KeNo's Housing and Economic Portal: Sunday August 23 Housing and Economic stories

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Fed Focusing on Real-Estate Recession as Bernanke Convenes FOMC - (www.bloomberg.com) The collapse in commercial real estate is preventing Federal Reserve Chairman Ben S. Bernanke from declaring the economy and financial markets are healed. Property values have fallen 35 percent since October 2007, according to Moody’s Investors Service. That’s making it tough for owners to refinance almost $165 billion of mortgages for skyscrapers, shopping malls and hotels this year, pressuring companies such as Maguire Properties Inc., the largest office landlord in downtown Los Angeles, to put buildings up for sale. The industry is likely to be high on the agenda when Bernanke and his colleagues sit down in Washington tomorrow for the Federal Open Market Committee meeting on monetary policy. Lawmakers including Barney Frankand Carolyn Maloney are pushing the central bank to extend an aid program designed to restore the flow of credit. If nonresidential real estate remains in the doldrums, the Fed may be forced to leave emergency-lending programs in place and keep its benchmark interest rate close to zero for longer than some investors expect, given positive signs elsewhere in the economy. Commercial property is “certainly going to be a significant drag” on growth, said Dean Maki, a former Fed researcher who is now chief U.S. economist in New York at Barclays Capital Inc., the investment-banking division of London-based Barclays Plc. “The bigger risk from it would be if it causes unexpected losses to financial firms that lead to another financial crisis.” ‘Close Attention’: The Fed is “paying very close attention,” Bernanke, 55, told the Senate Banking Committee on July 22, the second of two days of semiannual monetary-policy testimony before the House and Senate. “As the recession’s gotten worse in the last six months or so, we’re seeing increased vacancy, declining rents, falling prices, and so, more pressure on commercial real estate.” The pressure may be easing in other areas of the economy. Gross domestic product shrank at a better-than-forecast 1 percent annual pace in the second quarter after a 6.4 percent drop the prior three months, and residential housing starts rose unexpectedly by 3.6 percent in June as construction of single- family dwellings jumped by the most since 2004, according to data from the Commerce Department.

White House Blocks Opposition From Staged Obama Town Hall Event - (www.prisonplanet.com) - In an effort to protect the the saintly image of Barack Obama as his popularity plummets to new lows, the White House has ensured there will be no opposing voices to the Obamacare agenda when the President makes a town hall appearance in New Hampshire tomorrow. The Secret Service will also be keeping a close eye on the throngs of protesters that are likely to gather outside. However, the many liberal commentators who rightly slammed President George W. Bush for his numerous scripted town hall meetings are noticeably silent in their criticism of Obama’s similarly staged event. “The White House controlled the distribution of the free tickets to get into the gym at Portsmouth High School. And the Secret Service will take care of any unruliness,” reports the Boston Globe today. Helping the Secret Service to chill the free speech of Americans will be White House front groups such as HCAN, ACORN, MoveOn.org (a George Soros outfit), the National Council of La Raza, the eugenics front Planned Parenthood Federation of America, and the Clintonite John Podesta’s war-mongering Center for American Progress, who have organized “marshals,” less favorably described as “brownshirts” by some, whose job it will be to police protesters and stifle their freedom of speech. As we reported on Friday, pro-Obamacare union thugs, who will also be in attendance in New Hampshire tomorrow, last week assaulted Kenneth Gladney, who was handing out Gadsen flags outside an event in in Mehville, Missouri that opponents of the health care bill were barred from entering. The fact that Gladney is a black man is a fitting rebuttal to claims that Obamacare protesters are motivated by racism. The efforts on behalf of the White House and the Secret Service are designed to prevent a repeat of the raucous scenes of protesters speaking truth to power that have unfolded over the last two weeks across the country, actions labeled “Un-American” by Nancy Pelosi yet in reality as American as apple pie, baseball and George Washington. “Barack Hussein Obama will be arriving in Portsmouth on Tuesday to hold a STAGED “Town Hall Meeting”, where he will essentially hand pick who the guests will be and what types of questions will be asked of him,” reads an advisory released by the New Hampshire Republican Volunteer Coalition. “A MASSIVE protest rally is being organized just outside of the facility where Obama will be holding his ‘Town Hall Meeting’ to promote his plan for a government takeover of your healthcare decisions.” Beyond the sideshow of the partisanship divide, it’s interesting to note that liberals who were rightly up in arms over President Bush’s innumerable staged town hall events are in fact supporting measures to ensure Obama can preside over a similarly scripted meeting. In February 2009, the Think Progress website, which is the media arm of the Center for American Progress, a left-wing think tank whose stated goal is focused around “driving the White House’s message and agenda” according to its own director Jennifer Palmieri, and who have been busy attempting to discredit the town hall protests, reported that Obama was ensuring a “clean break” from the era of George Bush, “who aggressively screened his audience members.” Now that the Obama White House is screening its audience members, will Think Progress be as critical of him as they were of Bush for doing the same thing? Or will they just continue to peddle government talking points as part of their stated mission to ‘drive the White House’s message and agenda’?

