KeNo's Housing and Economic Portal: Saturday September 26 Housing and Economic stories

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Unemployment benefits about to run out for thousands - (www.northjersey.com) An estimated 33,000 New Jerseyans will receive their final unemployment check Friday, and the state estimates that benefits will dry up for about another 3,500 to 4,000 each week through the end of the year as residents exhaust the unemployment insurance benefits available to them. Help for the unemployed now rests on Congress, where legislation is pending that would extend benefits, likely for another 13 weeks. In New Jersey, and many other states, out of work residents can collect unemployment for 79 weeks. But nationwide, 500.000 people are expected to reach the maximum threshold this month and 1.5 million people by the end of the year, according to the National Employment Law Project (NELP). The national policy and research center is pushing for swift action in Washington to help lessen the burden on residents but also keep the economy afloat. "We want them to do something now, because workers are running out and it's virtually impossible to find a job," said Andrew Stettner, NELP deputy director. U.S. Sen. Robert Menendez, a co-sponsor of the benefits extension bill, said he recognizes the affect the economic downturn has had on state residents, calling it the "toughest times families have experienced in generations." "Not only have workers lost their jobs, but in many cases, new jobs simply aren't yet available. It's crucial that we extend this safety net to help families keep a roof over their heads and put food on the table while they look for new employment," Menendez (D-N.J.) said in a statement. "Many of us in Congress recognize this clearly, and I fully expect action in the Fall." In the meantime, state officials are urging residents to consider state resources, such as food stamps, housing help and utility assistance. The Department of Human Services sent a letter to county welfare agencies, day care centers and faith-based organizations alerting them of the state's situation and giving them instruction for how to direct those in need to help. Department of Human Services spokeswoman Suzanne Esterman said some people that were not eligible for benefits while they received unemployment could now be able to apply. The services, in essence, could service as a stop-gap measure while New Jerseyans are out of benefits.

She lived beyond her meager means - (www.nytimes.com) Millions of Americans have lost homes, jobs and savings to the financial crisis and recession. While greed and extravagance played roles, many lived beyond their means because their paychecks shrank. This article is adapted from “Past Due: The End of Easy Money and the Renewal of the American Economy,” by Peter S. Goodman, a reporter for The New York Times. The book, to be published Tuesday by Times Books, explores the origins of the crisis and suggests ways to reinvigorate the economy. ONE afternoon in November 2006, a policeman spotted an expired license plate on Dorothy Thomas’s 10-year-old Toyota Corolla as she drove through San Jose, Calif. He ordered her to pull over. Struggling under the weight of thousands of dollars in credit card bills, Ms. Thomas was perpetually short of cash. She had not bought a $10 auto registration sticker. The officer checked his database and recognized that she had already been ticketed once before for the same thing. He arranged to have her car towed away. “I got down on my knees and begged that officer,” Ms. Thomas recalled. As she watched her car being hauled off, she sensed that this was the beginning of a descent into a crisis from which she might not easily escape. Without money to pay the towing and storage fees, she could not extract her car from the lot, and the tab soon grew to $1,600. Without a car, she could not reach the hospital where she worked in the administrative offices, so she lost her $16-an-hour job. Without a paycheck, she could no longer pay the rent on her modest home. She moved to Oakland, where a friend lived in a beaten-down, rented house on a street they called Crack Avenue. By year’s end, Ms. Thomas, then 49, was occupying a bunk at a homeless shelter, searching in vain for a job in an economy plagued by unemployment. Across the United States a sense has taken hold that the Great Recession and the financial crisis are predominantly a result of national profligacy, as if the economy had been undone by insatiable shoppers, foolhardy home buyers and greedy investment bankers. Extravagance and recklessness certainly played crucial roles, and yet they are only part of the explanation. Many have lived beyond their incomes simply because incomes have been outstripped by the costs of middle-class life. By the fall of 2008, most American workers were bringing home roughly the same weekly wages they had earned in 1983, after accounting for inflation. “For middle- and low-wage workers, the median wage basically went nowhere over these years,” said the economist Jared Bernstein. Spirited and eloquent, Ms. Thomas had worked her way up from rural Oklahoma poverty, enduring the strains of forcibly integrated schools, before settling in California. She had become one of the first African-Americans to sell cosmetics at a Sacramento department store. Then, she forged a career in medical billing, at one point making $22 an hour. She had lived beyond her means, but not out of decadence. For years, she had rented homes in better neighborhoods than she could afford in order to send her two daughters to quality schools. She had run up credit card balances to pay for summer science camps and school supplies. She had never earned more than a high school diploma, but one of her daughters already had a master’s in education; the other was about to start college. “I truly bought into the idea that education is the way out of poverty,” Ms. Thomas said. “If your kids are going to school with kids who are preprogrammed to go to college, then that’s what they will expect. I didn’t get myself out of poverty. But I got my daughters out. I was the bridge.” Long before “subprime” entered the American lexicon, before Wall Street convulsed with the collapse of giant institutions and the financial world seized with fear, a slower-moving crisis was already under way for tens of millions of ordinary people like Ms. Thomas. The shock of recent times has merely intensified this deeper crisis, rendering void a mode of living that was already unsustainable. As wages stagnated, and as the costs of health care and education spiraled higher, easy money filled the gap: shrinking paychecks were masked by an explosion of consumer credit and by a pair of investment manias that made money surge through the American economy — one centered on the supposedly limitless promise of the Internet, the other propelled by faith that real estate values could only climb. On the backs of these fantasies, the financial system lent out ridiculous sums of money to businesses and homeowners, as if the laws of supply and demand had been repealed.

