KeNo's Housing and Economic Portal: Friday September 4 Housing and Economic stories

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Under Fire, Social Security Administration Explains Meeting at Arizona Biltmore - (www.successmtgs.com) A Social Security Administration (SSA) motivational management conference held earlier this month at the high-end Arizona Biltmore Resort and Spa in Phoenix cost $700,000 and has therefore attracted the ire of the public and the attention of Congress, reports local TV news station ABC15, which broke the story last week. Costs for the conference—which hosted 675 regional managers from San Francisco—included airfare, hotel, entertainment, dancers, motivational speakers and food, all of which was allegedly purchased using taxpayer money. Rooms that typically go for over $400 per night on peak were booked at $85 per night. An SSA spokesperson told ABC15 that the conference was essential, that teleconferencing was not an option and that all 675 attendees needed to meet in person. "This was a training conference," SSA Regional Communications Director Leslie Walker said in a statement. "The location was selected through the government's competitive bidding process. The facility that was selected was the lowest bidder, and we paid well below the prescribed government rate." In response to ABC15's investigation, which criticized several elements of the meeting—including audio/visual that cost $67,760, a dance party and an optional casino night event that was reportedly not paid for using government funds—Congress asked SSA to turn over all records detailing the cost of the event and has requested that the Inspector General audit the contracting process used by SSA to select the Biltmore as its venue. "It's unsurprising that a massive government agency would fall victim to an 'entitlement mentality,'" Arizona Congressman Trent Frank said, according to ABC15. "This is clearly a case of sheltered bureaucrats forgetting that they work for the American people and deciding that the taxpayers' money is their own personal bankroll." In a three-page letter sent to Congress, SSA says the purpose of the Phoenix event was "to enhance the quality and effectiveness of the Social Security Administration's service provided to the American public by providing substantive training for managers." The SSA conference is only the latest in a string of meetings that have been criticized this year by members of Congress and the media in the wake of last fall's AIG scandal. Other targets have included Wells Fargo, Northern Trust Bank and the NFL. In response to unfair criticism, the meetings industry has issued a series of guidelines for responsible meetings and events. Called the "Model Board Policy for Approval of Meetings, Events and Incentive/Recognition Travel," the guidelines may be downloaded in PDF form from the U.S. Travel Association.

Regulators shut Guaranty Bank, 2nd largest failure - (news.yahoo.com/s/ap) Regulators on Friday shut down Guaranty Bank, a big Texas-based lender felled by losses on loans to homebuilders and borrowers, in the second-largest U.S. bank failure this year. Guaranty's failure, along with those of three banks in Georgia and Alabama Friday, brought to 81 the number of U.S. bank failures in 2009, a mounting toll and the most in a year since 1992 at the height of the savings-and-loan crisis. The Federal Deposit Insurance Corp. seized Guaranty Bank, with about $13 billion in assets and $12 billion in deposits, and sold all of its deposits and $12 billion of the assets to BBVA Compass, the U.S. division of Banco Bilbao Vizcaya Argentaria SA, Spain's second-largest bank. It was the first foreign bank to buy a failed U.S. bank. In addition, the FDIC agreed to share losses with BBVA on about $11 billion of Guaranty Bank's assets. The collapse of Austin-based Guaranty Bank, whose parent company was Guaranty Financial Group Inc., was the 10th-largest bank failure in U.S. history. It is expected to cost thedeposit insurance fund an estimated $3 billion. The bank, with 162 branches in Texas and California, also suffered losses on mortgage-linked securities it bought from other banks. Birmingham, Ala.-based BBVA Compass, with 600 branches from Florida to California, said the acquisition creates the 15th-largest commercial bank in the U.S., with about $49 billion in deposits. "This compelling transaction makes excellent strategic sense and represents an exciting growth opportunity for BBVA Compass as we continue to build the leading banking franchise in the high-growth Sunbelt region," Jose Maria Garcia Meyer, chairman of BBVA Compass, said in a statement. In contrast to the big bank failures early in the financial crisis, many of the recently shuttered banks were undone not by exotic mortgage products but by garden-variety loans. At the same time, a knot of big, complex banks collapsing in recent months is sapping billions from the federal deposit insurance fund that insures regular accounts up to $250,000, spurring regulators to court potential buyers from the world of private investment. The FDIC last week seized Colonial Bank, a big lender in real estate development, and sold its $20 billion in deposits, 346 branches in five states and about $22 billion of its assets to BB&T Corp. It was the biggest bank failure so far this year, and the sixth-largest in U.S. history, expected to cost the insurance fund $2.8 billion.