US banks’ overdraft charges under fire - (www.ft.com) “I don’t see how they can be allowed to do things like this and then waste the money and expect us to bail them out,” wrote Ernestine Brinager of South Williamson, Kentucky in a letter to the Federal Reserve. Mrs Brinager’s bank had charged her $175 in overdraft fees by re-ordering her transactions to pay the largest first, incurring the first of five $35 charges, with the remaining four charges for items that would otherwise have cleared. “If I screw up and don’t total my check register right, I should be liable – but for the one check, not five of them,” she wrote. “If I don’t handle my finances right, the government is not going to hand me money. We need to change how banks do business!” Mrs Brinager, whose comments underscore the depth of popular anger against the banking industry, is one of more than 5,000 consumers who have written to the Fed this year to comment on overdraft fees and express support for new rules that would more closely regulate how banks charge for overdrafts. The Fed’s rules are expected to be finalised later this year, but they promise to be just the first stage in consumer protection efforts that could force banks to make sweeping changes to their overdraft programmes. The issue has won some influential supporters in Washington, not least President Barack Obama, whose administration would like to place overdraft programmes under the purview of its proposed Consumer Protection Agency. Chris Dodd, chairman of the Senate banking committee, said if the Fed did not curb overdraft abuses he would “pursue legislative action”. Representative Carolyn Maloney has sponsored legislation requiring banks to get consumers’ permission to cover overdrafts, disclose interest rates and pay transactions in a way that does not increase fees. Changes could also include requiring consumers to “opt-in” for overdraft programmes, rather than automatically enrolling customers when transactions threaten to put them in the red. Such automatic enrolment in overdraft programmes is now an industry standard, allowing customers to become overdrawn with debit card purchases and even ATM withdrawals. The Federal Deposit Insurance Corporation says a 2006 survey found that three-quarters of large banks had automated overdraft programmes. Banks are lobbying against strict restrictions because overdraft fees represent about three-quarters of total service charge income. Indeed, according to research from Moebs Services, without overdraft fees 45 per cent of banks and credit unions would not have made money in 2008.