3 more bank failures bring 2009 total to 92 - (www.marketwatch.com) Regulators closed three more banks Friday, bringing the 2009 total to 92. Closings announced by the Federal Deposit Insurance Corp.:

· Chicago-based Corus Bank, (CORS 0.26, -0.07, -21.26%) which had $7 billion in assets and $7 billion in deposits as of June 30, the FDIC said. The bank's deposits have been assumed by MB Financial Bank, the FDIC added. MB Financial(MBFI 17.03, +0.52, +3.15%) will pay the FDIC a premium of 0.2% to assume all of the failed bank's deposits, and has agreed to purchase roughly $3 billion of its assets, "comprised mainly of cash and marketable securities," the regulator said. Reports of Corus Bank's failure had surfaced earlier Friday. The Corus failure will cost the federal deposit-insurance fund $1.7 billion.

· Venture Bank, Lacey, Wash., which as of July 28 had total assets of $970 million and total deposits of $903 million according to the FDIC. The FDIC said First-Citizens Bank & Trust Co., Raleigh, N.C., will assume all of the deposits of Venture Bank; will buy $874 million of the assets and entered into a share-loss transaction for $715 million of the assets. The FDIC said it will retain the remaining assets for later disposition. It estimated the cost to the deposit insurance fund at $298 million. Venture Bank, based in an Olympia suburb, is the third in Washington to fail this year and the first since Westsound Bank in Bremerton on May 8.

· Brickwell Community Bank, Woodbury, Minn., which had $72 million in assets and $63 million in deposits as of July 24, according to the FDIC. Its deposits have been assumed by Mitchell, S.D.-based CorTrust Bank. Brickwell, based in a Minneapolis-St. Paul suburb, is the third bank to fail in Minnesota this year and will cost the deposit-insurance fund $22 million.

The closures have cost the federal deposit-insurance fund more than $1.7 billion as the credit crisis continues claiming victims.

U.S. Shuts Corus Bank of Chicago - (www.nytimes.com) The bank that was the most aggressive financer of condominium construction loans during the real estate boom was closed by federal regulators Friday night, and the Federal Deposit Insurance Corporation estimated that the bank’s $4 billion in outstanding loans and real estate were worth less than 60 cents on the dollar. The lender, Corus Bankshares, based in Chicago, whose loan portfolio tripled to $4.5 billion in the four years from 2001 to 2005, reported earlier this year that its capital had been wiped out by losses on loans, and its takeover by regulators was expected. The F.D.I.C. said that the bank’s deposits would be transferred to MB Financial Bank of Chicago, and that MB would acquire $3 billion of Corus’s assets, principally cash and securities. The regulator said it planned to sell the approximately $4 billion of outstanding loans and other assets, including foreclosed real estate, in a private placement within a month. It did not say what price it expected to receive, but estimated the loss to its insurance fund at $1.7 billion. In Corus’s last filing with the government, for June 30, it said it had $3.7 billion in outstanding loans, of which $3.2 billion were construction loans. It reported owning $463 million in real estate, nearly all of it in condominiums taken in foreclosures. Corus, formerly known as River Forest Bancorp, had only 11 branches. But it ventured out across the country in recent years, gaining a reputation for aggressive lending to finance condominium projects. At the peak of its lending activities, in 2005, only 5 percent of its loans were for projects in the Chicago area. Instead, most of its loans were in the hottest markets at the time — markets that have since suffered sharp declines. A total of 29 percent of the loans were in Florida, and 20 percent in California. New York City and Washington each had 14 percent of the portfolio, and Las Vegas had 6 percent. Earlier Friday, Edward W. Glickman, the brother of Robert J. Glickman, Corus’s former chief executive, disclosed he had sold more than 1 million shares this week, at prices ranging from 26 to 29 cents a share. He retained 2.4 million shares.

