KeNo's Housing and Economic Portal: Thursday September 3 Housing and Economic stories

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TOP STORIES:

Program to Offer Appliance Rebates - (online.wsj.com) Appliance manufacturers are counting on a "cash for clunkers"-type rebate program to revive slumping sales of refrigerators, washing machines and dishwashers. Beginning late this fall, federal rebates will be available for purchasers of high-efficiency household appliances, furnaces and air-conditioning systems. Congress authorized $300 million for the program earlier this year as part of the federal economic-stimulus bill. After seeing the recent surge in new-car orders attributed to the federally funded clunkers program, appliance industry executives are hoping to lure consumers back into appliance store showrooms with rebates that are expected to reach $200 on some types of appliances. "It's a good way for the consumer to get back into the marketplace," said J.B. Hoyt, director of governmental relations for Whirlpool Corp. (WHR), the world's largest producer of household appliances by revenue. "Clearly, anything that boosts business is good for us." Whirlpool has been pushing for such a program for years. The 2005 energy bill included an authorization for $300 million over six years for energy-efficiency rebates on appliances. That authorization was never funded, but in the 2009 stimulus bill, the entire $300 million was authorized. Appliances covered by the program include dishwashers, washing machines and refrigerators. They must carry Energy Star ratings, indicating they meet energy-efficiency standards set by the Environmental Protection Agency and Department of Energy. To qualify for rebates, buyers won't have to trade in older, less-efficient models, which is a key component of the car program. Appliances made by companies based overseas will be eligible for the rebates if they have the Energy Star label. In 2008, about 55% of newly produced major household appliances qualified for the Energy Star designation, according to the Association of Home Appliance Manufacturers in Washington. Whirlpool, Electrolux (ELUXY), General Electric Co. (GE) and other appliance companies are mired in severe sales slumps linked to the collapse of the U.S. home construction industry and prolonged by an economic recession that has damped consumers' interest in buying expensive durable goods. The $300 million was distributed to states based on the number of households. But the federal government left most of the details, including specific rebate amounts for each type of appliance, up to state governments to decide. States' plans for the program are due to the Department of Energy by Oct. 15.

Bernanke, a Hero to His Own, Can’t Shake Critics - (www.nytimes.com) Ben S. Bernanke, chairman of the Federal Reserve, no longer looks sleep-deprived. He still works seven days a week, but earlier this month he took two days off — for the first time in two years — to attend his son’s wedding. And he often gets home for dinner and even out to baseball games every few weeks. As central bankers and economists from around the world gather on Thursday for the Fed’s annual retreat in Jackson Hole, Wyo., most are likely to welcome Mr. Bernanke as a conquering hero. In Washington and on Wall Street, it would be a surprise ifPresident Obama did not nominate Mr. Bernanke for a second term, even though he is a Republican and was appointed by President George W. Bush. But the White House has remained silent. And despite Mr. Bernanke’s credibility in financial circles, both he and the Fed as an institution have come under political fire from lawmakers in both parties over the handling of particular bailouts and the scope of the Fed’s power. He has been frustrated that many in Congress do not give the Fed what he believes is enough credit for what it has accomplished. Indeed, Mr. Bernanke has met privately with hundreds of lawmakers in recent months to explain the Fed’s strategy. Fellow economists, however, are heaping praise on Mr. Bernanke for his bold actions and steady hand in pulling the economy out of its worst crisis since the 1930s. Tossing out the Fed’s standard playbook, Mr. Bernanke orchestrated a long list of colossal rescue programs: Wall Street bailouts, shotgun weddings, emergency loan programs, vast amounts of newly printed money and the lowest interest rates in American history. Even one of his harshest critics now praises him. “He realized that the great recession could turn into the Great Depression 2.0, and he was very aggressive about taking the actions that needed to be taken,” said Nouriel Roubini, chairman of Roubini Global Economics, who had long criticized Fed officials for ignoring the dangers of the housing bubble.

US warns businesses to brace for H1N1 - (www.boston.com) The federal government is urging employers to offer flexible sick leave policies as the nation braces for a second wave of the H1N1 influenza pandemic. Commerce Secretary Gary Locke, Health and Human Services Secretary Kathleen Sebelius, and Homeland Security Secretary Janet Napolitano offered guidance to businesses on how to prevent the spread of H1N1, also known as swine flu, and to prepare for a major outbreak. They stressed allowing employees who exhibit flu symptoms to go home and to stay home until at least 24 hours have passed since their fevers subsided. They also said businesses should consider eliminating policies that require a doctor’s note or other proof to justify a sick day and that employers should be prepared to operate with fewer people. “It’s more than just a significant health issue. It has the potential to affect every aspect of our lives,’’ Locke said. “It will take Americans from every walk of life pulling together and doing our part to mount an effective response.’’ As the first pandemic in more than 40 years, it has the potential to cause massive disruptions for businesses, schools, and governments. The United States and other northern nations have been scrambling to prepare for a resurgence of the virus by stockpiling flu treatments and vaccines. US officials said yesterday that data from tests on adults show it is safe to start trying out the new vaccine in children. The National Institute of Allergy and Infectious Diseases said it would soon start two trials of a Sanofi-Aventis vaccine in children ages 6 months to 17 years. US health officials said 45 million doses of the H1N1 vaccine will be on hand in mid-October, when mass vaccinations are to begin.

