KeNo's Housing and Economic Portal: Friday May 21 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Repaying Taxpayers With Their Own Cash - (www.nytimes.com) AS we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington. ruth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled “TARP money shuffle.” It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program. G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. “G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,” boasted Edward E. Whitacre Jr., its chief executive. G.M. also crowed about its loan repayment in a national television ad and the United States Treasury also marked the moment with a press release: “We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,” said Timothy F. Geithner, the Treasury secretary. Taxpayers are naturally eager for news about bailout repayments. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan. Neil M. Barofsky, the inspector general overseeing the troubled asset program, revealed this detail when he spoke before the Senate Finance Committee on April 20. “So it’s good news in that they’re reducing their debt,” Mr. Barofsky said of G.M. But he went on to note that G.M. was using other taxpayer money to make the loan repayment, according to the transcript of his testimony.

Debt collectors can come calling years after a mortgage default - (www.washingtonpost.com) Homeowners defaulting on mortgages today may be surprised to learn years from now that they still owe thousands of dollars -- and that a collection agency is coming after them to get it. That's because lenders have been quietly selling second mortgages and home-equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim. If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even to garnish their wages, said Scott CoBen, a Sacramento bankruptcy attorney. "The only relief a consumer will have is entering into a debt-negotiating plan or filing for bankruptcy," said Sylvia Alayon, a vice president with the Consumer Mortgage Audit Center. The firm provides mortgage analysis to lenders, advocacy groups and attorneys. The phenomenon suggests an ominous, looming echo of the recent real estate collapse. As debt collectors seek at least partial repayment of millions of dollars in unpaid home loans, some say renewed financial stresses on tens of thousands of consumers could dampen economic recovery.

Hidden Camera Investigation Shows on Duty LA Dept of Water and Power (DWP) employees Visiting Strip Clubs, Drinking While Driving, Picnicking - (Mish at globaleconomicanalysis.blogspot.com) Inquiring minds are watching a CBS2 hidden camera investigation of Los Angeles Department of Water and Power (LA DWP) employees visiting strip clubs, drinking while driving city owned vehicles, drinking and picnicking in the park, etc., all while on the job. Many DWP workers make 6-figures not counting outrageous pension benefits. No doubt the union will strive to protect every one of those workers. Regardless, the entire operation should be put up for competitive bid and outsourced, irrespective of these transgressions. Hopefully this will be a catalyst. If you live in LA, please pass this video around. I also encourage you to dump your corrupt mayor and elect someone much more mindful of your tax dollars.

Greece a bad omen for others in debt - (www.ft.com) The eurozone’s “one-size-fits-all” interest rate contributed to credit bubbles in the periphery. It also led to higher relative inflation, which has left countries like Greece, Portugal and Spain uncompetitive. With the traditional escape route of currency devaluation no longer available, these countries face severe deflationary pressures. Given such dire circumstances, it is small wonder the credit markets have lost confidence. Yet it is possible that confidence in Greek finances would have collapsed even had the country never joined the eurozone. The key features of sovereign credit vulnerability are laid out in a timely new book, Sovereign DisCreditby David Roche and Bob McKee of Independent Strategy. The single most important indicator of credit weakness is the national savings rate. Greeks are among the world’s leading spendthrifts with a net savings rate of around -7 per cent of GDP, according to Tim Lee of Pi Economics. Japan, by contrast, has been able to finance the huge expansion of its national debt over the past two decades thanks to its traditionally high savings rate. However, as its population ages, Japanese household savings are set to turn negative. Both the US and UK also have negative net savings rates. Countries with low savings tend to grow more slowly and depend on external sources to fund fiscal deficits. In good times, governments have little trouble finding the money. Yet foreign creditors are more skittish than domestic ones; they take fright easily and during times of contagion are liable to force up interest rates, creating a debt spiral. This is what is happening to Greece where roughly 70 per cent of the national debt is held by foreigners.

Who Knew Bankruptcy Paid So Well? - (www.nytimes.com) MORE than $263,000 for photocopies in four months. Over $2,100 in limousine rides by one partner in one month. And $48 just to leave a message. Explanations for these charges? Priceless. The lawyers, accountants and restructuring experts overseeing the remains of Lehman Brothers have already racked up more than $730 million in fees and expenses, with no end in sight. Anyone wondering why total fees doled out in the Lehman bankruptcy alone could easily touch the $1 billion mark merely has to look at the bills buried among the blizzard of court documents filed in the case. They’re a Baedeker to the continuing bankruptcy bonanza, a world where the meter is always running — sometimes literally: in the months after Lehman’s collapse in September 2008, the New York law firm Weil, Gotshal & Manges paid one car-service company alone more than $500 a day as limo drivers cooled their heels waiting for meetings to break (and this in a city overflowing with taxis). While most of corporate America may be just emerging from the Great Recession, bankruptcy specialists have spent the last two years enjoying an unprecedented boom. Ten of the 20 largest corporate bankruptcies in recent decades have occurred over the last three years, according to BankruptcyData.com, with Lehman snaring honors as the biggest corporate belly-flop in American history.