KeNo's Housing and Economic Portal: Thursday March 4 Housing and Economic stories

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TOP STORIES:

F.D.I.C. Pushes Back at Charges in YouTube Video‎ - (www.nytimes.com) All week long, officials at the Federal Deposit Insurance Corporation watched with growing dismay as a YouTube video ricocheted around the Internet. In 4 minutes 26 seconds, the clip asserted that the agency’s sale last year of the assets of the failed bank IndyMac to a group of private investors was a sweetheart deal. Finally, F.D.I.C. officials decided they had had enough, The New York Times’s Sewell Chan reported on Monday. “It is unfortunate but necessary to respond to blatantly false claims in a Web video that is being circulated” about the creation of OneWest Bank out of the assets of IndyMac, the agency’s chief spokesman, Andrew Gray, said in a written statement late Friday. In the statement, he went on to say that the video “has no credibility” and was replete with “falsehoods.” Mr. Gray expressed particular alarm about the video’s claim that “the F.D.I.C. just announced it needs to start borrowing money from the Treasury.” Nonsense, Mr. Gray retorted: “We continue to be funded by the banking industry through assessments, not by taxpayers as claimed in the video.” The F.D.I.C. has not borrowed from the Treasury since 1992, but officials have said it might have to do so, as a last resort, because bank failures have caused losses to its insurance fund, The Times reports.

Germany growls as Greece balks at immolation - (www.telegraph.co.uk) The EU has issued a political pledge to rescue Greece – and by precedent, all Club Med – without first securing a mandate from the parliaments of creditor nations. Holland's Tweede Kamer has passed a motion backed by all parties prohibiting the use of Dutch taxpayer money to bail out Greece, either through bilateral aid or EU bodies. "Not one cent for Greece," was the headline in Trouw. The right-wing PVV proposed "chucking Greece out of EU altogether". Germany's Bundestag has drafted an opinion deeming aid to Greece illegal. State bodies may not purchase the debt of another state, in whatever guise. The EU is entering turbulent waters by defying these irascible and sovereign bodies. It had no choice, of course. Europe's banking system was – and is – at imminent risk as Greek contagion spreads across Club Med. The danger of a "sovereign Lehman" setting off a chain reaction is very real, with Britain too in the firing line. I find myself in the odd position of backing drastic EU action, for fear of worse. We all go down together if this escalates.

US senators oppose ‘systemic risk’ curbs - (www.ft.com) Senate Republicans are resisting a fundamental tenet of the Obama administration’s financial regulatory reforms in another obstacle for the stalled legislative process. Several aides from both parties involved in reform negotiations told the Financial Times that Republicans had opposed in private a plan to impose tougher capital and liquidity requirements on companies that posed a risk to the financial system. Meanwhile, people familiar with the continuing bipartisan talks say a council of regulators will be proposed to tackle “systemic risk”, rather than the alternatives of setting up a regulator or giving the power to the Federal Reserve. Democrats maintain that the authority to curb the sorts of broad systemic risk that built up in the financial products unit of AIG, the insurer, is essential to preventing a repeat of last year’s crisis. But Republicans say they are unconvinced that any regulator can even define systemic risk. They are happy to set up monitoring of possible bubbles but say the whole concept is too vague for an immediate introduction of sweeping powers.

Neb. workers cut as caseloads up - (www.sacbee.com) What happens when more and more Nebraskans seek public help while state officials are trying to cut caseworker numbers? You wind up with people going to community agencies for emergency food supplies because they can't get an application in for food stamps.

Greece’s Goldman Sachs Swaps Spawn EU Dispute on Disclosure - (www.bloomberg.com) A dispute is unfolding about how long European Union officials have known that Greece used derivatives to conceal its growing budget deficit. Greece turned to Goldman Sachs Group Inc. in 2002, just after adopting the euro, to get $1 billion in funding through a swap on $10 billion of debt, Christoforos Sardelis, head of Greece’s Public Debt Management Agency at the time, said in an interview last week. Eurostat, the EU’s statistics office, was aware of the plan, he said. Risk Magazine also reported on the swap in July 2003. “Eurostat was not until recently aware of this alleged currency swap transaction made by Greece,” spokesman Johan Wullt said by e-mail yesterday. The disagreement about who knew what and when comes amid the worst crisis in the euro’s 11-year history. The existence of the swaps, which allowed Greece to delay payments and shrink its reported budget deficit, is fueling questions about whether Greece used the contracts to mask the fact it was struggling to comply with the currency’s membership criteria from the early days of its entry into the eurozone. “Greece falsified deficit statistics, and that can’t be legal,” said Wolfgang Gerke, president of the Bavarian Center of Finance in Munich and honorary professor at the European School of Business. “Greece needs to be kicked out of the EU because otherwise there will be new copycats, and that could lead to the next catastrophe on financial markets.”

Fed carries losses from Bear portfolio - (www.ft.com) The US Federal Reserve is sitting on significant paper losses on the real estate assets it acquired in the Bear Stearns rescue, with much of the red ink coming from debt used to back some of the most high-profile buy-out deals of the bubble years. Among the debts weighing on the central bank’s portfolio are those used in financing the acquisitions of Hilton Hotels, which is being restructured, and hotel operator Extended Stay, which is in bankruptcy, people familiar with the matter say. The Fed holds these and other real estate assets in a vehicle known as Maiden Lane I, which was set up to pave the way for JPMorgan Chase’s purchase of Bear. At the time the deal was struck in March 2008, JPMorgan feared that if it bought all of Bear’s assets it would be left with too much exposure to the real estate market. Bear, for example, originally had $5.4bn of Hilton debt, a huge concentration. The assets in Maiden Lane I – all of which came from Bear’s mortgage desk – were originally valued at $30bn when a final agreement on the portfolio was reached in June 2008 by the New York Fed, its advisers at asset managers BlackRock and JPMorgan. At the end of 2009 the Fed said the assets were worth $27.1bn (€20bn, £17.4bn). People familiar with the portfolio said Maiden Lane I’s losses were concentrated in commercial real estate assets, which had a face value of $8.4bn and an estimated worth of $7.7bn when they were acquired by the Fed. As of September they had been marked down to $4bn, filings show.