But Who Is Watching Regulators? - (www.nytimes.com) NOTHING succeeds like failure, as the saying goes. And nowhere is this dismal truth more evident than in our financial regulatory system, one year after the bankruptcy filing of Lehman Brothers. Even though calamitous lending practices laid waste to the nation’s economy, surprisingly little has changed about how the financial arena operates and is supervised. Sure, a couple of venerable brokerage firms have vanished, but many of the same players remain on the scene, in the same positions of power. Senior regulators who stood idly by for years as financial firms built their houses of cards have been rewarded with even bigger jobs or are jockeying for increased responsibilities. The Federal Reserve Board, for example, wants to become the financial system’s uber-regulator, even though its officials did nothing as banks made deadly decisions to lend recklessly and leverage themselves to the max. Awarding increased power to those who failed in their oversight duties flies in the face of all notions of accountability. Imagine hiring Angelo R. Mozilo, the former chief of Countrywide Financial, to run a global financial institution, or installing E. Stanley O’Neal, who presided over a disastrous period at Merrill Lynch, at the helm of a major investment firm. Yet those in the public sector ask us to believe that regulators who snoozed during the credit bubble will be alert to emerging problems on their beats when the next mania begins. That’s asking a lot, isn’t it? Here’s a novel thought. Instead of creating more regulations to try to prevent this kind of mess from recurring, why not figure out how to hold regulators accountable when they perform as poorly as they did in recent years? Edward J. Kane, a professor of finance at Boston College and an authority on the ethical and operational aspects of regulatory failure, has some ideas about how to do this and right our damaged system in the process. He outlined them in a recent paper titled “Unmet Duties in Managing Financial Safety Nets.” This ugly financial episode we’ve all had to live through makes clear, Mr. Kane says, that taxpayers must protect themselves against two things: the corrupting influence of bureaucratic self-interest among regulators and the political clout wielded by the large institutions they are supposed to police. Finally, he argues, taxpayers must demand that the government publicize the costs of efforts taken to save the financial system from itself.

Wells Fargo vows 'decisive action' in alleged use of Malibu mansion by an executive - (www.latimes.com) Wells Fargo & Co., seeking to distance itself from a company executive's alleged personal use of a $12-million beachfront Malibu home owned by the bank, said Friday that it would "take decisive action" against any employee "who may have violated Wells Fargo's policies." The bank's strongly worded statement came as it faced a potentially embarrassing public relations imbroglio in the aftermath of reports that one of its senior executives had lived in the home that was surrendered by victims of Bernard L. Madoff's massive fraud. "I almost fell out of my chair" when reading about the Wells Fargo allegations Friday morning, said Jerry Swerling, director of public relations studies at USC's Annenberg School for Communication. "That these folks could think this would not somehow become public astonishes me." The Times reported this week that Cheronda Guyton, a Wells Fargo senior vice president responsible for foreclosed commercial properties, allegedly spent weekends this summer at the home with her family. The paper cited eyewitness reports from residents of the exclusive Malibu Colony gated community. Guyton has not responded to phone calls or e-mails seeking comment. In a statement, the bank said that its rules of conduct prohibited employees from "personal use of properties held by Wells Fargo." The company reiterated Friday that it had launched a full investigation into the allegations. The San Francisco bank also said it regretted "the disruption to the neighboring property owners since these allegations were made." The property was transferred to Wells Fargo in May by the home's then-owners, bank customers who were said to have suffered heavy losses in Madoff's Ponzi scheme. Neighbors recounted a summer evening during which guests arriving for a party at the plush modern home were ferried on a dinghy from a yacht offshore. The use of the house, Swerling said, suggests that Wells Fargo has failed to ensure that executives "make concern for the company's reputation an organization-wide priority. They need to ask themselves, 'Is this consistent with who we want to be?' If it's not consistent, don't do it." Kevin Stein, associate director of the California Reinvestment Coalition, an advocacy group for low-income tenants, said the executive's alleged use of the Malibu house looked especially bad inasmuch as Wells Fargo and other banks often swiftly evicted renters from foreclosed houses to speed their resale. "At the same time at least one bank executive was [reportedly] moving into a house in Malibu, I was imagining that scene a few miles away in the San Fernando Valley where people are getting kicked out because Wells Fargo says they have to put those houses back on the market immediately," Stein said. He said his group was working with Wells Fargo and other lenders to defer selling foreclosed homes that were occupied by tenants so renters could remain in them longer. "I expect this is an aberration. I don't know if it is widespread, but I hope it is not widespread," Stein said of the Malibu situation. Even if the incident was isolated, he said, the harm to the image of Wells Fargo and the banking industry is more broad. "It plays into the public's distrust and skepticism about the role of large financial institutions in this crisis." Real estate agents contacted by The Times on Friday said they had not heard of similar cases, despite the huge increase in homes surrendered to lenders in the last two years as the housing market collapsed.

OTHER STORIES:

But Who Is Watching Regulators? - (www.nytimes.com)

Waiting for the next Lehman Brothers - (business.timesonline.co.uk)

Insiders sell like there's no tomorrow - (money.cnn.com)

The Consumer Credit Game Is OVER - (www.market-ticker.org)

US tyre duties spark clash - (www.ft.com)

Surging Euro Puts Bloc's Rebound at Risk - (online.wsj.com)

China Government ‘Strongly Opposes’ U.S. Tire Tariff Imposition - (www.bloomberg.com)

Why we’ve not got the ideal Fed boss - (www.ft.com)

Big Spenders? They Wish - (www.nytimes.com)

Global economic crisis to continue: IMF chief - (www.reuters.com)

U.S. posts $111.4 billion August budget deficit - (www.reuters.com)