Effort to Rein in Pay on Wall Street Hits New Hurdle - (www.nytimes.com) A guaranteed bonus might strike many people as a contradiction in terms. But on Wall Street, banks have become so eager to lure and keep top deal makers and traders that they are reviving the practice of offering ironclad, multimillion-dollar payouts — guaranteed, no matter how an employee performs. The resurrection of the guaranteed bonus is sure to become a hot-button issue for the Obama administration’s pay czar, Kenneth Feinberg, who is preparing this week to review how compensation should be structured at seven companies that received two or more federal bailouts. The companies must each submit 2009 compensation plans for their top 25 earners by Thursday, and Mr. Feinberg has 60 days to rule on them. He has the authority to single out any of those employees and adjust their pay packages. In the next phase, he is to review the packages of the next 75 highest earners in each company. For them, he can set pay formulas to be applied broadly. Mr. Feinberg has met privately with executives at the companies and urged them to voluntarily rework any guarantees for big earners in advance of the submission deadline, according to two executives briefed on the discussions, with the goal of holding out these pay packages as examples for the industry. The resurgence of bonus guarantees underscores just how difficult it is to control Wall Street pay, despite the public outcry over how taxpayer money is being spent. And it is not the only tough decision Mr. Feinberg faces. He also must decide how much overall compensation is too much, even when the pay is tied to performance, like the $100 million package that Citigroup has promised to Andrew J. Hall, a top trader. But guaranteed pay poses a particular problem, some compensation experts say, because it is unhinged from financial results.

VIX Signals S&P 500 Swoon as September Approaches - (www.bloomberg.com) Options traders are increasing bets that the steepest rally in the Standard & Poor’s 500 Indexsince the 1930s won’t surviveSeptember, historically the worst month for U.S. equities. Traders are betting the VIX, a gauge of expected stock swings, will increase 13 percent in the next five weeks, according to futures prices compiled by Bloomberg. That’s the biggest spread since August 2008, right before the S&P 500 suffered the steepest two-month plunge in 21 years. The indexes have moved in the opposite direction 81 percent of the time over the past five years, Bloomberg data show. VIX futures above the level of the index show investors expect fluctuations to widen and stocks to retreat. The S&P 500 has rallied 49 percent in five months, pushing valuations to the highest levels since December 2004. The S&P 500 gained 2.3 percent last week as reports showed home sales rose and theunemployment rate fell. “It’s a danger sign,” said Ronald Egalka, a 36-year options trader who oversees $8 billion as chief executive officer of Rampart Investment Management in Boston. “People expect volatility to pick up in the future, and that implies that there’s going to be a downward movement in the market.” History shows that U.S. investors lose the most in September. The benchmark index for American equities fell 1.3 percent on average since 1928 that month, data compiled by Bloomberg show. 30% Slump: Futures on the S&P 500 lost 0.3 percent to 1,003.40 at 7:33 a.m. in New York after the index closed at 1,010.48 on Aug. 7. Mark Mobius said global stocks will drop as much as 30 percent following their recovery from last year’s rout as companies take advantage of the rebound to sell more shares. “When you have these rapid increases almost without correction, you will definitely have a correction,” Mobius, who oversees about $25 billion as executive chairman of Templeton Asset Management Ltd., said in an interview in Kuala Lumpur today. “We can expect a lot of volatility.” The S&P 500 plunged 9.1 percent last September after New York-based Lehman Brothers Holdings Inc. collapsed. The biggest drop occurred in September 1931 during the Great Depression, when the S&P 500 tumbled 30 percent. February is the only other month when stocks fell on average since 1928, losing 0.3 percent, Bloomberg data show.

Pace of Sales Under 'Clunker' Program Has Slowed: GM - (www.cnbc.com) Demand for the 'Cash for Clunkers' program has slowed down since the government extended funding for the program, but the auto industry is still improving, General Motor's CEO Fritz Henderson told CNBC Monday. "The month started out ok, it did slow down a little bit. We expected to have a healthy impact on a positive basis, and that's what we've seen," said Henderson. "I think our sales last month were encouraging, the industry was actually." Henderson said he is still awaiting data reflecting the how much sales have dropped since the intial boom at the end of July, but said the anecdotal data suggests people were still visiting showrooms. Robert Lutz, GM's vice chairman of product development, also told CNBC Monday that the slowdown does not represent the end of people taking advantage of the program. "I think we are probably seeing a slower restart of it, but it seems to be catching on and the numbers are certainly above prior levels," said Lutz. Despite the slowdown, there are still people out there who want to take advantage of 'Cash for Clunkers,' but are facing difficulty in doing so, Lutz said.