KeNo's Housing and Economic Portal: Friday May 7 Housing and Economic stories

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TOP STORIES:

Goldman Sachs 'Morally bankrupt' - (www.dailymail.co.uk) The crisis at Goldman Sachs deepened yesterday as Gordon Brown said people had been 'misled' and called for a fraud investigation into the investment bank to be extended to the UK. The Prime Minister and German Chancellor Angela Merkel both said their regulators should launch inquiries after America's financial watchdog said it was suing the Wall Street giant for fraud. But sources at UK regulator the Financial Services Authority said it had not yet begun an investigation because none of the alleged offences had been committed in the UK. Mr Brown said he was shocked by the apparent 'moral bankruptcy' of Goldman which is expected to hand out a bumper £3.5billion in pay and bonuses to staff this week for the first three months of this year. Goldman has denied allegations it defrauded investors of $1billion (£650million) through its marketing of a sub-prime mortgage product two years ago.

Big Easy Beatdown… GOP Official and Boyfriend Savagely Beaten Leaving SRLC Dinner – (www.biggovernment.com) Of course, not mentioned in CNN like the attacks on the Democrats, but that is to be expected. On Friday night Allee Bautsch, chief campaign fundraiser for Louisiana Governor Bobby Jindal, and her boyfriend Joe Brown, were savagely beaten in New Orleans after leaving a Republican party fundraising dinner. This report was put together on what we know so far on this horrible attack on two young Republicans. The governor’s office said Monday that Allee Bautsch suffered a broken leg and her boyfriend suffered a concussion and fractured nose and jaw in the alleged incident. (KSLA) A Republican activist and her boyfriend were savagely beaten in New Orleans on Friday after leaving the SRLC dinner. It was originally reported that they were attacked because they were wearing Sarah Palin pins.. Free Republic reported: Allee Bautsch, chief campaign fundraiser for Louisiana Governor Bobby Jindal, and her boyfriend Joe Brown, were savagely beaten Friday night in New Orleans after leaving a Republican party fundraising dinner by a group of thugs who reportedly targeted the couple because they were wearing Sarah Palin pins. Bautch’s leg was broken and Brown incurred a broken jaw and nose as well as a concussion. The Hayride reports that a source who visited Bautsch at the hospital the day after the attack says they were told the couple was attacked for wearing Palin buttons: Two people at the Brennan’s event have now confirmed that the protest had largely broken up by the time it ended, but we also understand from someone who visited Allee Bautsch in the hospital Saturday morning that she and Brown were followed and attacked expressly because they had Palin pins on (she heard one of the attackers say “Let’s get them, they have Palin pins on” – so the attack WAS politically motivated as its victims understood it. It was not a mugging, it was not an argument gone wrong and it was not a bar fight.

The story of a Republican and her boyfriend being viciously attacked for wearing Palin buttons has yet to make national headlines, unlike say, unfounded rumors of nasty words being said by Tea Party protesters.

Going for broke in L.A.? - (www.latimes.com) Unless pension costs can be brought under control, the city may face bankruptcy. Former mayor Richard Riordan has been roiling the civic waters by arguing that the surest -- and perhaps the only -- way out of Los Angeles' fiscal crisis is a declaration of municipal bankruptcy, which he believes ought to come sooner rather than later. In a conversation with The Times over the weekend, Riordan argued that bankruptcy may be the only way to attack the structural problem gnawing the heart out of the city budget: unsustainable public employee pension costs. Currently, Riordan says, the city is struggling to meet its pension obligations, and that's assuming it will receive 8% annually on the money invested on retirees' behalf. In fact, the average return over the past decade has been just 4%. Over the next few years, L.A. may be looking at $1.5 billion in pension obligations it can't meet. "We need some adults to come alive in the city and to talk through how to meet that liability," he said. "If that doesn't happen, we shouldn't rule out bankruptcy." Mayor Antonio Villaraigosa's chief of staff, Jeff Carr, says categorically that "this mayor has made it clear that we are not going to declare bankruptcy." Moreover, while federal law lets bankruptcy judges reduce negotiated pension and health benefits in the private sector, it forbids changes in public employees' agreements.

U.S. States Face ‘Staggered’ Recovery, Pew Center’s Urahn Says - (www.bloomberg.com) U.S. states face a “staggered” recovery even as the national economy shows signs of stabilizing, Susan Urahn, a managing director at the Pew Center on the States, told investors on a conference call. They may also have to contend with three to four more years of budget woes, said Laura LaRosa, director of fixed income at Glenmede Investment & Wealth Management in Philadelphia, on the call yesterday. “When the recovery comes, it’s going to be staggered and slow,” Urahn said. “The lag happens because it takes time for the states’ unemployment rates to come down to pre-recession levels.” Nationally, unemployment held at 9.7 percent in March for a third month, the Labor Department reported on April 2. The jobless rate reached a 26-year high of 10.1 percent in October. Employment has a direct impact on the ability to generate revenue through personal income tax, Urahn said. States’ personal income-tax revenue fell 7.1 percent in January and February from the same period in 2009, and there is a risk the slide will extend into this quarter, the Nelson A. Rockefeller Institute of Government said in a report yesterday. Tax revenue likely declined for a record sixth straight quarter in the first three months of the year, the institute’s deputy director, Robert Ward, said in congressional testimony on April 15.

