KeNo's Housing and Economic Portal: Tuesday August 11 Housing and Economic stories

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TOP STORIES:

Union told Nummi's fate uncertain after October - (www.sfgate.com) The Fremont auto factory that cheated death once before will continue building cars through October, but what happens after that is unknown, union members heard at a meeting Sunday. New United Motor Manufacturing was created by General Motors and Toyota in 1984 on the site of a plant that GM closed in 1982. In June GM said it would quit the partnership, and Toyota is considering doing the same. Amid this uncertainty, several hundred members of United Auto Workers Local 2244 met in Fremont Sunday to get an update from union leaders. The gathering included workers who survived the 1982 shutdown and think that the 5.3 million square-foot factory can be saved again. "We are a very resourceful plant, and we are going to do everything we can," said Debbie Williams, who attended Sunday's meeting in the union hall across from the plant. Williams, an Oakland native, was laid off by GM in 1982, helped revive the plant in 1984 and has worked at Nummi ever since. Nummi chief executive Kunihiko Ogura told the plant's 4,500 workers in a handwritten note Friday that he had enough orders for new cars to keep them busy through October thanks in part to the federal government's "cash for clunkers" initiative that had spurred trade-ins. "It scares me after October," said union member Betty Sall, who also worked for the old GM factory and came back to work for Nummi. Union officials said Sunday that Nummi as a legal entity could soon be dissolved or file for bankruptcy. But they told workers that a series of tax incentives being pushed through the California Legislature could induce Toyota to take over the 380-acre site, which is the only automotive factory west of the Mississippi.

Politicians Accused of Meddling in Bank Rules - (www.nytimes.com) Accounting rules did not cause the financial crisis, and they still allow banks to overstate the value of their assets, an international group composed of current and former regulators and corporate officials said in a report to be released Tuesday. The report, from the Financial Crisis Advisory Group, also deplored successful efforts by politicians to force changes in accounting rules and said that accounting standards should be kept separate from regulatory standards, contrary to the desire of large banks. “The message to political bodies of ‘Don’t threaten, Don’t coerce’ flies in the face of some of what has been coming from the European Commission and from members of Congress,” said Harvey Goldschmid, a co-chairman of the group and a former member of the Securities and Exchange Commission. The report itself, written by a group that included Tommaso Padoa-Schioppa, a former Italian finance minister; Lucas Papademos, a vice president for the European Central Bank, and Michel Prada, a former head of the French stock market regulator, used considerably more diplomatic language. “We have become increasingly concerned about the excessive pressure placed on the two boards to make rapid, piecemeal, uncoordinated and prescribed changes to standards, outside of their normal due process procedures,” the group wrote in its report, which was commissioned by the Financial Accounting Standards Board of the United States and the International Accounting Standards Board. “While it is appropriate for public authorities to voice their concerns and give input to standard setters, in doing so they should not seek to prescribe specific standard-setting outcomes,” the report added. Earlier this year both boards, under pressure from banks and politicians, made rapid changes to allow banks more leeway in valuing assets and thus reduce the losses they would otherwise have to report. The group, whose other co-chairman is Hans Hoogervorst, the chairman of the Netherlands Authority for the Financial Markets, said that despite arguments that the financial crisis was worsened by forcing banks to write down their assets to market value, the overall effect had been the opposite. Pointing to rules that delayed the write-down of bad loans and allowed banks to hide risks off their balance sheets, the group said the net impact of accounting rules “has probably been to understate the losses that were embedded in the system.” Banking regulators have been looking for ways to make the regulatory system less “pro-cyclical,” perhaps by allowing banks to postpone recognition of profits in good times so that losses would not be as large in bad times.

UBS Brokerage Suspends U.S. Sales of Leveraged ETFs - (www.bloomberg.com) UBS AG’s U.S. brokerage business stopped selling exchange-traded funds that use leverage because the products don’t conform to its emphasis on long-term investing. UBS Wealth Management Americas suspended sales of inverse and leveraged ETFs immediately, citing the “short-term nature of these securities,” the New York-based brokerage said in a statement today. Edward Jones, a St. Louis-based brokerage, and Minneapolis-based Ameriprise Financial Inc. have also halted leveraged-ETF sales. The Financial Industry Regulatory Authority and Massachusetts Secretary of the Commonwealth William Galvin said in the past two months that leveraged and inverse ETFs might not be appropriate for individual investors. The funds’ assets have increased 51 percent to $32.8 billion this year, according to data from State Street Corp., a Boston-based company that sells ETFs and tracks the industry. “We would prefer our products were as broadly available as possible,” Andrew O’Rourke, senior vice president at Direxion Funds in Newton, Massachusetts, said today in a telephone interview. His firm is one of three ETF sponsors that received inquiries from Galvin this month. “We don’t believe there are many advisers making ill-suited recommendations about our funds.” Exchange-traded funds typically mimic indexes and trade throughout the day like stocks. Leveraged ETFs use swaps or derivatives to amplify the daily returns of an index, while inverse ETFs move in the opposite direction of a benchmark.

