KeNo's Housing and Economic Portal: Tuesday January 12 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

New Jersey Leads Municipal Bond Downgrades as State Aid Shrinks - (www.bloomberg.com) Bond ratings of New Jersey towns and cities are being reduced faster than in any other state as property values slide 11 percent and Governor Jon Corzine lowers municipal aid to cope with a $1 billion budget deficit. Moody’s Investors Service cut ratings on $592 million in general obligation debt issued by 14 municipalities since October, about four times the rate for neighboring New York, the second-most indebted state, according to data compiled by Bloomberg. New Jersey’s per-capita personal income of $51,358 last year was exceeded only by Connecticut, according to the U.S. Commerce Department’s Bureau of Economic Analysis. With the U.S. jobless rate hovering around 10 percent and tax revenue dwindling, the downgrades in New Jersey, the most- densely populated state, may be the start of a national trend, according to Richard Ciccarone, chief research officer at McDonnell Investment Management in Oak Brook, Illinois. Nine of 10 finance officers polled by the National League of Cities in September said it would be difficult to meet their fiscal needs in 2010, the worst outlook in 24 years. “In many of the large states, this is going to become the norm: California, New York, New Jersey and Illinois,” said Ciccarone, whose firm oversees $6.8 billion in municipal bonds, including New Jersey debt. “The stress levels have got to be very high right now for municipal fiscal officials.”

Did Rahm Emanuel Try to Arrange Plan to Keep Old Illinois Congressional Seat and Get Speaker of the House Post When Leaving White House? – (www.suntimes.com) Did then-Gov. Rod Blagojevich try to work out a plan to keep White House Chief of Staff Rahm Emanuel's old congressional seat warm for him if Emanuel decided in a few years to return? Computer records, newly obtained by the Chicago Sun-Times, offer the latest evidence the ousted governor did. On the day last year that Emanuel was named White House chief of staff, John Harris, the top aide to then-Gov. Blagojevich, began researching whether Blagojevich had the authority to appoint someone to temporarily fill Emanuel's Northwest Side congressional seat, according to records that show the Web browser history on Harris' state government computer. The records show that Harris, who was Blagojevich's chief of staff, Googled this exact search term on his state computer on Nov. 6, 2008: "temporary appointment to fill vacancies in the house of representatives." The confirmation of Harris' Google search -- which, by the way, yielded 308,000 hits -- lends credence to previous Sun-Times reports that Blagojevich's office was working with Emanuel at that time on a strategy that would enable Emanuel to one day reclaim his old House seat and vie for the powerful post of speaker of the House. In September, the newspaper reported that Emanuel wanted Blagojevich to appoint Cook County Commissioner Forrest Claypool to fill his soon-to-be-vacant 5th Congressional District seat. Emanuel broached the idea with the then-governor just days after last year's presidential election, the paper reported. The proposal was for Claypool to serve one or two terms, then to be considered for a spot in President Obama's Cabinet, which would give Emanuel the option of returning to Congress and making a bid for speaker, sources told the Sun-Times. Emanuel had hoped Blagojevich had the authority to appoint someone to serve the remaining weeks of his House term before a new Congress was seated in January -- which would have given Claypool an incumbent's advantage heading into last February's special election, the sources said.

Collapsed Lehman pays out big bonuses - (www.ft.com) Lehman Brothers, the collapsed Wall Street investment bank, is hiring bankers and paying generous bonuses in London to stop employees defecting. Lehman’s European business is recruiting middle and back office staff to help administrators PwC wade through the millions of transactions that must be reconciled with clients and trading partners to determine what is owed or can be claimed. A judge overseeing Lehman’s US bankruptcy in New York last week approved an extra $50m (€35m) in bonus pay-outs to some 230 derivatives traders working to unwind the dead bank’s $10bn portfolio. The pay-outs come as bankers in the US and Europe face public anger over probable multimillion-dollar bonuses at the end of this year and, in Britain and France, additional taxes on the pay-outs. Steven Pearson, a partner at PwC and one of the four joint administrators for the dead bank’s European arm, said the higher UK pay-outs reflected demand for the skills he needed and Lehman’s unique situation. “We’ve made our strategy and reasoning clear to our creditors,” said Mr Pearson. “We need to keep up with the market and we have to bear in mind that staff here have much narrower career development options than at other banks.” Lehman Europe is the biggest and most complex part of the dead bank outside its US headquarters operations. Mr Pearson said there were benefits in retaining staff with extensive knowledge of Lehman. Any bonuses, he said, were linked to the administrators’ focus on maximising the money returned to creditors.

More bailed-out community banks failing to pay U.S. dividends - (www.washingtonpost.com) A growing number of community banks that got federal bailouts are failing to pay quarterly dividends they owe to the government, including two banks that got aid after congressional intervention on their behalf, according to data released Monday by the Treasury Department. Fifty-five banks failed to make dividend payments in November, a 67 percent jump over the number of delinquent banks three months earlier. The missed payments reflect the struggles of many community banks, which have not benefited from the Wall Street windfalls that have helped return the largest banks to profitability. Many smaller banks focused their lending on real estate development in recent years, particularly in the suburbs of sprawling Sun Belt cities. The banks now are losing money as developers default on those loans. The Obama administration has expressed concern about the problems faced by smaller banks because they play a key role in the economy through their lending to small businesses. President Obama plans to meet at the White House on Tuesday with a group of community bankers to discuss ways to spark increased lending. The president met earlier this month to discuss the same subject with the heads of the nation's largest banks, which have not increased lending despite renewed profitability of their investment banking operations. Treasury is planning to offer banks about $30 billion in federal aid for a mix of programs to support lending to small businesses, according to people familiar with the matter.

