KeNo's Housing and Economic Portal: Thursday October 1 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

SAUDI BANKS READY TO TOPPLE - (socioecohistory.wordpress.com) Saudi banks are beginning to topple, soon to cause deep ripples across the globe. Meanwhile, Saudi royals are under threat of assassination. The Saudi Arabian central bank announced it will not purchase the debts from two family businesses after a major default. The Saudi Arabian Monetary Agency will not cover the debt from Ahmad Hamad Algosaibi & Brothers and Maan al-Sanea’s Saad Group. The debt is owed to local banks. Units of the two groups have borrowed at least $15.7 billion from more than 80 regional and international banks. About $5 billion of that is owed to Saudi banks, Standard Chartered stated in an August 26th report. ….. …. On August 30th, a suicide bomber injured Saudi Prince Mohammed bin Nayef, son of the interior minister and nephew of King Abdullah. The incident took place in Jeddah Saudi Arabia. Reports indicate the motive might be tied to Saudi involvement in the civil war in Yemen. A check reveals that Ramadan ends on September 19th. Expect all hell to break loose in the Persian Gulf after its end. Mayhem will be permitted at that time.

Saudi Central Bank Won’t Buy Algosaibi, Saad Debt From Banks - (www.bloomberg.com) Muhammad al-Jasser, Saudi Arabia’s central bank governor, said the bank won’t buy up debts from two family businesses that defaulted after borrowing more than $15 billion. “Absolutely not,” al-Jasser said when asked whether the Saudi Arabian Monetary Agency would buy up the debt of Ahmad Hamad Algosaibi & Bros. and Maan al-Sanea’s Saad Group from local banks. He spoke to Bloomberg News at a meeting of central bank governors and finance ministers of the Group of 20 countries in London yesterday. Units of the two groups have borrowed at least $15.7 billion from more than 80 regional and international banks, including Paris-based BNP Paribas SA, New York-based Citigroup Inc. and Arab Bank Plc in Amman, Jordan, according to documents provided by lenders. About $5 billion of that is owed to Saudi banks, Standard Chartered Plc said in an Aug. 26 report. Al-Jasser’s comment comes after the Economist Intelligence Unit said in a report this month that the “fall-out for local banks may be limited as the Saudi Arabian Monetary Agency is expected to help local banks to cover losses.” International and regional banks are suing the Al-Khobar- based Saudi groups after both missed payments due from their Bahraini-based banking units, which are now under the administration of the Bahraini central bank. Court cases are also taking place between the two after the Algosaibi group said in a May 22 New York filing that al-Sanea, the owner of Saad Group, used “falsified documents” to obtain $10 billion. Saad Group will respond to the claim through the judicial process, according to an Aug. 1 e-mailed statement from the company. ‘Debt Restructuring’: The Saudi government has set up a special committee to look at the debt defaults by the groups. The Algosaibi group, a holding company with a broad range of interests from financial institutions to hotels, shipping and a bottling company, said in May it hadn’t made payments to creditors of its Bahrain-based lender, The International Banking Corporation BSC, “pending a debt restructuring exercise.” The Saad group, which engages in a range of businesses from construction to health care, said in June it was planning an “orderly restructuring” of its debt. Qatar, a neighboring Gulf state, has bought up portfolios of local banks to boost the banking industry through the financial crisis. To date, Saudi Arabia’s central bank has cut interest rates, reduced the reserve requirements for banks and placed deposits with banks. ‘Stressed Financially’: Saudi Arabia’s economy will contract 1 percent this year as the debt problems of family-run businesses dissuade banks from lending, Riyadh-based Jadwa Investment Co. said in a July 28 report. In addition to these two Saudi conglomerates, “several other family groups are stressed financially,” Jadwa said. Al-Tuwairqi Group hired HSBC Holdings Plc to oversee a restructuring of its bank loans after the Saudi steelmaker was hurt by falling prices, a person familiar with the situation said on June 24. The Dammam-based company is restructuring as much as 7 billion riyals ($1.9 billion) in debt, the person said.

