KeNo's Housing and Economic Portal: Tuesday September 29 Housing and Economic stories

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The ghost fleet of the recession - (www.dailymail.co.uk) The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year. The tropical waters that lap the jungle shores of southern Malaysia could not be described as a paradisical shimmering turquoise. They are more of a dark, soupy green. They also carry a suspicious smell. Not that this is of any concern to the lone Indian face that has just peeped anxiously down at me from the rusting deck of a towering container ship; he is more disturbed by the fact that I may be a pirate, which, right now, on top of everything else, is the last thing he needs. His appearance, in a peaked cap and uniform, seems rather odd; an officer without a crew. But there is something slightly odder about the vast distance between my jolly boat and his lofty position, which I can't immediately put my finger on. Then I have it - his 750ft-long merchant vessel is standing absurdly high in the water. The low waves don't even bother the lowest mark on its Plimsoll line. It's the same with all the ships parked here, and there are a lot of them. Close to 500. An armada of freighters with no cargo, no crew, and without a destination between them. My ramshackle wooden fishing boat has floated perilously close to this giant sheet of steel. But the face is clearly more scared of me than I am of him. He shoos me away and scurries back into the vastness of his ship. His footsteps leave an echo behind them. Navigating a precarious course around the hull of this Panama-registered hulk, I reach its bow and notice something else extraordinary. It is tied side by side to a container ship of almost the same size. The mighty sister ship sits empty, high in the water again, with apparently only the sailor and a few lengths of rope for company. Nearby, as we meander in searing midday heat and dripping humidity between the hulls of the silent armada, a young European officer peers at us from the bridge of an oil tanker owned by the world's biggest container shipping line, Maersk. We circle and ask to go on board, but are waved away by two Indian crewmen who appear to be the only other people on the ship. 'They are telling us to go away,' the boat driver explains. 'No one is supposed to be here. They are very frightened of pirates.' Here, on a sleepy stretch of shoreline at the far end of Asia, is surely the biggest and most secretive gathering of ships in maritime history. Their numbers are equivalent to the entire British and American navies combined; their tonnage is far greater. Container ships, bulk carriers, oil tankers - all should be steaming fully laden between China, Britain, Europe and the US, stocking camera shops, PC Worlds and Argos depots ahead of the retail pandemonium of 2009. But their water has been stolen. They are a powerful and tangible representation of the hurricanes that have been wrought by the global economic crisis; an iron curtain drawn along the coastline of the southern edge of Malaysia's rural Johor state, 50 miles east of Singapore harbour. t is so far off‑ the beaten track that nobody ever really comes close, which is why these ships are here. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies. So they have been quietly retired to this equatorial backwater, to be maintained only by a handful of bored sailors. The skeleton crews are left alone to fend off‑ the ever-present threats of piracy and collisions in the congested waters as the hulls gather rust and seaweed at what should be their busiest time of year. Local fisherman Ah Wat, 42, who for more than 20 years has made a living fishing for prawns from his home in Sungai Rengit, says: 'Before, there was nothing out there - just sea. Then the big ships just suddenly came one day, and every day there are more of them. 'Some of them stay for a few weeks and then go away. But most of them just stay. You used to look Christmas from here straight over to Indonesia and see nothing but a few passing boats. Now you can no longer see the horizon.' The size of the idle fleet becomes more palpable when the ships' lights are switched on after sunset. From the small fishing villages that dot the coastline, a seemingly endless blaze of light stretches from one end of the horizon to another. Standing in the darkness among the palm trees and bamboo huts, as calls to prayer ring out from mosques further inland, is a surreal and strangely disorientating experience. It makes you feel as if you are adrift on a dark sea, staring at a city of light. Ah Wat says: 'We don't understand why they are here. There are so many ships but no one seems to be on board. When we sail past them in our fishing boats we never see anyone. They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships.'

