KeNo's Housing and Economic Portal: Sunday May 23 Housing and Economic stories

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Suddenly, bank account was gone - (www.ajc.com) When Hope and Matt Hughes stopped for supplies at a pet store last month, they thought the trouble with their debit card was just a glitch. But it turned into a financial crisis. They quickly discovered that their bank, Wachovia-turned-Wells Fargo, had deducted $4,059.82 from their checking account, wiping it out. It was no glitch. It is called the right of setoff or offset, a long-accepted practice dating to early English common law. When the right of setoff is applied to bank accounts, it works like this: When consumers place money in bank accounts, they are basically agreeing to let the bank borrow the money, with a promise to repay, usually backed by the Federal Deposit Insurance Corporation. If the consumer then takes out a loan with that same bank and falls behind, the bank can use the money in that account to offset the loan. The trouble stemmed from Hope Hughes’ $10,000 student loan, which the bank called in. Now, the couple, who rely on Matt Hughes’ once-a-month paycheck from Kimberly-Clark, have had to sell possessions on Craigslist, tap into his 401K and negotiate with creditors so they don’t put their house and car loans in danger. And they were charged $385 in overdraft fees for purchases that would have cleared their account the day it was cleaned out.

More American Expatriates Give Up Citizenship - (www.nytimes.com) Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship. “What we have seen is a substantial change in mentality among the overseas community in the past two years,” said Jackie Bugnion, director of American Citizens Abroad, an advocacy group based in Geneva. “Before, no one would dare mention to other Americans that they were even thinking of renouncing their U.S. nationality. Now, it is an openly discussed issue.” The Federal Register, the government publication that records such decisions, shows that 502 expatriates gave up their U.S. citizenship or permanent residency status in the last quarter of 2009. That is a tiny portion of the 5.2 million Americans estimated by the State Department to be living abroad. Still, 502 was the largest quarterly figure in years, more than twice the total for all of 2008, and it looms larger, given how agonizing the decision can be. There were 235 renunciations in 2008 and 743 last year. Waiting periods to meet with consular officers to formalize renunciations have grown.

Goldman Sachs now hit with 6 shareholder suits - (www.washingtonpost.com) Goldman Sachs said Monday that six private lawsuits alleging "breach of fiduciary duty, corporate waste, abuse of control, mismanagement and unjust enrichment" have been filed against the bank since the government charged it last month with committing fraud. The rare announcement, in the form of a regulatory filing, underscores the widening legal assault that Goldman is facing as well as the firm's increasing sensitivity about telling investors any information that might be deemed pertinent. The issue of disclosure is at the center of the Securities and Exchange Commission's civil fraud suit against the company. The SEC alleges that Goldman failed to tell clients looking to invest in the housing market important details about an investment opportunity the bank was touting, known as collateralized debt obligation. Goldman denies wrongdoing.

PA Tax Amnesty TV Ad "We Know Who You Are" - (www.youtube.com) And we wonder why people are flying planes into corrupt IRS offices?

Foreclosures mounting in wealthier neighborhoods - (www.ocregister.com) The Laguna Beach home sits on a rock jutting out into the ocean. It has a 20-foot salt water aquarium on the lower balcony, not to mention the 64 million-square-mile aquarium stretching to the horizon and beyond. The master suite has two walk-in closets, a shoe closet, a private fireplace, a workout room and a sunken tub. It lists for $12.5 million, but if a buyer doesn't rescue it soon, the home might be sold or revert to the lender at a foreclosure auction to satisfy unpaid debts. The current opening bid is about $9 million. The South Laguna mansion is but one example of how defaults and even the loss of homes to foreclosure are mounting in Orange County's beach cities, in its higher-income neighborhoods and, yes, even for homes valued in the millions.

The trillion-dollar fraud: Why is the Fed so opposed to being audited? - (www.salon.com) Commercial banks, by law, have to hold a certain percentage of their deposits as cash at the Federal Reserve. From January 1959 until August 2008, the total of these reserves held by the commercial banks at the Fed grew from $11.1 billion to $46.2 billion. At no time during this almost 50-year period did the total bank reserves held at the Fed exceed the minimum required by law by more than $2 billion. But since August 2008, these bank reserves held at the Fed have exploded to more than $1.2 trillion (as of March 2010), even though only $65.6 billion was required to be deposited by law. This increase in excess reserves resulted directly from the Fed's policy of dramatically increasing the quantity (and lowering the quality threshold) of assets it bought in the marketplace. During the past 20 months, the Fed has tripled the size of its balance sheet by acquiring more than $1.5 trillion of new assets, more than $1 trillion of which are mortgage-backed securities. What is going on here? Why would commercial banks hold $1 trillion more than they legally had to in reserves at the Fed, earning only 0.25 percent interest per year, and why would the Fed buy more than $1 trillion of mortgage securities of undisclosed quality in the marketplace?

Swaps desk ban seen fading from bank reform - (www.reuters.org) Support was slipping on Monday in the Senate for a proposal to require that banks spin off their swap-trading desks, analysts and sources familiar with discussions among lawmakers said. The proposal, drafted by Senate Agriculture Committee Chairman Blanche Lincoln, was added last week to a wider Wall Street reform bill that senators continued debating on Monday. No votes on amendments to the bill will come until Tuesday. The Senate will likely drop the Lincoln proposal and allow bank holding companies to continue to trade derivatives. But it will likely impose other new limits on derivatives, said Paul Miller, policy analyst at investment firm FBR Capital Markets. Political momentum for a harsh crackdown on Wall Street could yet convince lawmakers to keep the swaps-desk ban in the bill, but other analysts concurred with Miller. "In our view, momentum is building to eliminate this provision and we expect it to be dropped as part of the Senate process," said Jaret Seiberg, analyst at Concept Capital.