KeNo's Housing and Economic Portal: Wednesday January 27 Housing and Economic stories

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TOP STORIES:

Add homebuilders to the government bailout tab - (www.money.cnn.com) Talk about cash for clunkers. Lennar (LEN), the Miami-based homebuilder that has been gushing red ink since its misguided bets on house prices went bad three years ago, on Thursday posted its first quarterly profit since 2007 -- thanks to a handout from Congress. The company earned $36 million for the fourth quarter ended in November. In a Thursday morning press release, CEO Stuart Miller pointed to a rare increase in new home orders and reduced spending on giveaways to customers. Lennar shares rose 8% to their highest level since October. But don't congratulate Miller. The entire profit -- and then some -- came straight from taxpayers' pockets. The real driver of Lennar's rebound, as the company acknowledged Thursday, was a $353 million tax gain that stems from a bit of congressional largesse in November. What's more, dozens of zombie homebuilders and other serial money-losers will stake similar claims in coming months, in a cash scramble that could cost the government more than $50 billion. The gift came in a piece of legislation that was billed as expanding unemployment benefits by 20 weeks and extending the homebuyer tax credit into the middle of this year.

STIMULUS WATCH: White House changes job-count rule (AP) - (news.yahoo.com/s/ap) The White House has abandoned its controversial method of counting jobs under President Barack Obama's economic stimulus, making it impossible to track the number of jobs saved or created with the $787 billion in recovery money. Despite mounting a vigorous defense of its earlier count of more than 640,000 jobs credited to the stimulus, even after numerous errors were identified, the Obama administration now is making it easier to give the stimulus credit for hiring. It's no longer about counting a job as saved or created; now it's a matter of counting jobs funded by the stimulus. That means that any stimulus money used to cover payroll will be included in the jobs credited to the program, including pay raises for existing employees and pay for people who never were in jeopardy of losing their positions. The new rules, quietly published last month in a memorandum to federal agencies, mark the White House's latest response to criticism about the way it counts jobs credited to the stimulus. When The Associated Press first reported flaws in the job counts in October, the White House said errors were being corrected and future counts would provide a full and correct accounting of just how many stimulus jobs were saved or created.

Your Legal Right To Redeem Your Money Market Account Has Been Denied - (www.zerohedge.com) Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets." You read that right: this does not refer to the charter of procyclical, leveraged, risk-ridden, transsexual (allegedly) portfolio manager-infested hedge funds like SAC, Citadel, Glenview or even Bridgewater (which in light of ADIA's latest batch of problems, may well be wishing this was in fact the case), but the heart of heretofore assumed safest and most liquid of investment options: Money Market funds, which account for nearly 40% of all investment company assets. The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, a back office person will get back to you saying, "Sorry - your money is now frozen. Bank runs have become illegal." This is precisely the regulation now proposed by the administration. In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous "extraordinary circumstances" arise. The second the game of constant offer-lifting ends, and money markets are exposed for the ponzi investment proxies they are, courtesy of their massive holdings of Treasury Bills, Reverse Repos, Commercial Paper, Agency Paper, CD, finance company MTNs and, of course, other money markets, and you decide to take your money out, well - sorry, you are out of luck. It's the law.

U.S. Subpoenas 15 FHA Lenders With High Mortgage Defaults - (www.businessweek.com) The U.S. Housing and Urban Development Department said it subpoenaed 15 mortgage companies today to seek out possible fraud in an effort to stem losses on loans insured by the Federal Housing Administration. HUD officials, who oversee the FHA mortgage insurance program, said they haven’t haven’t found any evidence of wrongdoing at the lenders, and were singling out those with the highest default rates. The investigation is “focusing on many of the worst performers in the FHA portfolio,” FHA Commissioner David Stevens said on a conference call with reporters in Washington. “We aren’t making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue any indicators of fraud,” HUD Inspector General Kenneth Donohue said. “The fact that there are 15 institutions on this list today does not in any way suggest that there aren’t other institutions that we will not look at later.” HUD said in a statement that it subpoenaed First Tennessee Bank N.A. of Memphis, Tennessee; Alethes LLC in Lakeway, Texas; Security Atlantic Mortgage Co. of Edison, New Jersey; Pine State Mortgage Corp. of Atlanta; Birmingham Bancorp Mortgage Corp. of West Bloomfield, Michigan; Alacrity Financial Services LLC of Southlake, Texas and Assurity Financial Services LLC of Englewood, Colorado.

Federal Reserve "earned" $45 billion in 2009 gaming interest rates - (www.washingtonpost.com) Wall Street firms aren't the only banks that had a banner year. The Federal Reserve made record profits in 2009, as its unconventional efforts to prop up the economy created a windfall for the government. The Fed will return about $45 billion to the U.S. Treasury for 2009, according to calculations by The Washington Post based on public documents. That reflects the highest earnings in the 96-year history of the central bank. The Fed, unlike most government agencies, funds itself from its own operations and returns its profits to the Treasury. The numbers are good news for the federal budget and a sign that the Fed has been successful, at least so far, in protecting taxpayers as it intervenes in the economy -- though there remains a risk of significant losses in the future if the Fed sells some of its investments or loses money on its stakes in bailed-out firms. This turn of events comes as the banks that benefited from the Fed's actions are under the microscope. Starting at the end of the week, major banks are expected to announce significant earnings and employee bonuses. Anger in Washington is at such a high boil that the Obama administration will probably propose a fee on financial firms to recoup the cost of their bailout, officials confirmed Monday.

OTHER STORIES:

More Houseowners Struggling As Option ARMs Reset Higher - (www.cnbc.com)

The Tip of the Foreclosure Iceberg - (www.housingstorm.com)

Second Wave Of Mortgage Defaults Coming - (www.youtube.com)

Here Comes the 'Double-Dip Recession' - (www.seekingalpha.com)

Retail Winners: Off-Price is On Target - (www.caps.fool.com)

Australia & NZ still in huge bubble - (www.slycapital.wordpress.com)

Capitalist Fools In Commerical Real Estate - (www.theatlantic.com)

Lenders Are More Culpable than Borrowers - (www.irvinehousingblog.com)

Mortgage deduction contributed to housing collapse - (www.centralvalleybusinesstimes.com)

S.E.C. Seeks New Charge Against Bank of America - (www.dealbook.blogs.nytimes.com)

Obama Plans to Raise $120 Billion From Banking Fees - (www.bloomberg.com)