Healthcare Reform is More Corporate Welfare - (Ron Paul at www.safehaven.com) Last Wednesday the nation was riveted to the President's speech on healthcare reform before Congress. While the President's concern for the uninsured is no doubt sincere, his plan amounts to a magnanimous gift to the health insurance industry, despite any implications to the contrary. For decades the insurance industry has been lobbying for mandated coverage for everyone. Imagine if the cell phone industry or the cable TV industry received such a gift from government? If government were to fine individuals simply for not buying a corporation's product, it would be an incredible and completely unfair boon to that industry, at the expense of freedom and the free market. Yet this is what the current healthcare reform plans intend to do for the very powerful health insurance industry. The stipulation that pre-existing conditions would have to be covered seems a small price to pay for increasing their client pool to 100% of the American people. A big red flag, however, is that they would also have immunity from lawsuits, should they fail to actually cover what they are supposedly required to cover, so these requirements on them are probably meaningless. Mandates on all citizens to be customers of theirs, however, are enforceable with fines and taxes. Insurance providers seem to have successfully equated health insurance with health care but this is a relatively new concept. There were doctors and medicine long before there was health insurance. Health insurance is not a bad thing, but it is not the only conceivable way to get health care. Instead, we seem to still rely on the creativity and competence of politicians to solve problems, which always somehow seem to be tied in with which lobby is the strongest in Washington. It is sad to think of the many creative, free market solutions that government prohibits with all its interference. What if instead of joining a health insurance plan, you could buy a membership directly from a hospital or doctor? What if a doctor wanted to have a cash-only practice, or make house calls, or determine his or her own patient load, or otherwise practice medicine outside the constraints of the current bureaucratic system? Alternative healthcare delivery models will be at an even stronger competitive disadvantage if families are forced to buy into the insurance model. And yet, the reforms are sold to us as increasing competition. What if just once Washington got out of the way and allowed the ingenuity of the American people to come up with a whole spectrum of alternatives to our broken system? Then the free market, not lobbyists and politicians, would decide which models work and which did not. Unfortunately, the most broken aspect of our system is that Washington sees the need to act on every problem in society, rather than staying out of the way, or getting out of the way. The only tools the government has are force and favors. These are tools that many unscrupulous and lazy corporations would like to wield to their own advantage, rather than simply providing a better product that people will willingly buy. It seems the health insurance industry will get more of those advantages very soon.

The New Israel Lobby‎ - (www.nytimes.com) In July, President Obama met for 45 minutes with leaders of American Jewish organizations. All presidents meet with Israel’s advocates. Obama, however, had taken his time, and powerhouse figures of the Jewish community were grumbling; Obama’s coolness seemed to be of a piece with his willingness to publicly pressure Israel to freeze the growth of its settlements and with what was deemed his excessive solicitude toward the plight of the Palestinians. During the July meeting, held in the Roosevelt Room, Malcolm Hoenlein, executive vice chairman of the Conference of Presidents of Major American Jewish Organizations, told Obama that “public disharmony between Israel and the U.S. is beneficial to neither” and that differences “should be dealt with directly by the parties.” The president, according to Hoenlein, leaned back in his chair and said: “I disagree. We had eight years of no daylight” — between George W. Bush and successive Israeli governments — “and no progress.” It is safe to say that at least one participant in the meeting enjoyed this exchange immensely: Jeremy Ben-Ami, the founder and executive director of J Street, a year-old lobbying group with progressive views on Israel. Some of the mainstream groups vehemently protested the White House decision to invite J Street, which they regard as a marginal organization located well beyond the consensus that they themselves seek to enforce. But J Street shares the Obama administration’s agenda, and the invitation stayed. Ben-Ami didn’t say a word at the meeting — he is aware of J Street’s neophyte status — but afterward he was quoted extensively in the press, which vexed the mainstream groups all over again. J Street does not accept the “public harmony” rule any more than Obama does. In a conversation a month before the White House session, Ben-Ami explained to me: “We’re trying to redefine what it means to be pro-Israel. You don’t have to be noncritical. You don’t have to adopt the party line. It’s not, ‘Israel, right or wrong.’ ” There appears to be an appetite for J Street’s approach. Over the last year, J Street’s budget has doubled, to $3 million; its lobbying staff is doubling as well, to six. That still makes it tiny compared with the American Israel Public Affairs Committee, or Aipac, whose lobbying prowess is a matter of Washington legend. J Street is still as much an Internet presence, launching volleys of e-mail messages from the netroots, as it is a shoe-leather operation. But it has arrived at a propitious moment, for President Obama, unlike his predecessors, decided to push hard for a Mideast peace settlement from the very outset of his tenure. He appointed George Mitchell as his negotiator, and Mitchell has tried to wring painful concessions from Israel, the Palestinians and the Arab states. In the case of Israel, this means freezing settlements and accepting a two-state solution. Obama needs the political space at home to make that case; he needs Congress to resist Prime MinisterBenjamin Netanyahu’s appeals for it to blunt presidential demands. On these issues, which pose a difficult quandary for the mainstream groups, J Street knows exactly where it stands. “Our No. 1 agenda item,” Ben-Ami said to me, “is to do whatever we can in Congress to act as the president’s blocking back.”

