KeNo's Housing and Economic Portal: Saturday January 9 Housing and Economic stories

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TOP STORIES:

Sovereign confidence lies in ruins - (www.marketwatch.com) Debt disaster fears rumble from Athens to London. Game of chicken for bond spreads: Will E.U. honor 'no bailout' clause? Rumors of a debt disaster are swirling around Europe, from Athens to Madrid and all the way to London. Investors have rushed to sell Greek bonds since the newly elected government of George Papandreou made a startling revelation: the deficit will soar to over 12% of gross domestic product this year, well above previous official projections. Greece's predicament has escalated concerns about contagion in other European countries whose finances are in poor shape. Just this month, the ratings of Greece have been cut both by Fitch Ratings, and, late Wednesday, by Standard & Poor's, and major agencies have warned Spain and Portugal of possible cuts. The market reaction has been swift, and brutal. The euro has dropped below the key $1.50 level. Credit-default swaps on Greek government debt -- essentially, bets that Greece will default -- have ballooned. The ASE Composite stock-market index has dropped more than 20% since mid-October, dragged by shares of lenders including Piraeus Bank, EFG Eurobank Ergasias and National Bank of Greece. Irish and Spanish institutions also have seen extreme bouts of turbulence of late. The most vulnerable countries like Greece and Spain indeed confront a mounting debt burden, which will likely lead to more ratings downgrades and more market sell-offs. The path to fiscal health will require painful, unpopular reforms. But, most analysts agree that the European Union will, if necessary, bail out its members and never let a country's fiscal situation deteriorate to the point of sovereign default. Those rescue expectations continue even as terms of euro entry explicitly forbids such moves.

Another billion in small biz credit vanishes - (money.cnn.com) The small business credit crunch is still deepening: Major banks cut their small business loan balances by another $1 billion in October, according to a Treasury report released late Tuesday. The 22 banks that got the most help from the Treasury's bailout programs have decreased their small business lending by a collective $11.6 billion since April, when the Treasury began requiring them to file monthly reports. The banks' total lending has fallen 4.3% in that six-month period, to $257.7 billion. When loan and credit lines dry up, small businesses have trouble launching, expanding, and funding their daily operations. President Obama met Monday with CEOs from a dozen of the nation's biggest banks to pressure them to do more to rebuild the economy they helped blast apart. "We expect some results," Obama told the bankers. "I'm getting too many letters from small businesses who explain that they are credit worthy, and banks that they've had a long-term relationship with are still having problems giving them loans." President Obama is planning another banker gathering next week. On Tuesday, he'll host a discussion with representatives of several community banks, according to a White House spokeswoman. The White House has not yet made any additional details available about the meeting and its agenda. 'Wait till next year': Banks are beginning to respond to the heat they're getting from administration officials. Bank of America, which whittled its small business loan balance down further every month since April, said Monday that it will loan $5 billion more in 2010 than it did this year.

Half of Detroit is Unemployed - (www.detnews.com) espite an official unemployment rate of 27 percent, the real jobs problem in Detroit may be affecting half of the working-age population, thousands of whom either can't find a job or are working fewer hours than they want. Using a broader definition of unemployment, as much as 45 percent of the labor force has been affected by the downturn. And that doesn't include those who gave up the job search more than a year ago, a number that could exceed 100,000 potential workers alone. "It's a big number, and we should be concerned about it whether it's one in two or something less than that," said George Fulton, a University of Michigan economist who helps craft economic forecasts for the state. Mayor Dave Bing recently raised eyebrows when he said what many already suspected: that the city's official unemployment rate was as believable as Santa Claus. In Washington for a jobs forum earlier this month, he estimated it was "closer to 50 percent." Although the government doesn't produce an unemployment number that high, it's not hard to get close.Officially, the unemployment rate in Detroit was estimated at 27 percent in October. But that number does not include people working part-time who want full-time work, nor does it include "discouraged" workers, who have stopped looking for work. It also doesn't include people who have gone back to school rather than search for a job. The Bureau of Labor Statistics estimated that for the year that ended in September, Michigan's official unemployment rate was 12.6 percent. Using the broadest definition of unemployment, the state unemployment rate was 20.9 percent, or 66 percent higher than the official rate. Since Detroit's official rate for October was 27 percent, that broader rate pushes the city's rate to as high as 44.8 percent.

How to fight global warming: Taxes - (money.cnn.com) More misguided policies being discussed by our fearless administration. Who would profit most? The big banks who would control the carbon trading exchange (another market to be traded like stocks or commodities). With Copenhagen climate talks looking stalled and the Senate mired in complicated eco-wrangling, is there a simpler way to get the U.S. to reduce the carbon emissions that most scientists blame for global warming? Some say yes, a refundable carbon tax. The current cap and trade plan in congress to cut greenhouse gases involves a complex web of allotments and giveaways that some fear are too compromised to work. A carbon tax could cut greenhouse gases without having to make major concessions to any one interest group, supporters say. The tax works like this: A fee is levied at the refinery, coal mine, or natural gas well for each ton of carbon produced when the fuel is burned. That fee is passed on to the consumer, thus discouraging the use of the costliest, and most carbon-intensive fuels. The fees start out small and increase gradually. In 10 years they'll add about $1 a gallon to the price of gas and $50-$70 extra a month in household electricity bills. Those fees are then returned to the consumer. They could be returned in the form of a direct monthly payment deposited into people's bank accounts, or as a reduction in another tax, like the payroll tax.

Pension Fund Collapse: St. Louis Post-Dispatch Retirees to Protest Dropped Medical Coverage - (www.bizjournals.com) Retirees of the St. Louis Post-Dispatch plan to protest parent Lee Enterprises Inc.’s taking away health coverage for hundreds of retired union members and managers. The retirees found out Monday that Lee is dropping medical reimbursements Dec. 31. The St. Louis Newspaper Guild requested a 30-day delay, but Lee rejected it. About 100 Guild members who retired from 1994 to 2004, and hundreds more managers are affected. Union officials said they believe Lee also will move to drop retiree health benefits for younger workers who took buyouts after the 2005 acquisition of Pulitzer Inc. A coalition of retirees, guild members and pressmen plan to protest outside the newspaper’s downtown offices Tuesday morning. Davenport, Iowa-based Lee (NYSE: LEE) reported a profit of nearly $1.8 million in the third quarter due to cost cuts and lower newsprint prices. Lee said third-quarter revenue dropped 20 percent to $195.8 million. Newspapers nationwide are grappling with declining revenue as readers flock to the Internet for news and classified ads.

Obama's approval ratings falling - (www.marketwatch.com) Obama's Numbers Plummet; GOP Too. An exclusive NBC/WSJ poll has Barack Obama's popularity below 50 percent for the first time in his presidency. But, as WSJ's Peter Wallsten points out, the news for the GOP isn't all good.