Judge sides with R.I. on retiree health benefits - (www.projo.com) U.S. District Court Judge William E. Smith has upheld the state’s trimming of health-care benefits for state employees who retire early. Governor Carcieri on Thursday proclaimed the decision “a victory for all taxpayers” that affirms state officials’ legal authority to better align employee benefits with what the government can afford. “It was a huge cost-saver to the state,” said Carcieri spokeswoman Amy Kempe. A savings estimate was not immediately available. But Kenneth DeLorenzo, executive director of the employees labor union, Rhode Island Council 94 of the American Federation of State, County and Municipal Employees, denounced the decision as a historic repudiation of the state’s obligations to its employees. Council 94 had sued to block implementation of the law on state-subsidized health-care benefits — a law that Judge Smith described as an attempt by the state amid a fiscal crisis in 2008 “to tighten its belt” by reducing the amount it spends on those benefits. In a decision entered Tuesday, Smith rejected claims by the union that the reduction in benefits violated employee rights under the contract clauses of the Rhode Island and U.S. Constitutions. Contrary to the union claims, he said, no enforceable contract exists for retiree health benefits under the state’s past practice regarding retirees, the negotiated collective-bargaining agreement between Council 94 and the state, state statute and common law.

Unions seeking more power over local governments - (www.sacbee.com) Los Angeles Mayor Antonio Villaraigosa's threat to shut down city government two days a week because of a looming shortage of cash fizzled when city officials suddenly discovered an additional $30 million in property taxes. Nevertheless, Los Angeles' financial woes are emblematic of a widening crisis in California's 5,000 units of local government as they deal with flattening or even declining property and sales tax revenues, reduced and/or delayed payments from a deficit-wracked state budget, and burgeoning costs. And if their pinch continues, which seems highly likely, some probably will wind up in bankruptcy court. One city, Vallejo, is already there, having foolishly squandered windfalls of property and sales taxes on unsustainable contracts for its police and firefighters. And the prospect that more public entity bankruptcies could follow is unsettling to public employee unions, who fear their salary contracts and/or pension benefits could be abrogated. Last year, the unions' allies in the Legislature's Democratic majority pushed legislation that would indirectly give unions a veto power on local government bankruptcies, or at least the power to extract concessions from local officials.

This Bailout Is a Bargain? Think Again - (www.nytimes.com) IT’S way too early to tally the costs of the government’s various efforts to help our nation’s financial institutions survive the credit debacle. But that hasn’t stopped anonymous Treasury officials from claiming in recent days that their Armageddon-avoidance will wind up costing far less than many feared. One Treasury estimate, leaked to The Wall Street Journal last week, put a price tag of $89 billion on the financial bailout. That’s far below the $250 billion the Congressional Budget Office estimated last year or other analyses that put the all-in number at $1 trillion or more. It is understandable, of course, that Treasury might want to transmit good news about bailouts the same week Americans were rushing to meet the I.R.S.’s tax deadline. And given that Treasury is run by Timothy F. Geithner, the man who doled out bailout billions as president of the Federal Reserve Bank of New York, his current minions certainly have an interest in peddling the view that the price of these rescues has become less onerous. But before we break out the Champagne, let’s look at the costs this estimate included — as well as those it left out. What the $89 billion included were costs associated with stabilizing Fannie Mae and Freddie Mac, the mortgage finance giants; loan guarantees by the Federal Housing Administration; and liquidity programs offered by the Federal Reserve, such as those authorizing the purchase of mortgage-backed securities from financial institutions. It also included the Troubled Asset Relief Program — which, nameless Treasury officials contended, may someday generate a profit. But if the Treasury wants to provide a full assessment of the costs of this financial debacle, it will have to add some more beads to its abacus. “If you are going to do a ledger, you have to do a full and complete ledger,” said Christopher Whalen, editor of the Institutional Risk Analyst. “To talk about making money on short-term transactions with the TARP while you have this huge cost to the nation is incongruous.” A major factor missing from Treasury’s math is the vast transfer of wealth to banks from investors resulting from the Fed’s near-zero interest-rate policy. This number is not easy to calculate, but it is enormous. The Fed’s rock-bottom interest-rate policy bestows huge benefits on banks because it allows them to earn fat profits on the spread between what they pay for their deposits and what they reap on their loans. These margins are especially rich on credit cards, given their current average rate of 14 percent and up.

OTHER STORIES:

The Arrogance of Wall Street Bankers at New Highs - (www.reuters.com)

SEC charges Goldman Sachs with fraud - (money.cnn.com)

Three cheers for the SEC! - (money.cnn.com)

U.S. bank chief mobbed by angry borrowers - (www.reuters.com)

Government extend and pretend housing initiatives immoral - (immoralhazard.housingstorm.com)

Morgan Stanley real estate fund may face $5.4 billion loss - (money.cnn.com)

Yes, 47% of Households Owe No Taxes. Look Closer. - (www.nytimes.com)

California's poor pay the highest tax rate - (totalbuzz.freedomblogging.com)

Wine Beats Russell Stocks as Liquid Investment in Swiss Study - (www.bloomberg.com)

Crack Shack or Mansion? - (www.crackshackormansion.com)

Goldman Sachs set to pay L3.5bn in bonuses - (business.timesonline.co.uk)