KeNo's Housing and Economic Portal: Tuesday March 9 Housing and Economic stories

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In D.C., more evidence that commercial real estate headed for foreclosure crisis - (www.washingtonpost.com) A mortgage crisis like the one that has devastated homeowners is enveloping the nation's office and retail buildings, and few places are likely to be hit as hard as Washington. The foreclosure wave is likely to swamp many smaller community banks across the country, and many well-known properties, including Washington's Mayflower Hotel and the Boulevard at the Capital Centre in Largo, are at risk, industry analysts say. The new round of financial pain, which some had anticipated but hoped to avoid, now seems all but certain. "There's been an enormous bubble in commercial real estate, and it has to come down," said Elizabeth Warren, chairman of the Congressional Oversight Panel, the watchdog created by Congress to monitor the financial bailout. "There will be significant bankruptcies among developers and significant failures among community banks." Unlike the largest banks, such as Citigroup and Wachovia, that got into so much trouble early on, the community banks in general fared better in the residential mortgage crisis. But their turn is coming: Not only did community banks issue a higher proportion of commercial loans, but they also have held on to them rather than sell them to other investors. Nearly 3,000 community banks -- 40 percent of the banking system -- have a high proportion of commercial real estate loans relative to their capital, said Warren, whose committee issued a report on commercial real estate last week. "Every dollar they lose in commercial real estate is a dollar they can't use for small businesses," she said. Individuals -- who saw their home values drop in the residential mortgage crisis -- would not feel that kind of loss, but, Warren said, a large-scale failure would "throw sand into the gears of economic recovery."

Buffett’s ‘Dangerous Business’ Ensnares Municipal Bond Insurers - (www.bloomberg.com) Forewarned bankruptcies linked to infrastructure projects from Las Vegas to Harrisburg, Pennsylvania, may prove Warren Buffett’s conclusion that insuring municipal bonds is a “dangerous business.” Ambac Financial Group Inc., the second biggest bond insurer, faces as much as $1.2 billion in claims if a judge in Nevada allows Las Vegas Monorail Co., which runs a train connecting the city’s casinos, to reorganize in Chapter 11 bankruptcy. The City Council of Pennsylvania’s state capital shelved a plan to sell taxpayer-owned assets to meet payments on $288 million of debt used for an incinerator funded in part with bonds insured by a unit of Bermuda-based Assured Guaranty Ltd. Harrisburg is weighing a possible bankruptcy filing. With state tax collections last year through September showing the biggest drop since at least 1963, as measured by the Nelson A. Rockefeller Institute of Government in Albany, New York, local governments are seeking concessions from creditors of public projects, including bond insurers. The moves further threaten companies backing $1.16 trillion of public debt that already face $11.6 billion of claims on collapsed securities backed by mortgages.

After the Bubble, Beauty Is But Fleeting for Greenspan Portraits - (online.wsj.com) In the offices of the Hennessee Group hang two oil paintings and two prints, each portraying the bespectacled visage of former Federal Reserve Chairman Alan Greenspan. "What I should do is make them into a dart board," says Charles Gradante, who with his wife, Lee Hennessee, runs the Fifth Avenue firm that advises investors in hedge funds. "All I see when I look at these paintings are two market crashes, a bear market, and the current economic crisis." The pictures stay on the wall because of Ms. Hennessee, who remains loyal to the paintings and to the man they portray. "Wonderful," she says, surveying one canvas. Ms. Hennessee paid $2,500 for the portrait by artist Erin Crowe. She believes the works could grow in value. The paintings at the center of this husband-and-wife disagreement are artifacts of a bygone era: a time when many Americans thought central bankers were cool, and Mr. Greenspan was the coolest, or perhaps hottest, of them all.

Bleak Economy Pushing Health Insurers to Raise Rates, Analysts Say - (www.nytimes.com) ealth insurers lately seem more afraid of Wall Street than of Washington. The nation’s insurers have come under sharp attack by the Obama administration for seeking seemingly staggering rate increases on policies they sell to individuals. The health and human services secretary, Kathleen Sebelius, recently pounced on WellPoint’s Anthem Blue Cross unit for wanting to raise premiums as much as 39 percent in California, and on Thursday she issued a scathing report detailing double-digit increases sought by other insurers last year and so far this year. Angela F. Braly, WellPoint’s chief executive, was forced to cancel an investor presentation to prepare for the grilling she is likely to receive before Congress next week about the insurer’s rate increases.

US home loan foreclosures reach record high - (www.ft.com) MBA says 15% of loans in foreclosure or late. Delinquency and foreclosure rates among US homeowners climbed to their highest levels on record in the fourth quarter of last year, as the Obama administration unveiled its latest effort to aid the housing market. The Mortgage Bankers Association said 15 per cent of all home loans were either in foreclosure or late on a payment, the highest proportion since its surveys began in 1972. “The pattern of mortgage delinquencies now very much follows the pattern of unemployment, said Jay Brinkmann, MBA’s chief economist.“Until the issue of this large segment of long-term unemployed is resolved, many of the longer-term mortgage delinquencies will remain a problem with a strong likelihood of turning into foreclosures.” However, Mr Brinkmann noted that the rates of homes entering the foreclosure process had started to fall and that short-term delinquencies of 30 days were easing, suggesting the problem is starting to bottom out. The data were released as President Barack Obama announced $1.5bn (€1.1bn, £970m) in support for housing finance agencies in the states worst-hit by the housing crisis – Nevada, Arizona, California, Florida and Michigan. All have seen falls of more than 20 per cent in house prices.