy the rights to this tale. In 2002, the “Miami Vice” star was stopped by German customs officers as he was traveling in a car carrying credit notes and other securities worth as much as $8 billion. Now he could claim it was all, uh, research. When I first heard of the $134 billion story, I was tempted to glance at my calendar to make sure it didn’t read April 1. Let’s assume for a moment that these U.S. bonds are real. That would make a mockery of Japanese Finance Minister Kaoru Yosano’s “absolutely unshakable” confidence in the credibility of the U.S. dollar. Yosano would have some explaining to do about Japan’s $686 billion of U.S. debt if more of these suitcase capers come to light.

Loan Redos Get Tangled in Thicket of Red Tape - (online.wsj.com) Kellina Lawrie used to be a mortgage broker, pitching loans to borrowers who in the end couldn't afford them. Her current job is working through the wreckage. Ms. Lawrie is one of thousands of J.P. Morgan Chase & Co. employees trying to modify mortgages for Americans who are in danger of losing their homes. "I feel badly for them, but I also have a responsibility to the bank," says the 30-year-old Ms. Lawrie, who was forced to sell her own home and trade in her Mercedes for a Toyota when the housing market went bust. Clobbered by the recession, millions of homeowners are asking for help from mortgage lenders like J.P. Morgan's Chase unit, the nation's third-largest servicer of mortgages behind Bank of America Corp. andWells Fargo & Co. Large and small banks have responded with programs that reduce interest rates, stretch out payments and provide other assistance. These efforts are getting a boost from the Obama administration's housing-rescue plan, which gives lenders financial incentives to modify as many as nine million mortgages. But the competing interests, red tape and raw emotions that collide in Ms. Lawrie's cubicle and in the loan-counseling center where she works show how hard it will be to overhaul those troubled loans. More than 9% of 45 million U.S. mortgages, or about four million loans, were delinquent in the first quarter of 2009, according to the Mortgage Bankers Association. That is the highest level since the group started tracking such data in 1972. As of the end of April, though, just 518,155 home loans had been modified, says Hope Now, a coalition of mortgage companies, investors and housing counselors. Getting a mortgage modified can take months, slowed by thin staffing and mountains of paperwork. With so many loans bundled and sold to investors, it's sometimes hard to figure out who even owns them. The new federal program requires borrowers to meet slightly different requirements than bank programs do, meaning banks need to navigate two procedures….. Bill Campbell, a self-employed electrician in Covington, Ky., recently got a new 20-year mortgage from Chase with an interest rate of 2.75% that will rise no higher than 4.75%, compared with his previous rate of 5.375%. Mr. Campbell, 60, fell three months behind last year on the loan for his 114-year-old house when his business began to slow. "This is absolutely wonderful for me, and I can tell that I will start having more money coming in because I'm starting to get more work," he says. Joe Figueroa, a 42-year-old county worker in Cleveland, hasn't been so lucky. He says he fell behind on his $133,000 mortgage after an illness that forced him to take unpaid medical leave several years ago. Once he went back to work, he tacked additional money onto his monthly $1,300 payments for a while, but remains behind. Mr. Figueroa says he can't persuade Chase to halt foreclosure proceedings on his 150-year-old Victorian house, though he filed modification paperwork five months ago. "I didn't borrow more than I could afford and I'm not asking to keep the house for free," says Mr. Figueroa.

Woman To Be Foreclosed On For Previous Owner’s Debt - (www.housingdoom.com) Good video. It’s tough enough when a homeowner can’t pay their debts and loses a home to foreclosure. It’s even more mind-boggling though when they are notified that it will happen for a previous owner’s debt:

Indictment: Man posed as dead mom for 6 years - (www.cnn.com) A 49-year-old man impersonated his dead 77-year-old mother in paperwork -- and sometimes in person -- for six years, collecting more than $100,000 in her name, according to the Brooklyn district attorney. The man sometimes dressed as his mother and, with an accomplice, collected more than $52,000 in Social Security benefits and another $65,000 in city rent subsidies, prosecutors said. Thomas Parkin and a man accused of being his accomplice, Mhilton Rimolo, 47, pleaded not guilty Wednesday to a sweeping 47-count grand jury indictment that includes charges of perjury, grand larceny, conspiracy, forgery and criminal impersonation, Brooklyn District Attorney Charles J. Hynes told reporters. Their bail was set at $1 million each. If convicted, they could each face up to 25 years in prison. "These defendants ran a multiyear campaign of fraud that was unparalleled in its scope and brazenness," Hynes said. Authorities allege Parkin impersonated his late mother, Irene Prusik, after her death in September 2003. On April 29, surveillance video captured Parkin posing as his mother to renew her driver's license at a state Department of Motor Vehicles office in Brooklyn, authorities said. Parkin was wearing a blonde wig, a red sweater, sunglasses and a scarf around the neck, authorities said. Next to him was Rimolo, who was pretending to be her nephew, authorities said. "[Parkin] did a pretty good job of covering himself up so that those that didn't know what to look for wouldn't be able to see anything," said Michael Vecchione, chief of the Brooklyn district attorney's rackets division. According to the indictment against him, the source of the fraud dates as far back as 1996, when Prusik ceded the deed of a building she owned in the Park Slope section of Brooklyn to her son. By 2000, he had gotten into debt after purchasing properties with business partner Rimolo, "presumably for speculation," Hynes said.

