KeNo's Housing and Economic Portal: Saturday March 20 Housing and Economic stories

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TOP STORIES:

White House extends struggling refinancing program - (www.washingtonpost.com) The Obama administration announced Monday that borrowers with little or no equity in their homes will have another year to take advantage of a refinancing program that so far has made little progress. The Home Affordable Refinance Program was set to expire in June, but so far it has reached fewer than 200,000 of the up to 5 million borrowers federal regulators hoped it would help. Market conditions have not changed significantly since the program was launched last year, Edward DeMarco, acting director of the Federal Housing Finance Agency, said in a statement. So to give lenders more time to implement the plan and to "support and promote market stability," the initiative will be extended to June 2011, he said. The program is aimed at the millions of borrowers whose home values have been diminished by a weak housing market, or who owe more than their houses are worth, making it impossible for them to take advantage of historically low mortgage rates. Originally, the program targeted borrowers whose loan balances were slightly higher than their property values. The program was later expanded to include those who owe up to 25 percent more than their homes are worth.

Chicago Public Schools System Is Broke; Union Contract Mandates Raises Through 2012; Expect Fireworks - (Mish at globaleconomicanalysis.blogspot.com) The Chicago Public School system is broke. By now you know the score: pension promises cannot be met and union salaries and benefits are out of line with reality. Combined with bloated administration costs, the system is bankrupt. The Sun Times says the best hope is for teachers to accept a wage freeze. Best Hope? Not so fast. The contract is not up until 2012, and knowing what we know about unions, the picture is set for massive teacher layoffs or a gut wrenching strike and legal battle if the CEO unilaterally imposes a wage freeze. Please consider No way around CPS teacher pay freeze. Chicago Public Schools CEO Ron Huberman on Thursday painted the grimmest financial picture the Chicago schools have ever seen. The budget deficit could top $900 million, a hole so big that Huberman says he needs major concessions from teachers -- a move that could easily lead to a teachers' strike if the unions refuse to play ball. We're not alerting parents to cause a panic or to bash beleaguered teachers. We're alerting parents now, when there's still time, to try to resolve this crisis and avoid a strike.

Chile Disaster May Cost Insurers $2 Billion, AIR Says - (www.bloomberg.com) The 8.8-magnitude earthquake that struck Chile last week may cost insurers more than $2 billion, according to catastrophe-modeling firm AIR Worldwide. The earthquake killed more than 700 people, cut off the nation’s main highway, knocked out power lines and damaged 1.5 million homes, officials said. Economic losses may exceed $15 billion, the Boston-based firm said today in an e-mailed statement. “The total economic loss will likely be severe from damage not only to buildings, but from the widespread impact on infrastructure, including roads, bridges, airports, and utilities and telecommunications networks,” said Jayanta Guin, senior vice president of research and modeling at AIR, in the statement.

Germany moves to out Greek debt speculators-source - (www.reuters.com) Financial watchdog BaFin attempts to identify debt bettors. Probe sharpens German debate about helping Greece. Berlin fears a rescue could give windfalls to speculators. Germany has moved to identify speculators in Greek debt to try to prevent them from profiting from any bailout of the euro zone country's ailing economy, a source with direct knowledge of the matter told Reuters. The initiative by the country's financial watchdog is part of delicate deliberations in Germany as to whether it should help bail out Greece, which is grappling with mounting debts. "It would be bad if it were to emerge after a rescue that the money had gone into the pockets of speculators," the source told Reuters. "The result of the 'Greek tragedy' is that the political environment has become such that the Credit Default Swap (debt insurance) problem has come to the fore." The investigation by financial watchdog BaFin comes against a backdrop of worries over Greece's future. It sends a warning to those trading insurance for Greek debt which, while legal, has been blamed for fuelling volatility - though it has so far failed to identify to what extent speculators are behind Greek debt price swings.

Airfare Taxes Become Ever Weightier Part of Total - (www.nytimes.com) A recent search for a flight from New York to London turned up an eye-catching fare: $229 each way on several airlines. But nine government taxes and fees added $162 — more than a quarter of the total ticket price. Baggage fees may be the cause of more grumbling among passengers, but airlines are trying to draw attention to other charges lurking in the fine print: all the taxes and fees that go toward airport projects, air traffic control, airport security, customs inspections and, in some cases, projects that have nothing to do with flying — like a French “solidarity tax” on departing passengers that is meant to subsidize purchases of drugs to fight diseases like AIDS, tuberculosis and malaria in developing countries. Most of these taxes are small individually, but they can add up to a significant share of the price of a ticket, particularly for international flights. While there is some debate about precisely how much ticket taxes have risen in recent years, airline representatives say that governments are increasingly turning to travelers to raise revenue in lean times, and that there is little oversight over how the money is spent.

US bank lending falls at fastest rate in history - (www.telegraph.co.uk) Bank lending in the US has contracted so far this year at the fastest rate in recorded history, raising concerns that the Federal Reserve may have jumped the gun by withdrawing emergency stimulus. David Rosenberg from Gluskin Sheff said lending has fallen by over $100bn (£63.8bn) since January, plummeting at an annual rate of 16pc. "Since the credit crisis began, $740bn of bank credit has evaporated. This is a record 10pc decline," he said. Mr Rosenberg said it is tempting fate for the Fed to turn off the monetary spigot in such circumstances. "The shrinking in banking sector balance sheets renders any talk of an exit strategy premature," he said. The M3 broad money supply – watched by monetarists as a leading indicator of trouble a year ahead – has been contracting at a rate of 5.6pc over the last three months. This signals future deflation. The Fed's "Monetary Multplier" has dropped to a record low of 0.81, evidence that the banking system is still broken. Tim Congdon from International Monetary Research said demands for higher capital ratios and continued losses from the credit crisis are both causing banks to cut lending. The risk of a double-dip recession – or worse – is growing by the day. "It is absurdly premature to think of withdrawing stimulus while bank credit is still sliding. To have allowed this monetary collapse to occur a full 18 months after the financial cataclysm is extreme incompetence. They seem to have forgotten that the lesson of the 1930s was the falling quantity of money," he said.

Consumers Just Didn’t Get The Memo - Everything Is Beautiful - (www.businessweek.com) February was a sweetheart of a month, with love for all (it’s all in the definition), and not just on the 14th. The FDIC loved another 500 banks, raising its list of ‘challenged’ institutions to 702 from the 252 that were the center of their admiration at year-end 2008. Google decided to engage China in talks, as one part of Congress accelerated their love for Toyota, while another part of Congress yielded their approval for Ben with hopes of him not yielding some back. The quick Volker rule seemed to be more of a dating process, sometimes called discovery, other times called politics. Wall Street quantified that its love for bonuses had derived a 17% growth rate (not sure if there is a default swap on it – they never tell you to after the event), as both buybacks (at least for authorizations – the proof however is in the trade) and dividends (best month in 2 years – and that’s cash in your hand) come back into fashion. ….The only one left on the side line appeared to be the consumer, whom with no one to turn to, were down-right depressed over their insecure, paranoid, emotionally inspired belief that higher prices, higher taxes, and fewer jobs were ahead of them (where do they get that from? didn’t they get the memo?). That, even though it now appears that many of them may be classified as rich. These malcontents sent the Consumer Confidence Index down to 46 from an already discouraging 56.5; someone needs to lobby them a pick-me-up e-card, or at least something more than a token stimulus package. March madness is coming (Syracuse will beat Villanova, but in the end ‘you’re not in Kansas anymore’; if the President speaks basketball, you need to speak basketball), but in Washington, March madness will be called reconciliation, which should insure late-night TV employment.