States' jobless funds are being drained in recession - (www.washingtonpost.com) The recession's jobless toll is draining unemployment-compensation funds so fast that according to federal projections, 40 state programs will go broke within two years and need $90 billion in loans to keep issuing the benefit checks. The shortfalls are putting pressure on governments to either raise taxes or shrink the aid payments. Debates over the state benefit programs have erupted in South Carolina, Nevada, Kansas, Vermont and Indiana. And the budget gaps are expected to spread and become more acute in the coming year, compelling legislators in many states to reconsider their operations. Currently, 25 states have run out of unemployment money and have borrowed $24 billion from the federal government to cover the gaps. By 2011, according to Department of Labor estimates, 40 state funds will have been emptied by the jobless tsunami. "There's immense pressure, and it's got to be faced," said Indiana state Rep. David Niezgodski (D), a sponsor of a bill that addressed the gaps in Indiana's unemployment program. "Our system was absolutely broke." The Indiana legislation protected the aid checks, Niezgodski said, but it came after a give-and-take this spring in which Gov. Mitchell E. Daniels Jr. (R) said the state had been providing "Rolls-Royce benefits" and several thousand union workers countered by protesting proposed cuts at the state capitol. In January, the legislature is slated to consider a bill to delay the proposed tax increases intended to refill the fund. In Nevada, Gov. Jim Gibbons (R) and legislators have feuded over the unemployment program, which is $85 million in debt to the federal government, with Gibbons accusing the legislature of "callous disregard" for not setting a tax rate.

Jobless Middle-Class New Yorkers Struggle to Get By - (online.wsj.com) High unemployment is spreading in New York City beyond the poorest neighborhoods to once-secure middle-class enclaves, where some residents are falling behind on rent and mortgage payments. Among the hardest-hit spots are the northern Bronx and southeastern Queens. Both areas have seen unemployment double since the third quarter of 2007, according to the Fiscal Policy Institute, a nonpartisan think tank. "The recovery in the labor market is a long way off and it will be a long time coming to middle-income neighborhoods," said James Parrott, the institute's deputy director and chief economist. Close to half of all New Yorkers work for small and medium-size businesses, Mr. Parrot said, "and they don't readily recover in a downturn." New York City has shed 144,000 jobs since August 2008, leaving it with an unemployment rate of 10% as of November, on par with the national average. But some pockets are much worse, including neighborhoods that haven't typically experienced such severe joblessness. The Bronx, with its big public-housing complexes, lower education levels and large unskilled population, long has had the highest unemployment rate in the city. In the third quarter, the Bronx's jobless rate was 13%, the institute said. But in the northernmost stretch, populated by middle- and working-class families, bordering Westchester County suburbs, unemployment was 12.2% in the third quarter, more than double the rate of two years earlier, the institute found. Residents, city officials and economists said there have been more foreclosure cases this year in that northern part of the Bronx, as well as an increase in small-business closings, illegal renting of bedrooms and basements, and court petitions by landlords seeking back rent. Restaurant employee Gregory Ramsden, a 46-year-old renter in the Norwood neighborhood of the north Bronx, has been looking for full-time work since June 2008. He has been teaching classes in English as a second language, but hasn't had enough money to pay the rent on his apartment since July. His landlord has begun eviction proceedings. "I'd take anything. I'd take a job cleaning toilets," said Mr. Ramsden, who, as a full-time waiter, used to make $50,000 a year, the area's median income. "I believe I'm running out of options." On the southeastern strip of Queens, where generations of families have entered the middle class by buying starter homes, unemployment has doubled in the past two years to 12.2%. In 2008, there were more than 1,800 foreclosure cases filed in the area, and 1,589 filed as of the third quarter of this year, according to the Furman Center for Real Estate and Urban Policy at New York University. Residents said vacant homes in the area -- known largely as Jamaica -- have attracted illegal dumping, more rodents and break-ins. "You've got squatters going in," said Yvonne Reddick, district manager of a community board for the area. The Center for an Urban Future, a nonpartisan think tank, has found that food, housing and utility costs for New Yorkers rose significantly between 2002 and 2007 while wages in boroughs other than Manhattan stagnated.

Israel harvested Palastinean organs without permission, officials say‎ - (www.cnn.com) Israel harvested organs from bodies in the 1990s without permission of family members, the former head of a state-run forensic laboratory said in a newly released interview. Government officials acknowledge that the practice happened, but emphasize that it ended years ago. In an interview in 2000, which was released to an Israeli TV channel and broadcast over the weekend, Dr. Yehuda Hiss -- who was once head of the Abu Kabir forensic institute -- discussed the practice. "We started to harvest corneas for various hospitals in Israel," Hiss said in the interview on Israel's Channel 2 network. "Whatever was done was highly informal. No permission was asked from the families," he said. Hiss said the harvesting also included heart valves, skin and bones. He was speaking to an American researcher, who recently gave the tape to the Israeli network. An Israeli Ministry of Health spokeswoman, Einav Shimron-Grinboim, issued a statement saying the practice discussed in the report was "an old story that ended years ago" and that in the vast majority of cases, the actions were done to Israelis, including soldiers. Procedures were not clear at the time and have since been clarified, she said. None of the practices led to charges, she said. The report said organs were at times also harvested from Palestinians and foreign workers.