KeNo's Housing and Economic Portal: Thursday January 6 Housing and Economic stories

Tuesday, January 5, 2010

Thursday January 6 Housing and Economic stories

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TOP STORIES:

CEO Dick Fuld Got Millions In Special Bonus 4 Days Before Lehman Filed For Bankruptcy - (www.dailybail.com) It all goes down in the first 30 seconds. Henry Waxman tells you something you might not have known regarding Lehman's final days. Days from becoming the largest bankruptcy in U.S. history, Lehman Brothers steered $20 million to 3 departing executives even while pleading for a federal rescue, Congress is told.

Housing Chill Could Trash 2011 - (www.huffingtonpost.com) Imagine sitting on a four-legged stool and one of its legs suddenly collapses. Or, put another way, let's say one of the key organs in your body stops functioning. Obviously, you're in trouble in either case. You can say the same thing about the economic ravages from the ongoing hell in housing, which, because of the heavy media focus on quantitative easing (namely QE2) and Obama's tax cut fight, has been swept under the rug amid the renewed wave of economic enthusiasm. But it's not something to casually ignore. In this case, the present housing picture could be scarier than The Picture of Dorian Gray or one of those ghost-filled haunted houses in the amusement parks. In fact, based on the risks, we could be talking about the scariest housing situation of them all. Why so? Because current trends show that housing, a critical leg of the economic stool, is getting increasingly shakier. In turn, that means 2011 could produce a renewed wave of housing dousing, dangerously threatening the vigor of the widely expected economic recovery that most economists tell us is a sure thing.

16 US Cities Facing Bankruptcy If They Don't Make Deep Cuts In 2011 - (www.businessinsider.com) 2011 will be the year of the municipal default. At least that's what analysts like Meredith Whitney predict, as do bond investors that have been fleeing the muni market.

There are many reasons to be worried. First, the expiration of Build America Bonds will make it harder for cities to raise funds. Second, city revenues are crashing and keep getting worse. Property taxes haven't reflected the total damage from the housing crash. High joblessness is cutting into city revenues, while increasing costs for services. The next default could be a major city like Detroit, or it could be one of hundreds of small cities that are on the brink. Did we leave off your ailing city? Let us know in the comments.

$2tn debt crisis threatens to bring down 100 US cities - (www.guardian.co.uk) Overdrawn American cities could face financial collapse in 2011, defaulting on hundreds of billions of dollars of borrowings and derailing the US economic recovery. Nor are European cities safe – Florence, Barcelona, Madrid, Venice: all are in trouble. More than 100 American cities could go bust next year as the debt crisis that has taken down banks and countries threatens next to spark a municipal meltdown, a leading analyst has warned. Meredith Whitney, the US research analyst who correctly predicted the global credit crunch, described local and state debt as the biggest problem facing the US economy, and one that could derail its recovery. "Next to housing this is the single most important issue in the US and certainly the biggest threat to the US economy," Whitney told the CBS 60 Minutes programme on Sunday night. "There's not a doubt on my mind that you will see a spate of municipal bond defaults. You can see fifty to a hundred sizeable defaults – more. This will amount to hundreds of billions of dollars' worth of defaults."

Gov't report forbidden from saying "deregulation", "shadow banking", or "Wall Street" - (www.nytimes.com) It’s not as if the story of the crisis is particularly obscure. First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to “shadow banks,” which weren’t covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks. Then the bubble burst, with hugely disruptive consequences. It turned out that Wall Street had created a web of interconnection nobody understood, so that the failure of Lehman Brothers, a medium-size investment bank, could threaten to take down the whole world financial system. It’s a straightforward story, but a story that the Republican members of the commission don’t want told. Literally. Last week, reports Shahien Nasiripour of The Huffington Post, all four Republicans on the commission voted to exclude the following terms from the report: “deregulation,” “shadow banking,” “interconnection,” and, yes, “Wall Street.” When Democratic members refused to go along with this insistence that the story of Hamlet be told without the prince, the Republicans went ahead and issued their own report, which did, indeed, avoid using any of the banned terms.