Happy Anniversary ! – (www.ritholtz.com) While everyone is so focused on the anniversary of Lehman Brothers (9/15) and AIG (9/16), today is a different sort of anniversary: Its been exactly one year months since the single dumbest column ever published in The Washington Post appeared: Quit Doling Out That Bad-Economy Line. Breathtaking in its ignorance, shocking in its fallibility, astonishing in its author’s perversely misperceived world view, it stands as a monument to sheer cluelessness in a single person: “There have been 11 recessions since the Great Depression. And we’re nowhere close to being in the 12th one now. This isn’t just a matter of opinion. Words — even words as seemingly subjective as “recession” — have meaning.” -September 14, 2008 It turned out that we were already in a recession for 9 months — and it was about to get a whole lot worse. The article goes on to deny the Housing slump, misreads the debt markets, recommends equities, states that bank capital was more than sufficient, looked at employment trends as proof there was no recession, applauds economic growth levels, decried the use of the terms crisis” and “meltdown” — and gets every single one exactly wrong. If you had a time machine, knew the future, and purposefully tried to write something where every word was literally wrong, you could not have done a better job. Be sure to read the whole embarrassing thing if you want to enjoy a good chuckle.

Wells Fargo fires exec in probe into use of bank-owned house - (www.latimes.com) Cheronda Guyton, a senior vice president responsible for commercial foreclosed properties, had been seen by neighbors using the Malibu Colony house lost by victims of Bernard Madoff's Ponzi scheme. Moving to contain a public relations mess, Wells Fargo & Co. fired a top executive accused of using a bank-owned Malibu beach house to entertain her family and friends. Cheronda Guyton, a senior vice president responsible for commercial foreclosed properties, broke company rules barring personal use of bank property, Wells Fargo said in a statement Monday. The Times reported last week that Guyton had been spotted by neighbors spending time at the Malibu Colony home with her family this summer. At a party in August, guests were ferried to the beach house from a yacht, residents of the enclave said. Guyton did not return phone calls or e-mails requesting comment. The property's former owners, Lawrence and Linda Elins, were among the victims in Bernard L. Madoff's massive Ponzi scheme. Because of their financial losses, the couple had been forced to sign over the property to Wells Fargo to help satisfy a debt, their former real estate agent said. As Wells Fargo investigated the employee's alleged improper conduct over the weekend, the reports of lavish frolicking in the wake of the foreclosure crisis drew widespread attention from organizations including the ABC, CNN and Fox television news networks, as well as the overseas wire service Agence France-Presse. In a statement Wells Fargo said its internal investigation concluded that "a single team member was responsible for violating our company policies. As a result, employment of this individual has been terminated." "We deeply regret the activities that have taken place as they do not reflect the conduct we expect of our team members," the statement added. Although the statement did not mention the fired employee by name, Wells Fargo spokeswoman Jennifer Langan confirmed that it was Guyton. Wells Fargo's investigation has concluded, Langan said, adding that "no other Wells Fargo team member was involved." Wells Fargo's quick action after The Times' report last week reflects the bank's recognition that the case could become a liability, especially in light of its acceptance of federal bailout money, ethics experts said. Wells Fargo is trying to "cut the story off rather quickly," said Mark Pastin, president of the Council of Ethical Organizations, an Alexandria, Va., nonprofit promoting ethics in business and government. "They might have acted differently if it was a lower-tier employee, but this was a senior vice president." Rapidly firing Guyton could also have been an attempt by Wells Fargo to present her conduct as the isolated action of an individual, Pastin said. If Wells Fargo let the situation drag on for weeks or months, other employees might have gotten the idea that Guyton's alleged behavior was tolerable. But by firing her, he said, it cuts off the "internal rot" that could have set in.

