KeNo's Housing and Economic Portal: Tuesday January 19 Housing and Economic stories

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Governor Paterson: "New York Runs Like a Payday Loan Operation" - (Mish at globaleconomicanalysis.blogspot.com) I rarely applaud politicians but I will gladly give New York governor Patterson a standing ovation for his state of the state address on Wednesday. Please consider Paterson Speech Chastises Lawmakers: In a strikingly blunt State of the State address, Gov. David A. Paterson chastised the lawmakers seated before him on Wednesday, saying they had spent the state into near-ruin and stood by as a plague of political corruption destroyed New Yorkers’ trust in their government. “You have left me and other governors no choice,” Mr. Paterson, the former State Senate minority leader, said. “Whether it be by vetoes or delayed spending, I will not write bad checks, and we will not mortgage our children’s future.” The public scolding drew a cold response from lawmakers. Some sat stony-faced during the speech, while others fidgeted with BlackBerrys. The governor entered the packed chamber with nary a handshake for the hundreds of lawmakers and other officials who had assembled to hear him speak, and did not crack a single smile during his 30-minute address. Lawmakers, Mr. Paterson charged, had too often bowed to the wishes of powerful special interests, feeding an “addiction to spending, power and approval” and plunging the state into economic catastrophe. “No longer are we going to run New York like a payday loan operation,” the governor vowed.

Firm suggests government manipulated stocks - (www.marketwatch.com) The unusual circumstances that led the U.S. market to rally powerfully in 2009 might be explained by secret government moves to buy stocks, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market. "We cannot identify the source of the new money that pushed stock prices up so far so fast," Biderman said in a statement Tuesday. Are foreign stocks the way to go in 2010? Jonathan Auerbach, managing director of Auerbach Grayson, discusses the performance of foreign stocks in 2009 and their outlook for 2010. He talks with Kelsey Hubbard about which overseas funds are a good bet for investors. The source of approximately $600 billion net new cash necessary to lift the market's overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn't come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds. "We know that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well?" The Federal Reserve or the Treasury, Biderman said, could have easily manipulated the stock market by purchasing $60 to $70 billion worth of futures of the S&P 500 Index (SPX 1,137, +0.62, +0.05%) on a monthly basis.

Stockton, CA is Foreclosureville, USA - (www.thecalifornian.com) Stockton hardly looks like the most miserable city in the country. But the statistics and stories over the last two years make a case that it is: Since the housing crisis began, this inland port city 80 miles east of San Francisco has had one of the worst foreclosure rates in the country — for most of the time, the worst. At the height of it, about 1 in 10 houses fell to foreclosure. Houses that sold for more than $500,000 before the crash now go for $200,000. In some neighborhoods, fixer-uppers cost less than a new Honda Fit — under $20,000. To spend time in Stockton, a plain-jane city of single-family home neighborhoods edged by freeways and lingering farms, is to begin to understand the calamitous effects of the nation's foreclosure crisis, which has devastated so many once-booming places. Stockton is the San Joaquin County seat. And according to the Associated Press Economic Stress Index, a month-by-month scoring of U.S. counties' rates of unemployment, bankruptcy and foreclosures, San Joaquin had a score of 23.55 in November, making it the fourth-most stressed of counties with a population over 25,000. Its foreclosure rate of 6 percent was exceeded only by metro Las Vegas, metro Fort Myers, Fla., metro Orlando, Merced County, Calif., and Kendall County, Ill. An outsider might not notice immediately how Stockton has suffered. It boasts a downtown mall, a mix of handsome, century-old and modern architecture, a new sports stadium, even a promenade overlooking the city's canal.

Taxpayers Help Goldman Reach Height of Profit in New Skyscraper - (www.bloomberg.com) In the first six months of 2010, about 6,000 employees of Goldman Sachs Group Inc. will take a break from their spreadsheets and move across the southern tip of Manhattan to a new 43-story, steel-and-glass skyscraper. The building was a bargain -- and not just because the final cost is expected to be $200 million less than the $2.3 billion price the company had estimated when construction began in November 2005. Goldman Sachs also benefited from the government’s determination to avoid losing jobs in lower Manhattan after the Sept. 11, 2001, terrorist attacks. Building a new headquarters cater-cornered to where the World Trade Center once stood qualified the firm to sell $1 billion of tax-free Liberty Bonds and get about $49 million of job-grant funds, tax exemptions and energy discounts. Henry Paulson, then Goldman Sachs’s chief executive officer, threatened to abandon the project after delays in addressing his concerns about safety. To keep the plan on track, state and city officials raised the bond ceiling to $1.65 billion and added $66 million in benefits. The interest expense on the financing is about $175 million less over 30 years than if the company had issued corporate debt at the time, according to data compiled by Bloomberg.

Iceland's President Effectively Tells UK "Go To Hell" - (Mish at globaleconomicanalysis.blogspot.com) Congratulations to Iceland for figuring out that it is better to suffer a credit rating downgrade than to torture its citizens for a decade or longer. Please consider Iceland president vetoes collapsed Icesave Bank's bill to UK. Iceland was plunged back into crisis after its president refused to sign a bill promising to repay more than €3.8bn (£3.4bn) to Britain and the Netherlands after the collapse of the country's Icesave bank in 2008. The escalating row threatens to further destablise the Icelandic economy, which went into meltdown after the failure of its three big banks, cutting off further aid from the International Monetary Fund and jeopardising efforts to join the European Union. The credit rating agency Fitch immediately downgraded Iceland, describing the latest political row as a "significant setback". The British and Dutch governments had compensated savers who lost money when Icesave's parent Landsbanki filed for bankruptcy. But both have since put pressure on Reykjavik to repay the money. Opinion polls suggest that Icelanders will overwhelmingly vote against the passage of the bill. A petition urging Grimsson not to sign the bill attracted 62,000 signatures, around one-fifth of the population. Critics say the bill would burden each citizen with a debt of €12,000 including interest.

Lobbying Blows Back on Mortgage Lenders, Shareholders - (www.industry.bnet.com) Between 2002 and 2006, Countrywide spent $8.7 million on political donations, campaign contributions and lobbying activities aimed at derailing anti-predatory lending legislation. By mid-2007, the mortgage giant was flat-lining, a victim of self-inflicted wounds incurred during the ensuing housing crash. Connection? Three IMF economists think so. And they don’t merely seek to prove that the financial industry’s political clout contributed to the 2007 mortgage crisis. Deniz Igan, Prachi Mishra andThierry Tressel find evidence that all this flesh-pressing in the corridors of power actually hurt — not helped — lenders’ financial performance. The researchers show that mortgage companies that lobbied intensively in the years leading up to the financial crisis had higher loan-to-income ratios; more aggressively securitized those loans; and had faster growing loan portfolios. These same lenders subsequently saw a higher rate of defaults, and their stock price fell more than average in 2007 and 2008. Put another way, the firms that lobbied the most took the biggest risks. And they fared the worst when the real estate sector went to hell. Say the researchers: Our analysis indicates that financial institutions that lobbied on specific issues experienced negative abnormal returns during the major events of the financial crisis, suggesting that these financial institutions were significantly more exposed, directly or indirectly, to bad mortgage loans.