KeNo's Housing and Economic Portal: Friday February 12 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Add $75 billion to the recovery bill - (money.cnn.com) The Congressional Budget Office hiked its forecast Tuesday for how much the stimulus bill will add to the nation's deficit, raising its estimate by $75 billion to $862 billion. The American Recovery and Reinvestment Act, passed in February 2009, was initially believed to have a price tag of $787 billion. With the glaring exception of skyrocketing unemployment compensation costs, the CBO said the Recovery Act's effects on government spending and revenues have closely followed its initial estimate for 2009 and 2010. The vast majority of the increased deficit impact is linked to anticipated spending in 2011 to 2019. It now appears to the Budget Office that stimulus will have a larger impact on the deficit in the years to come based on changing economic factors since the bill was signed into law 11 months ago.

Fed Weighs Interest on Reserves as New Benchmark Rate - (www.bloomberg.com) Federal Reserve policy makers are considering adopting a new benchmark interest rate to replace the one they’ve used for the last two decades. The central bank has been unable to control the federal funds rate since the September 2008 bankruptcy of Lehman Brothers Holdings Inc., when it began flooding financial markets with $1 trillion to prevent the economy from collapsing. Officials, who began a two-day meeting at 2 p.m. today in Washington, have said they may replace or supplement the fed funds rate with interest paid on excess bank reserves. “One option you might want to consider is that our policy rate is the interest rate on excess reserves and we let the fed funds rate trade with some spread to that,” Richmond Fed President Jeffrey Lacker told reporters on Jan. 8 in Linthicum, Maryland.

Scrapped Chrysler dealer: 'Smells really fishy' - (money.cnn.com) An expensive gamble: The appeal process will be pricey. Each dealer has to pay $1,625 to enter arbitration, with a matching amount due from the manufacturer. If the case then moves to a hearing -- meaning the parties decide not to settle -- the dealer has to pay another $625, half of the $1,250 fee the AAA charges to coordinate a case. Legal fees will add thousands more to each dealer's costs. But dealers planning to appeal say it's worth it for the chance to save their businesses. "The loss of the Little Rock dealers makes no sense," said Ethel Cook, the co-owner of Cook Automobile Company -- formerly Cook Jeep Chrysler. Cook's great-grandfather opened the Arkansas dealership in 1914, and her father began selling Jeeps just after World War II. In May, Chrysler dropped the guillotine on 789 dealers, including Cook. She had less than 30 days to wind down her new-car franchise. Half of her 30 person staff was laid off. Cook continues to operate a scaled-down business, selling used cars and doing repair work. Her competition across town -- a big, shiny megadealer -- was also given the axe. "Little Rock is a major metropolitan city, and it is without a dealer at this time," she said. Chrysler doesn't plan to neglect the market. A new dealership is already under construction. But from Cook's perspective, favoritism guided Chrysler's decisions about which dealers to terminate.

Sacramento officials admit misusing utilities funds; cost still unknown - (www.sacbee.com) Sacramento city officials acknowledged Tuesday they misused utilities funds to pay for general government expenses. The question now is: How much will those violations cost the cash-strapped city? "There's going to be an impact from paying back the funds," City Manager Ray Kerridge said. "We need to deal with this in a systematic way, a phased way." The issue burst into the public this month when the Sacramento County grand jury released the findings of its investigation into the city's compliance with Proposition 218. The 1996 voter-approved initiative bars local governments from using ratepayer funds such as water and sewer to cover general government expenses. The grand jury alleged that city officials ignored warnings they might be violating the law. Marty Hanneman, the city's utilities director, addressed the City Council on Tuesday night, outlining a number of steps the city has taken to address Proposition 218 violations and proposing additional measures. He said there had been memos indicating possible problems. But council members lashed out at Hanneman, saying they had no recollection of internal city memos outlining long-standing concerns. "It makes us look like fools because we didn't know about it," Councilwoman Sandy Sheedy said, adding that she was "really, really offended." Councilwoman Lauren Hammond said she was upset the violations could have caused utility rates to go up for residents because the money for utilities was being diverted elsewhere. She said her own bills went from less than $79 in 2003 to more than $106 in late 2009.

Sacramento building department frustrates council - (www.sacbee.com) An investigation into how 35 home permits were improperly issued in the Natomas flood zone last year has raised questions among Sacramento City Council members about the overall operation of the city's building department. After Tuesday night's council meeting, many of those questions remain unanswered. A law firm investigating the Natomas home permits received reports of "potential quid pro quo" in the building department, thousands of dollars in uncollected or deferred building fees, and cases where the city's planning requirements were ignored. But city staffers declined to elaborate on those findings Tuesday during a report to the City Council, saying that to do so would impede an ongoing investigation. In addition to the quid pro quo and fee issues, investigators received reports of buildings being demolished without California Environmental Quality Act review, and projects being constructed without permits. Investigators were confronted with "conflicting messages arising out of departmental culture," according to a staff report.

OTHER STORIES:

Credit-Default Swaps Rising to Five-Week High: Credit Markets - (www.bloomberg.com)

Bank of China, Construction Bank Start Curbing Credit - (www.bloomberg.com)

European states need to borrow €2,200bn - (www.ft.com)

Japan’s Ratings Outlook Cut on Lack of Hatoyama Plan - (www.bloomberg.com)

U.K. Economy Resumes Growth By Less Than Forecast - (www.bloomberg.com)

Chavez Currency ‘Burn’ Failing as $93 Billion Leaves Venezuela - (www.bloomberg.com)

Consumer Confidence in U.S. Rose More Than Forecast - (www.bloomberg.com)

Home Prices in 20 U.S. Cities Rose for Sixth Month - (www.bloomberg.com)

Bernanke rallies more Senate votes for confirmation - (www.washingtonpost.com)

Obama Seeks Freeze on Many Domestic Programs - (www.nytimes.com)

Decision Looms on Advancing Health Care Bill - (www.nytimes.com)