KeNo's Housing and Economic Portal: Friday January 8 Housing and Economic stories

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N. Korea Shuts Markets as New Banknotes Stoke Prices - (www.bloomberg.com) orth Korea shut street markets to buy time to bring down prices that have surged since a recent currency revaluation, a Seoul-based rights group said. The three-day closure, which began yesterday, came after markets sold most goods for more than double the revised prices set by the communist regime and announced on Dec. 9, Good Friends said today on its Web site. The government may readjust the state prices, according to the group, which says it obtains information by contacting people in North Korea. North Korea is backtracking on currency exchange measures after riots by traders in eastern Hamhung on Dec. 5 and 6, Chosun Ilbo reported today, citing unnamed people in the country. The government raised the amount of money its citizens can exchange for new bills to 500,000 won per person from 100,000 won to calm growing protests, the Korean-language newspaper said. The government had ordered citizens to exchange 1,000-won notes for new 10-won bills between Nov. 30 and Dec. 6, the country’s first currency reform in 17 years. The revaluation may have been aimed at tightening control of free-market activities, according to South Korea’s government. The North Korean won slumped 96 percent against the U.S. dollar after the new notes were introduced, according to reports by Yonhap News Agency and Good Friends last week. A bank in Sinuiju, near the border with China, offered to buy dollars for 35 new won, equivalent to 3,500 won in old notes, on Dec. 7, Good Friends said. Before the revaluation, the official rate was about 140 old won, Yonhap said.

Regulators Resist Volcker Wandering Warning of Too-Big-to-Fail - (www.bloomberg.com) Paul A. Volcker visited nine cities in five countries in the past eight weeks to warn that bankers and regulators “have not come anywhere close to responding with necessary vigor” to the worst economic crisis in 70 years. “There is a lot of evidence that financial weaknesses brought us to the brink of a great depression,” Volcker, 82, said Dec. 8. at a conference in West Sussex, England. He told executives there that the changes they’ve proposed are “like a dimple.” Two years after the start of the deepest recession since the 1930s, no U.S. or European authority has put in force a single measure that would transform the financial system, based on data compiled by Bloomberg. No rule- or law-making body is actively considering the automatic dismantling of banks that Volcker told Congress are sheltered by access to an implicit safety net. There’s little evidence that policy makers are heeding Volcker, the former chairman of the U.S. Federal Reserve. More than 50 regulatory overhaul proposals have been submitted in the U.S. and Europe, the data compiled by Bloomberg show. Lawmakers and regulators have debated new rules for capitalization and leverage, central clearing for derivatives trading, oversight of hedge funds and ways to monitor systemic risk.

Fannie, Freddie Overseer Said to Consider Seeking More U.S. Aid - (www.bloomberg.com) Fannie Mae and Freddie Mac’s federal regulator is renegotiating the companies’ financing plan with the U.S. Treasury Department and may seek an increase to their $400 billion federal lifeline before the end of the year, according to people familiar with the talks. Treasury and Federal Housing Finance Agency officials are also debating whether to lower the mortgage-finance companies’ dividend payments on their Treasury borrowings, according to these people, who requested not to be identified describing the internal deliberations. Fannie Mae and Freddie Mac, the largest sources of mortgage money in the U.S., have used $111.6 billion of their $400 billion in backup financing in less than a year. The companies say their 10 percent annual dividend payment, which comes to about $5 billion each, costs more than either have earned in most years and adds to their draws on Treasury. “A larger line, safest to be executed before year end, would buy Washington the time necessary to address more pressing housing matters,” Jim Vogel, a debt analyst with FTN Financial in Memphis, Tennessee, said in a note to clients today. “The possible risk in the discussions is any investor disappointment that might follow no change in the existing agreements.” FHFA spokeswoman Stefanie Mullin, Treasury spokeswoman Meg Reilly, Freddie Mac spokesman Doug Duvall and Fannie Mae spokesman Brian Faith declined to comment. Fannie Mae rose 5 cents, or 4.4 percent, to $1.18 at 4:15 p.m. in New York Stock Exchange composite trading. Freddie Mac rose 4 cents, or 2.8 percent, to $1.48.

Banks Hoarding Cash in Europe Drives Treasurers to Record Bonds - (www.bloomberg.com) Abertis Infraestruturas SA, Spain’s largest highway operator, has 20 years of revenue growth and an “excellent” risk profile from Standard & Poor’s. Yet of the last 10 financing proposals it received from banks, none was for a loan. “I’ve never in more than 15 years in business seen banks so unwilling to lend,” said Jose Aljaro, chief financial officer at Barcelona-based Abertis. The company turned to the bond market, selling 1 billion euros ($1.5 billion) of seven- year notes in September. For all the cash provided by the European Central Bank to ease the worst seizure in credit markets since World War II, financial institutions in the region are unwilling to lend, using the money instead to invest in the safest, most liquid government securities. Bond investors are offering money like never before as returns on corporate debt reach as much as 70 percent this year, according to Merrill Lynch & Co. indexes. The result is corporate bond sales in Europe are exceeding the amount raised through bank loans for the first time, with issuance by non-financial companies doubling to a record 337 billion euros this year. Syndicated loans, or debt underwritten by a group of banks which they then sell to investors, fell 46 percent to 279 billion euros, data compiled by Bloomberg show. European banks, which have lost or written down $561 billion in the credit freeze, are awash with cash after governments approved $5.3 trillion of aid, more than the annual gross domestic product of Germany, European Union data show.

Recession ends for Summers but for who else? - (www.onlinejournal.com) White House chief economic advisor Lawrence Summers has declared the recession over, but as with most things economic, the opinion you get depends on whom you ask. Seven million families are behind on their mortgages and at risk of foreclosure, and 25 million Americans wanting full time work can’t find it. I doubt many of them would share Mr. Summer’s rosy assessment of the business climate. In the third quarter, the economy did manage to grow by about $90 billion, and Wall Street banks are divvying up $140 billion in year-end bonuses on the back of $280 billion in new profits. The unemployment rate did fall in December, because millions of Americans have quit looking for work and are no longer counted in the jobless rate. All together, GNP is up but all the gains seem to be going to the bankers, while the rest of the economy appears shrinking and Americans keep losing their homes and jobs. If you work on Wall Street, Ben Bernanke’s near zero interest rate loans to bankers delivered an economic recovery and a joyous holiday season. Santa Summers’ sleigh seems not to stop for Americans who don’t work at Goldman Sachs, where the average pay is $700,000 a year. The $789 billion stimulus package has not created many private sector jobs, and the hundreds of billions in TARP money squandered by Treasury Secretary Geithner to bail out General Motors, Chrysler, Bank of America, AIG, and Citigroup has not reached most businesses and working Americans. Despite mortgage rates below 5 percent, most homeowners can’t refinance their homes and most businesses can’t get credit. The big banks are simply holding out until mortgage and business lending rates are higher, and profits fatter, next spring. While President Obama was collecting his Nobel Prize for deeds yet to be discovered and saving the world from American misdeeds in Copenhagen, Lawrence Summers declared America resurrected. Yet, retailers are reporting very slow shopping for the first two weeks of December, and short of massive discounting, this holiday season is in danger of being a huge bust. In March, Federal Reserve support for mortgage financing is scheduled to end, 30-year rates are likely to rocket past 6 percent, and the risk of a second housing market collapse and double dip recession becomes real. If the U.S. economy is as healthy as Lawrence Summers has declared, then I will start at point guard for the Detroit Pistons next season.