KeNo's Housing and Economic Portal: Tuesday April 20 Housing and Economic stories

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TOP STORIES:

Irish Banks Need $43 Billion in New Capital - (www.bloomberg.com) Ireland’s banksneed $43 billion in new capital after “appalling” lending decisions left the country’s financial system on the brink of collapse. The fund-raising requirement was announced after the National Asset Management Agency said it will apply an average discount of 47 percent on the first block of loans it is buying from lenders as part of a plan to revive the financial system. The central bank set new capital buffers for Allied Irish Banks Plc and Bank of Ireland Plc and gave them 30 days to say how they will raise the funds. “Our worst fears have been surpassed,” Finance Minister Brian Lenihan said in the parliament in Dublin yesterday. “Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come.” Dublin-based Allied Irish needs to raise 7.4 billion euros to meet the capital targets, while cross-town rival Bank of Ireland will need 2.66 billion euros. Anglo Irish Bank Corp., nationalized last year, may need as much 18.3 billion euros. Customer-owned lenders Irish Nationwide and EBS will need 2.6 billion euros and 875 million euros, respectively. ‘Truly Shocking’:

Alameda Supes Approve Re-Training Funds For NUMMI Workers‎ - (www.ktvu.com) Again, union workers get special deal not available to regular laid-off workers. They are eligible for $10,000 in re-training costs if they enter a new field of work, three years of unemployment benefits and having 80 percent of their health insurance costs paid. The Alameda County Board of Supervisors voted unanimously Tuesday to spend $6.5 million for re-training and re-employment services for workers at the New United Motor Manufacturing Inc. plant in Fremont, which will close on Thursday. County officials said there won't be any net county costs for the services because the money will come from federal plant closure funding and the American Reinvestment and Recovery Act. Alameda County Workforce Investment Board Director Dorothy Chen said the county also hopes to get additional funding from a $30 million national emergency grant request that the California Employment Development Department has submitted to the U.S. Department of Labor to help workers in six Bay Area counties that are most directly impacted by the closure of NUMMI.

Greek Budget Crisis Adds 13 Billion Euros to Interest - (www.bloomberg.com) Greece may pay about 13 billion euros ($17.5 billion) more in interest on the debt it sells this year than it would have if yields had stayed at their pre-crisis levels relative to Germany’s, according to data compiled by Bloomberg and Credit Agricole Corporate and Investment Bank.

California seeks details of banks’ CDS trade - (www.ft.com) California has asked large banks that underwrite the state’s bond sales to detail their trading in credit default swaps on its debt, raising fresh questions about whether derivatives play a disruptive role in financial markets. Bill Lockyer, the state’s treasurer, wrote to the heads of Bank of America Merrill Lynch, Barclays, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley to question their activity in credit default swaps (CDS) and whether it has an impact on state borrowing costs. “I have no preconceived notions about the effect of CDS trading on California GO [general obligation] bond prices, or about your firm’s activities in the California CDS market,” Mr Lockyer said in the letters. “I do, however, worry about firms selling our bonds, on one hand, and trading CDS on our bonds, or otherwise participating in that market, on the other.”

Build Americas Outperform Tax-Exempts as Sales Top $90 Billion - (www.bloomberg.com) Build America Bonds are poised to return more than tax-exempt securities this quarter for the first time since September, boosted by the subsidy’s appeal to issuers and by foreign investor interest in the taxable debt. Build Americas, the fastest-growing part of the $2.8 trillion municipal market, were created by Congress as part of the federal economic stimulus package. Issuers have sold about $91 billion of the debt so far and $26 billion in the first three months of this year, according to data compiled by Bloomberg. The program provides a 35 percent interest-rate subsidy for debt-funded government projects. The taxable securities have returned almost three times more than their tax-exempt counterparts so far this year. Bank of America Merrill Lynch’s Build America Bond Index, which tracks total return on the taxable securities, has yielded 3.61 percent, as of yesterday. The bank’s Municipal Master Index, which tracks the profit from tax-exempts, yielded 1.26 percent.

Blaming China will not solve America’s problem - (www.ft.com) America's fixation on the "China problem" is now boiling over. From Google to the renminbi, China is being blamed for all that ails the US. Unfortunately, this reflects a potentially lethal combination of political scapegoating and bad economics. The political pressures are grounded in the angst of American workers. After more than a decade of stagnant real compensation and, more recently, a sharp upsurge in unemployment, US labour is being squeezed as never before. Understandably, voters want answers. It is all because of the trade deficit, they are told - a visible manifestation of a major loss of production to foreign competition. With China and its so-called manipulated currency having accounted for fully 39 per cent of the US trade deficit in 2008-09, Washington maintains that American workers can only benefit if it gets tough with Beijing. However appealing this argument may seem, it is premised on bad economics. In 2008-09, the US had trade deficits with over 90 countries. That means it has amultilateral trade deficit. Yet aided and abetted by some of America's most renowned economists, Washington now advocates a bilateral fix - either a sharp revaluation of the renminbi or broad-based tariffs on Chinese imports.

OTHER STORIES:

M&A surges in Asia while US and Europe suffer - (www.ft.com)

Bonds Cap Epic Comeback - (online.wsj.com)

Volcker Optimistic for Financial Revamping This Year - (www.nytimes.com)

Corporate Bonds Extend Longest Streak Since ’04: Credit Markets - (www.bloomberg.com)

Lowest Emerging-Market Bond Yields Spur Record Sales - (www.bloomberg.com)

House Flippers in U.S. Crowd Courthouse Steps in Hunt for Deals - (www.bloomberg.com)

Iron ore swaps could grow to $200bn - (www.ft.com)

Steel prices to rocket under new contract - (www.ft.com)

Greece Plans to Sell Global Dollar Bond by Early May - (www.bloomberg.com)

Japan’s Tankan May Show Fourth Advance in Sentiment - (www.bloomberg.com)

Europe Inflation Jumps More Than Economists Forecast - (www.bloomberg.com)