Ghost Towns May Haunt Ireland in Property Loan Gamble - (www.bloomberg.com) The skeleton of an eight-story Dublin office block lays deserted on the north bank of the River Liffey, just next to the financial district that less than two years ago was the heart of Ireland’s economic boom. Four cranes stand idle at the site, one of at least 35,000 unfinished or empty new offices and homes that dot Ireland’s landscape after the collapse of its real estate market. Finance Minister Brian Lenihan will detail tomorrow how much Ireland will pay for about 90 billion euros ($131 billion) of real estate loans now crippling what as recently as 2006 was one of Europe’s most dynamic economies. In what may be the biggest financial gamble in 87 years as a sovereign state, the government will become the owner of loans for property developments that have plunged in value. “Short of declaring war, this is the most important decision these guys will ever make,” said Brian Lucey, associate professor of finance at Trinity College Dublin, who opposes the plan. “Our entire economic credibility and independence is at stake.” Ireland is suffering the worst economic slump of any developed nation since the Great Depression, according to the Economic & Social Research Institute in Dublin. The banking system came close to collapse after the bankruptcy of New York-based Lehman Brothers Holdings Inc. a year ago today froze global credit markets and swelled bad debts. Ireland’s banks are now in a “vegetative state,” according to RBC Capital in London. The government is hoping that by purging toxic assets, the banks will revive lending and reignite the economy. Seize Land: “If we don’t take that basic step, our banks are going to evolve into zombie banks” that won’t support the economy, Lenihan said in an interview in Athlone, central Ireland, late yesterday. The National Asset Management Agency, known as NAMA, will buy 18,000 loans at a discount from lenders led by Allied Irish Banks Plc and Bank of Ireland Plc. The agency will manage the loans, which amount to about half of Ireland’s gross domestic product. Should any of the 1,500 borrowers default, the agency can seize the land or other security put up. Most of the property-related loans of the biggest Irish banks are being taken over by the agency, excluding residential mortgages. Finding Right Price: For Lenihan, it’s a tightrope: pay too much, and he risks damaging the taxpayer, opponents of the plan say. Pay too little, and he wipes out the banks. Bank of Ireland fell 2.2 percent to 2.78 euros in Dublin trading, while Allied Irish advanced 3.7 percent to 2.70 euros. NAMA may pay more than current market prices for some loans as it seeks to place a “long-term economic value” on the debt, Lenihan told a parliamentary committee on Aug. 31, a strategy which could keep the banks alive. The agency may discount the loans of Allied Irish by 23 percent and Bank of Ireland by 18 percent, according to an estimate by Merrion, a Dublin-based securities firm. The loans taken over by the agency may include those given to developer Liam Carroll by Anglo Irish Bank Corp. to build its new headquarters on the north bank of the Liffey. With Carroll now seeking protection from creditors amid debts of 1.3 billion euros, the building lies unfinished. Anglo, owed about 30 million euros, is offering another 8 million euros to allow the developer to complete the building.

Madoff versus Stanford: Allen Stanford Gets Public Defender for Criminal Case - (www.bloomberg.com) Regulators and investors have fought attempts to unlock legal defense funds from Stanford’s seized assets, which were frozen by court order on Feb. 17 when the U.S. Securities and Exchange Commission accused him of investor fraud. Stanford is also being denied access to his company’s liability insurance policy, after the court-appointed receiver claimed those funds may be needed to defend Stanford’s companies against lawsuits. Caminiti, Washington, Hannon. Marjorie Meyers, head of the federal public defender’s office in Houston, said it has a staff of seven. Schaffer is a partner in the Houston law firm Bires & Schaffer. A biography on his firm’s Web site describes him as having more than 25 years of experience in criminal law, including white collar crime, bank fraud, government contract fraud and homicide. His clients have included one-time Houston Astros baseball player Ken Caminiti, who is deceased, as well as U.S. Congressman Craig Washington and former Enron Broadband Services Inc. executive Kevin Hannon, according to the site. Asked for a comment on his client, Schaffer said, “Let me talk to him first.” During the hearing, Hittner asked Stanford if he had money to hire a lawyer. ‘Insurance Policy’: “I think I have funds in an insurance policy,” said Stanford, who appeared in court in an orange jumpsuit and looking thinner than his last appearance in late June. The judge cut him off, saying “That has not been resolved. I’m talking right at this moment. Do you have sufficient funds at this moment?” “I don’t have an answer to that,” Stanford said. Hittner replied, “I’ll take that as a no.”

Celente: Revolution next for U.S. - (www.youtube.com) Gerald Celente (good but radical trends forecaster) sits down for an exclusive interview with RT's Anastasia Churkina to talk about what the future holds for America during and after the Great Recession, gives advice to Obama, and forecasts the unexpected.