SF Tower forfeited to lender – (www.sfgate.com) The owners of a premier San Francisco office tower plan to forfeit the property to their lenders, the city's second distressed transaction involving a major commercial building in recent weeks and another sign of the growing pressures in the sector. Hines and Sterling American Property decided to transfer their interest in 333 Bush St. to the original financers, following the surprise dissolution of law firm Heller Ehrman in September, according to a letter Hines sent to local real estate brokers and obtained by The Chronicle. The 118-year-old law firm defaulted on its 250,000-square-foot lease, leaving the nearly 550,000-square-foot property 65 percent vacant. Industry watchers have been openly speculating the building would fall into default in the months since. Hines and Sterling bought the tower for $281 million in 2007, near the top of the market, when it was 75 percent leased. The partnership is handing the property to Brookfield Real Estate Finance and Munich Hypo Bank for the amount of the outstanding loan, the letter said. "We diligently worked with the lender, but were not able to come to a mutually satisfactory restructure of the existing debt," it said. Hines spokeswoman Kim Jagger declined to address the talks or letter, saying via an e-mail: "As a matter of policy, we don't comment on ongoing lender discussions." The letter said that Hines is "financially sound and well positioned," but the Houston real estate investment company has defaulted on two other Bay Area properties in recent months. Those include the three buildings at the 1.2 million-square-foot Watergate Office Towers in Emeryville that it held in a joint venture with CalPERS, as well as the nearly 500,000-square-foot Marin Commons office property in San Rafael.

Report: Bank of America planning to cut 10 percent of branches - (www.insidebayarea.com) Bank of America Corp.'s CEO Ken Lewis said he is planning to shrink the bank's 6,100-branch network by about 10 percent, The Wall Street Journal reported Tuesday. The newspaper said Lewis told investors of the plans at a meeting last week in Charlotte, N.C., where the bank's headquarters are located. The Journal cited unidentified people familiar with the discussion. The move would be a pullback from the bank's two-decade expansion, most recently under Lewis' command, which expanded the bank from coast to coast. A Bank of America spokesman could not be reached for immediate comment. Shares of Bank of America fell 1.5 percent in premarket trading Tuesday. The report said it was told Liam McGee, president of Bank of America's consumer and small-business bank, cited changing customer preferences for the move, saying more people are using online and mobile banking. McGee, however, reportedly said it would be premature to specify how many locations could be closed. The report comes as Bank of America continues to be under the careful watch of the U.S. government, while it works to integrate two recent deals. Bank of America acquired troubled mortgage lender Countrywide Financial Corp. last summer and investment bank Merrill Lynch & Co. in January. Those two acquisitions have proven challenging for Lewis, who was stripped of his chairman title by a shareholder vote at his company's annual meeting in April. The bank and Lewis have been under intense scrutiny because Bank of America is one of the biggest recipients of government bailout money — $45 billion — and because the losses at Merrill Lynch turned out to be much higher than expected. It is not known when it will repay the government. Over the years, Bank of America has become a financial powerhouse befitting of its name.

OTHER STORIES:

Dollar Index Falls to Lowest This Year as Stocks Extend Rally - (www.bloomberg.com)

Oil rises to near $69, extending 3-week rally - (finance.yahoo.com)

Treasuries Little Changed Amid Stock Rally, Before Debt Sale - (www.bloomberg.com)

Currency-Trading Revival May Take Years as Global Volumes Slide - (www.bloomberg.com)

Derivatives bill to clamp down on speculation - (www.reuters.com)

S.E.C. Rule Curtailing Short Sales Will Stay - (www.nytimes.com)

Sugar Rises to Three-Year High on Global Deficit, India Imports - (www.bloomberg.com)

Libor-OIS Falls Below 30 Basis Points for First Time Since 2008 - (www.bloomberg.com)

Libor Falls Below 0.50% for First Time on Credit Thaw - (www.bloomberg.com)

China warns banks over asset bubbles - (www.ft.com)

Bank of China Aims to Continue Lending Expansion - (www.bloomberg.com)