U.K. Banks to Post $215 Billion Losses, Moody’s Says - (www.bloomberg.com) .K. banks are less than half way through posting 240 billion pounds ($398 billion) of losses on loans and securities, a reflection of the country’s economic weakness, according to Moody’s Investors Service Ltd. British banks are likely to record losses of at least 130 billion pounds, in addition to 110 billion pounds lost since the beginning of the credit crisis in 2007, Moody’s said in a report today. The company “expects the sustained weakness of the U.K. macroeconomic environment to feed through into higher loan arrears with ensuing pressure on profitability and capital,” it said. British taxpayers have provided about 1.4 trillion pounds of support to banks, becoming the biggest shareholder of Royal Bank of Scotland Group Plc andLloyds Banking Group Plc, while seeking to shore up capital eroded by writedowns. British banks have raised about 120 billion pounds of capital from the beginning of the credit crisis to mid-2009, Moody’s said. “We have been underweight on the banks for some time,” said Dave Bradbury who helps manage $6 billion at Canada Life Ltd. in London. “We are still worried about bad debts and the possible need to raise more money.” Standard & Poor’s last month estimated British banks would record 97 billion pounds of loan losses from 2009 to 2011, with bad debts peaking in 2010. The estimate was for domestic loans and didn’t include the overseas operations of banks, like the U.S. units of HSBC and RBS.

New Kids on the Prime-Brokerage Block - (online.wsj.com) A stream of new players jumping into the business of servicing hedge funds shows how quickly Wall Street adapts and how rarely it allows an opportunity to make money go unexploited. The big Wall Street firms that lend to and provide trading and other services to hedge funds scaled back their exposure last year as their clients posted big losses or closed altogether. Lately, new and lesser-known players in the prime-brokerage business all are seeking a piece of lucrative fees generated by hedge funds that they see as up for grabs. FBR Capital Markets, the Arlington, Va.-based investment bank and brokerage firm, launched a prime brokerage Sept. 1. In July, New York investment bank Cantor Fitzgerald & Co. announced it was starting a prime brokerage. Jefferies & Co.'s prime brokerage, launched precrisis in early 2007, now has more than 300 hedge-fund clients, most with $300 million or less in assets. Division head Glen Dailey says Jefferies has roughly doubled the hedge-fund assets its prime brokerage unit serves from a year ago, to more than $10 billion. "With the meltdown that took place last year, we saw an opportunity," said Christopher Nealon, managing director in the institutional brokerage at FBR. Many niche financial firms such as FBR see a chance to serve smaller hedge-fund clients shunned by many big banks during the turmoil. Prime brokerage, which involves lending money and securities to hedge funds, clearing trades and managing cash accounts, boomed as a source of profits this decade as hedge funds raked in hundreds of billions of dollars from investors. The fund managers became fiercely coveted clients; by 2007, prime brokerages competed for a pile of fees analysts estimated worth $10 billion or more. But as crisis gripped the street last year, two of the biggest prime brokerage providers, Bear Stearns Cos. and Lehman Brothers Holdings Inc., collapsed. Lehman's bankruptcy filing one year ago tied up billions of dollars in assets that hedge funds had thought were readily available. Meanwhile, hedge funds in 2008 turned in their worst collective performance ever. Across Wall Street, big banks narrowed their focus to concentrate on hedge funds most likely to generate fees, primarily larger funds, effectively cutting off many funds with $500 million or less in assets. But this year, hedge funds are posting strong gains and investors are poised to channel money back to the funds, making smaller funds look more promising.