Tom Ridge: I Was Pressured To Raise Terror Alert To Help Bush Win - (www.huffingtonpost.com) Former Bush administration officials are vehemently denying Ridge's statements. "We went over backwards repeatedly and with great discipline to make sure politics did not influence any national security and homeland security decisions," former White House chief of staff Andy Card told Politico. "The clear instructions were to make sure politics never influenced anything." "Under no circumstance was Tom Ridge or anyone else directed to change the threat level," former homeland security adviser Frances Townsend said. "It didn't work that way, and it certainly didn't work that way in 2004. It was always an apolitical process." It seems that no other former top Bush political and national security officials were willing to respond. In a new book, former Secretary of Homeland Security Tom Ridge reveals new details on politicization under President Bush, reports US News & World Report's Paul Bedard. Among other things, Ridge admits that he was pressured to raise the terror alert to help Bush win re-election in 2004. Ridge was never invited to sit in on National Security Council meetings; was "blindsided" by the FBI in morning Oval Office meetings because the agency withheld critical information from him; found his urgings to block Michael Brown from being named head of the emergency agency blamed for the Hurricane Katrina disaster ignored; and was pushed to raise the security alert on the eve of President Bush's re-election, something he saw as politically motivated and worth resigning over. Dave Weigel, writing for the Washington Independent, notes that in the past, Ridge has denied manipulating security information for political reasons. In 2004, for example, he said, "We don't do politics in the Department of Homeland Security." "What Tom Ridge disclosed confirms our worst suspicions," said Sen. Lautenberg (D-N.J.), who criticized the color-coded system back in 2003. "Just like they did in Iraq, the Bush Administration manipulated intelligence to cause fear in the public to further its political goals." The Bush administration was forced to admit in the days after the 2004 alert that it was based on intelligence three or four years old. Officials then claimed there was a previously unmentioned "separate stream of intelligence" that justified the warning -- but offered little tangible information to support their new story..

Why AT&T Killed Google Voice - (online.wsj.com) Earlier this month, Apple rejected an application for the iPhone called Google Voice. The uproar set off a chain of events—Google's CEO Eric Schmidt resigning from Apple's board, and the Federal Communications Commission (FCC) investigating wireless open access and handset exclusivity—that may finally end the 135-year-old Alexander Graham Bell era. It's about time. With Google Voice, you have one Google phone number that callers use to reach you, and you pick up whichever phone—office, home or cellular—rings. You can screen calls, listen in before answering, record calls, read transcripts of your voicemails, and do free conference calls. Domestic calls and texting are free, and international calls to Europe are two cents a minute. In other words, a unified voice system, something a real phone company should have offered years ago. Apple has an exclusive deal with AT&T in the U.S., stirring up rumors that AT&T was the one behind Apple rejecting Google Voice. How could AT&T not object? AT&T clings to the old business of charging for voice calls in minutes. It takes not much more than 10 kilobits per second of data to handle voice. In a world of megabit per-second connections, that's nothing—hence Google's proposal to offer voice calls for no cost and heap on features galore. What this episode really uncovers is that AT&T is dying. AT&T is dragging down the rest of us by overcharging us for voice calls and stifling innovation in a mobile data market critical to the U.S. economy. For the latest quarter, AT&T reported local voice revenue down 12%, long distance down 15%. With customers unplugging home phones and using flat-rate Internet services for long-distance calls (again, voice is just data), AT&T's wireline operating income is down 36%. Even in the wireless segment, which grew 10% overall, per-customer voice revenue is down 7%. Wireless data service is AT&T's only bright spot, up a whopping 26% per customer. How so? As any parent of teenagers knows, text messages are 20 cents each, or $5,000 per megabyte. After the first month and a $320 bill, we all pony up $10 a month for unlimited texting plans. Same for Internet access. With my iPhone, I pay $30 a month for unlimited data service (actually, one gigabyte per month). Is it worth that? The à la carte price for other not-so-smart phones is $5 per megabyte (one-thousandth of a gigabyte) per month. So we buy monthly plans. Margins in AT&T's Wireless segment are an embarrassingly high 25%. The trick in any communications and media business is to own a pipe between you and your customers so you can charge what you like. Cellphone companies don't have wired pipes, but by owning spectrum they do have a pipe and pricing power. Aren't there phone competitors to knock down the price? Hardly. Verizon Wireless, T-Mobile and others all joined AT&T in bidding huge amounts for wireless spectrum in FCC auctions, some $70-plus billion since the mid-1990s. That all gets passed along to you and me in the form of higher fees and friendly oligopolies that don't much compete on price. Google Voice is the new competition. By the way, Apple also has a pipe—call it a virtual pipe—to customers. Its iTunes music service (now up to one-quarter of all music sales, according to NPD Market Research) works exclusively with iPods and iPhones. The new Palm Pre, another exclusive deal, this time by Verizon Wireless, tricked iTunes into thinking it was an iPod. Apple quickly changed its software to lock the Pre out, and one would expect Apple locking out any Google phone from using iTunes. It wouldn't be so bad if we were just overpaying for our mobile plans. Americans are used to that—see mail, milk and medicine. But it's inexcusable that new, feature-rich and productive applications like Google Voice are being held back, just to prop up AT&T while we wait for it to transition away from its legacy of voice communications. How many productive apps beyond Google Voice are waiting in the wings?