Pelosi Rewarded By Lobbyists For Backing Off Public Option - (www.openleft.com) House Speaker Nancy Pelosi for the first time yesterday suggested she may be backing off her support of the public option. According to CNN, Pelosi and Senate Majority Leader Harry Reid "said they would support any provision that increases competition and accessibility for health insurance - whether or not it is the public option favored by most Democrats." When "asked if inclusion of a public option was a non-negotiable demand - as her previous statements had indicated Pelosi ruled out any non-negotiable positions," according to CNN. This was also corroborated by the Associated Press, and by Pelosi's own words, as quoted in those stories. This announcement came just hours before Steve Elmendorf, a registered UnitedHealth lobbyistand the head of UnitedHealth's lobbying firm Elmendorf Strategies, blasted this email invitation throughout Washington, D.C. I just happened to get my hands on a copy of the invitation from a source - check out this OpenLeft exclusive:

From: Steve Elmendorf [mailto:steve@elmendorfstrategies.com]
Sent: Friday, September 11, 2009 8:31 AM
Subject: event with Speaker Pelosi at my home

You are cordially invited to a reception with

Speaker of the House
Nancy Pelosi

Thursday, September 24, 2009
6:30pm ~ 8:00pm

At the home of
Steve Elmendorf
2301 Connecticut Avenue, NW
Apt. 7B
Washington, D.C.

$5,000 PAC
$2,400 Individual

To RSVP or for additional information please contact
Carmela Clendening at (202) 485-3508 or clendening@dccc.org

Steve Elmendorf
ELMENDORF STRATEGIES
GOVERNMENT AFFAIRS SOLUTIONS
900 7th Street NW Suite 750 Washington DC 20001
(202) 737-1655

Again, Elmendorf is a registered lobbyist for UnitedHealth, and his firm's website brags about its work for UnitedHealth on its website (Elmendorf was also a chief of staff for Democratic Minority Leader Dick Gephardt). The sequencing here is important: Pelosi makes her announcement and then just hours later, the fundraising invitation goes out. Coincidental? I'm guessing no - these things rarely ever are. I wrote a book a few years ago called Hostile Takeover whose premise was that corruption and legalized bribery has become so widespread that nobody in Washington even tries to hide it. This is about as good an example of that truism as I've ever seen.

Many mortgage modifications push payments .... higher - (www.usatoday.com) Tens of thousands of financially strapped homeowners who have asked lenders to lower their mortgage payments are instead winding up with higher monthly payments and larger debts on their homes. Homeowners who were hoping for lower payments are discovering to their dismay that lenders roll late fees, back taxes or other costs into the principal, sometimes turning a difficult payment into an impossible one. That is one reason that many reworked mortgages are sliding back into default. It's too early to know if this pattern will continue under theObama administration's $75 billion initiative to get lenders to reduce monthly payments for homeowners struggling to make their mortgages. A total of 360,165 mortgage modifications are now in a three-month trial period under the government's plan announced in March. But the initiative focuses on reducing interest rates rather than cutting principal, which has been found to be one of the most effective modifications for helping homeowners avoid defaulting a second time (known as a "re-default"). Of loans modified from Jan. 1, 2008, through March 31, 2009, monthly payments increased on 27% and were left unchanged on an additional 27.5%, according to a recent report by banking regulators. Many modified mortgages fall delinquent — 25% to 40%, depending on the type of mortgage — often because of homeowners' loss of income or additional outstanding debt, according to a report last month by CreditSights, a financial research firm. "Payments have gone up …. (and) the payment relief can last for the first few years and then go up (again)," says Alan White, assistant professor of law at the Valparaiso University School of Law in Valparaiso, Ind. He has studied the subprime mortgage situation for 10 years. "(The lenders) focus on today and not on the future." Even under the Obama plan, they don't focus on permanent debt reduction, White says. The majority of borrowers who've gotten mortgage modifications have seen their overall principal balance go up, according to an analysis by CreditSights and ICP of about 660,000 mortgages modified this year. In about 90% of the modifications, the principal balance after a modification was larger, CreditSights said.

OTHER STORIES:

Economic Obsolescence of Large Houses - (www.blogs.usc.edu)

Hard Times In Suburban Wastelands - (www.newgeography.com)

Condo Speculators Unclear Rent vs Buy - (www.wcvarones.blogspot.com)

Wells Fargo fires executive accused of using bank-owned Malibu house - (www.latimes.com)

The Final Demise of A Speculative Housing Bubble - (www.Charles Hugh Smith)

Seven New Rules for the First-Time House Buyer - (www.nytimes.com)

Bernanke says recession 'very likely over' - (www.news.yahoo.com)

Taleb: Recession definitely not over - (www.theglobeandmail.com)

The Continuing Disaster of Wall Street, One Year Later - (www.robertreich.blogspot.com)

'We're going to have zombie capitalism for the next 15-20 years,' says Jim Rogers - (www.bi-me.com)

Investor says bank let him borrow too much - (www.heraldtribune.com)