CalPERS Walks Away - (Mish at globaleconomicanalysis.blogspot.com ) The Wall Street Journal is reporting Calpers Takes Another Property Hit. The decision by Calpers, the country's largest public pension fund by assets, to walk from its investment in the Koin Center, one of Oregon's tallest buildings at about 509 feet, nicknamed the "mechanical pencil" for its signature shape, also shows that leasing problems are cropping up in even the country's healthier markets. Large pension funds like Calpers typically have reserves or other means of handling underperforming properties during difficult periods, said Michael Holzgang, senior vice president of corporate services for Colliers in Portland. "Calpers is the gold standard, and it's surprising that their backup plan is to walk away," Mr. Holzgang said. "It's further indication that the impairment of commercial-property values is very real." As of March 31, Calpers's $17.6 billion real-estate portfolio, a majority of which is invested in commercial properties while about 5% is invested in residential, reported a one-year decline of about 35% in its value. Calpers's pinned the troubles at the Koin Center to insufficient cash flow. Colliers said the building's office vacancy rate is expected to rise from about 7.9% in the second quarter to the 26% range by about October. Eric Haskins, vice president of Grubb & Ellis estimates the Calpers partnership bought the building expecting the property to fetch rents in the $28-to-$32-a-square-foot range annually. Buildings like the Koin Center are signing leases in the mid-$20 range, Mr. Haskins said. Question Of Ethics: Is CalPERS...
1) Ethical?
2) Unethical?
3) Making a simple business decision in which ethics plays no part?
Clearly it's door #3, the same as for individual mortgage holders. Indeed, it is preposterous to hold individuals mortgage holders to some idealized standard of "ethics" that does not apply to businesses.

Spaniards Bail Out Guaranty Financial - (www.zerohedge.com) One would think that with a 17.8% unemployment rate the Spaniards have enough problems, right? Wrong. According to Bloomberg the winning (and highly subsidized) bidder for Guaranty is BBVA (Banco Bilbao Vizcaya Argentaria SA), Spain's second-largest bank by market value (probably not saying much). Furthermore, one wonders just what additional bailout acumen BBVA has that Blackstone, JP Morgan, Felxpoint, US Bancorp do not. Then again, BVA already has a rather extensive exposure in the Alabama and Texas region, with 583 branches, after purchasing Compass Bancshares for $9 billion in 2007. And as everyone knows, synergies is what it is all about, especially if synergies is just another name for FDIC-povided taxpayer cash. From Bloomberg: Aug. 19 (Bloomberg) -- Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank by market value, was selected to take over the assets of Guaranty Financial Group Inc. in a government-assisted transaction, according to people familiar with the situation. The Austin, Texas-based lender said last month that it was unable to raise capital as demanded by regulators and will probably fail. The Office of Thrift Supervision has taken over board functions, directed the bank to turn itself over to the Federal Deposit Insurance Corp. and is pursuing transactions likely to wipe out shareholders, Guaranty said in a July 23 filing with the Securities and Exchange Commission. Bids for the bank were due on Aug. 18, the people said. BBVA spokesman Ed Bilek and FDIC spokesman Andrew Gray declined to comment. A call to Guaranty spokesman John Wessman wasn’t immediately returned. Blackstone Group LP, Gerald Ford’s Flexpoint and U.S. Bancorp were among other groups considering bids for assets of Guaranty, people familiar with the situation said earlier. Guaranty’s biggest shareholders include billionaire Carl Icahn and Omni Hotels owner Robert Rowling. BVA ranks as the third-largest bank by assets in Alabama and fourth in Texas with 583 branches in the U.S., according to the company’s Web site. The company acquired Birmingham-based Compass Bancshares Inc. in 2007 for $9 billion. Francisco Gonzalez, chairman and chief executive officer, of BBVA, discussed his interest in acquiring failed U.S. banks during visits earlier this year with Federal Deposit Insurance Corp. Chairman Sheila Bair, the Treasury Department and Federal Reserve, the Wall Street Journal reported yesterday. And in order for readers to get a first person perspective of the exhaustive diligence that occurred, we present Guaranty's most recent notification of late filing, which concludes with this ominous warning that "any transaction would not be expected to result in the receipt of any proceeds by the stockholders of the Company", run translated through Babel Fish from English to Spanish:

OTHER STORIES:

Corporate Defaults Soar to $453 Billion, S&P Reports - (www.bloomberg.com)

FDIC May Add to Special Fees as Mounting Failures Drain Reserve - (www.bloomberg.com)

Derivatives Proposal Is Too Soft, Regulator Says - (www.washingtonpost.com)

Names Deal Cracks Swiss Bank Secrecy - (www.nytimes.com)

Hoenig Stirs Debate on Bank Failures as Fed Forum Convenes - (www.bloomberg.com)

Hedge Funds Ratchet Up Their Focus on China - (online.wsj.com)

Dollar-Yen Borrowing Cost Spread Shrinks to Tightest Since 1993 - (www.bloomberg.com)

Bank struggles to gauge QE effect - (www.ft.com)

U.K. Has Record July Deficit as Recession Curbs Taxes - (www.bloomberg.com)

European Bond Supply Pressure to Intensify in 2010, ING Says - (www.bloomberg.com)

King Changes Tune as Slump Prompts ‘Activist’ Stance - (www.bloomberg.com)