13% of US Mortgages are in Default (15% in California) - (www.latimes.com) In the second quarter, the number of homeowners behind on payments or in foreclosure rose along with the jobless rate, with California among states leading the way. Widespread joblessness is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation's economic recovery. A mortgage trade group reported Thursday that more than 13% of the nation's mortgage holders were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That's the highest figure since tracking began in 1972. California's rate, 15.2%, was among the highest of all states. The numbers underscore a worrisome trend. A spate of foreclosures -- which began with speculators who walked away from their souring investments, then spread to high-risk borrowers who couldn't make their payments when their low-interest mortgages reset -- is now hitting unemployed homeowners with good credit scores, clean financial histories and conventional home loans. The U.S. has shed 6.7 million jobs since the recession began, employment losses that have left even high-quality borrowers struggling. One in three new foreclosures from April to June was from a prime, fixed-rate loan, up from 1 in 5 a year earlier. The rising tide of foreclosures could swamp positive economic trends such as improving home sales and a surprise increase in U.S. regional manufacturing, also reported Thursday. "The broadening of the foreclosure crisis to include prime loans due to high and rising unemployment will delay a bottom in the housing market and threatens the economic recovery," said Mark Zandi, co-founder and chief economist of Moody's Economy.com. It's also a huge challenge to the Obama administration, which is pressuring banks to restructure troubled mortgages to keep borrowers in their homes. Such modifications are difficult to achieve when a family's income is slashed. The Washington-based Mortgage Bankers Assn. predicts that U.S. job losses will continue at least until the middle of 2010, meaning that mortgage delinquencies and repossessed homes will almost certainly continue rising. "We would expect delinquencies and foreclosures to peak sometime after that, probably at the end of next year," said Jay Brinkmann, the trade group's chief economist. The U.S. jobless rate in July was 9.4%, down slightly from 9.5% in June, a 26-year high. California's June unemployment rate was 11.6%. July figures will be released today.

Decaying Soviet Infrastructure - A Prelude of Things to Come in US? - (www.nytimes.com) A devastating breach in Russia’s largest hydroelectricdam reminded Russians and foreign investors alike this week of the dangers posed by this country’s largely Soviet-era infrastructure. The failure of the towering Sayano-Shushenskaya dam, which accounts for 15 percent of Russia’s hydroelectric power and 2 percent of its overall power, highlighted what a risky investment Russia’s infrastructure can be. At the same time, the disaster’s immediate effect — a spike in electricity prices in Siberia where the dam is located — showed how infrastructure problems could hamper any Russian economic recovery. “We need to conduct a thorough check of all strategic and vital parts of the infrastructure and work out a plan for their regular upgrade,” Russia’s prime minister, Vladimir V. Putin, told a cabinet meeting on Thursday. Legacy equipment, a blessing for newly privatized companies in the early post-Soviet period, has now become a headache, or worse, for many private Russian companies. Sayano-Shushenskaya and similar dams built by the Soviet Union’s command economy provided copious, cheap hydropower, and many businesses benefited. Rusal, the world’s largest aluminum company with many smelters in Siberia, took advantage of bountiful supply and cheap prices as it ramped up operations over the last decade. Rusal consumed about 70 percent of the Sayano-Shushenskaya dam’s output. Rusal’s owner, the oligarch Oleg V. Deripaska, once claimed that the Russian aluminum industry would outgrow America’s because cheap Siberian electricity provided an unbeatable advantage. In fact, all of Russia’s economy grew on roads, pipelines, electrical transmission towers and other infrastructure built by the Soviets, but idled during the deep post-Soviet recession. This helped facilitate rapid economic growth. But metal fatigues and snaps, gear teeth chip, grind and stick, oil pipes burst and leak, roads and bridges crack and buckle, and agricultural machinery fails during harvest. A dearth of capital investment from the late 1980s until around 2005 left Russia with badly decrepit infrastructure. The nadir was probably in 2004, when the state statistics agency calculated that Russian capital equipment was, on average, 21.5 years old — compared with about 10 years in most Western economies, said Yaroslav D. Lissovolik, the chief economist at Deutsche Bank in Moscow. “To re-equip Russia’s industrial base will take decades, not just two or three years,” Mr. Lissovolik said. “This is a long-term challenge.” It has been a long-term challenge for a while. Long anticipated, the breakdown of Soviet infrastructure began in earnest this decade.