Germany's Subprime Crisis Blamed On US - (www.us1.institutionalriskanalytics.com) The United States is solely to be blamed for the financial crisis. They are the cause for the crisis, and it is not Europe and it is not the Federal Republic of Germany.": Peer Steinbrück, German Finance Minister, September 25, 2008

"Excessively cheap money in the U.S. was a driver of today's crisis… "I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the U.S. and elsewhere and whether we could find ourselves in five years facing the exact same crisis.":, Angela Merkel, German Chancellor, November 27, 2008

"Greenspan needs to create a housing bubble" from 2002! - (www.nytimes.com) If the story of the current U.S. economy were made into a movie, it would look something like ''55 Days at Peking.'' A ragtag group of ordinary people -- America's consumers -- is besieged by a rampaging horde, the forces of recession. To everyone's surprise, they have held their ground. But they can't hold out forever. Will the rescue force -- resurgent business investment -- get there in time? The screenplay for that kind of movie always ratchets up the tension. The besieged citadel fends off assault after assault, but again and again rescue is delayed. And so it has played out in practice. Consumers kept spending as the Internet bubble collapsed; they kept spending despite terrorist attacks. Taking advantage of low interest rates, they refinanced their houses and took the proceeds to the shopping malls. But predictions of an imminent recovery in business investment keep turning out to be premature. Most businesses are in no hurry to go on another spending spree. And those that might have started to invest again have been deterred by sliding stock prices, widening bond spreads and revelations about corporate scandal. Will the rescuers arrive in the nick of time? Not necessarily. This movie may not be ''55 Days at Peking'' after all. It may be ''A Bridge Too Far.'' A few months ago the vast majority of business economists mocked concerns about a ''double dip,'' a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I've repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever. The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging. On the surface, the sharp drop in the economy's growth, from 5 percent in the first quarter to 1 percent in the second, is disheartening. Under the surface, it's quite a lot worse. Even in the first quarter, investment and consumer spending were sluggish; most of the growth came as businesses stopped running down their inventories. In the second quarter, inventories were the whole story: final demand actually fell. And lately straws in the wind that often give advance warning of changes in official statistics, like mall traffic, have been blowing the wrong way. Despite the bad news, most commentators, like Mr. Greenspan, remain optimistic. Should you be reassured? Bear in mind that business forecasters are under enormous pressure to be cheerleaders: ''I must confess to being amazed at the venom my double dip call still elicits,'' Mr. Roach wrote yesterday at cbsmarketwatch.com. We should never forget that Wall Street basically represents the sell side. Bear in mind also that government officials have a stake in accentuating the positive. The administration needs a recovery because, with deficits exploding, the only way it can justify that tax cut is by pretending that it was just what the economy needed. Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble. But wishful thinking aside, I just don't understand the grounds for optimism. Who, exactly, is about to start spending a lot more? At this point it's a lot easier to tell a story about how the recovery will stall than about how it will speed up. And while I like movies with happy endings as much as the next guy, a movie isn't realistic unless the story line makes sense.

OTHER STORIES:

New CA Foreclosure freeze - (www.sfgate.com)

California's New House Tax Credit Running Out - (blogs.wsj.com)

Millionaire Houses May Lose Value Until 2012 - (www.bloomberg.com)

New York House Prices Forecast To Drop 40% More - (www.time.com)

KB, Countrywide sued over inflated house prices - (www.sfgate.com)

Housing starts "soared" in May? Hardly! - (themessthatgreenspanmade.blogspot.com)

High Housing Starts Don't Reflect Reality - (www.finance.yahoo.com)

Worst Housing Number in Decades: What Is Media Smoking? - (www.seekingalpha.com)

Thoughts On Walking Away From Upside Down Mortgage - (www.housingcrashhub.com)

Banks accept 66% of debt value at foreclosure auctions - (mortgage.freedombloggingcom)

Inconsistencies in the $134 billion bearer bond mystery - (www.seekingalpha.com)