Sunday May 30 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Rep. Alan Grayson: You Own the Red Roof Inn, Thanks to the Fed; Why the Fed Does Not Want an Audit; America is Wall Street's Sucker - (Mish at globaleconomicanalysis.blogspot.com) Please play this must-see video by Alan Grayson explaining in great detail exactly why the Federal Reserve does not want to be audited, and thus why it absolutely needs to be audited. "Let's find out once and for all who owns the hotels, who owns the houses, and let's try and put this wild beast that creates money out of nothing and jams it in the pockets of special interests like Maiden Lane, like Bear Stearns, like JPMorgan, like all their friends. Let's put them under some degree of restraint before it all comes crashing down, on us." Please play the video!

What hit the market? - (money.cnn.com) New York Stock Exchange efforts to stabilize Thursday's stock market had the opposite effect, triggering a momentary market collapse. It wasn't a goof. It wasn't human error. Rather, it was an instant that displayed the hazard of new markets that handle billions of dollars' worth of trades each day. During yesterday's fast-moving midday market, NYSE specialists -- who oversee trading in individual stocks -- used their authority to call a momentary time out. The idea was to bring together buyers and sellers, and get their prices more in line with each other. It happened in five Dow stocks, including 3M (MMM, Fortune 500) and Procter & Gamble (PG, Fortune 500), according to the NYSE, and in a good number of the listed stocks. The NYSE did not have a tally of exactly how many. Years ago, when the NYSE dominated trading, such "time-outs" worked well at stabilizing stock prices. But today, the NYSE accounts for only about 25% of the volume in its listed stocks. Much of the rest comes from computerized markets run by private companies -- and some of those systems did not take a time out yesterday. So, as the NYSE paused for a minute or two at about 2:40 p.m. ET, the off-exchange computers kept searching to execute trades. They hit the best bids still standing, which in many cases were far below the prior price. And in some cases, the off-exchange computers found no bids at all. When that happens, market-making computers see a zero bid, then offer a penny higher to capture the trade and collect a commission -- hence the trades of just one cent for several stocks, including Accenture (ACN), Boston Beer (SAM), Exelon (EXC, Fortune 500). "Computers are looking for the best bids. The real best bids shut themselves down," one trader told CNNMoney.com. "You had penny prints. The bid was zero. The algorithms were designed to penny the bids," said another trader. The attempt to stabilize the market by timing out the human bidders made matters worse. The computers reacted by bidding $.01 when there were no other bids. This was not a planned conspiracy. Rather, it was a natural occurrence after all the sell stops and buy stops executed, the NYSE paused, and the only game in town was computers bidding against computers finding no bids.

EU's Barnier Calls For Tougher Sanctions On Market Speculators - (online.wsj.com) The European Union's internal market commissioner Sunday called for tougher sanctions on stock market speculators. Speaking on French radio Europe 1, Michel Barnier said sanctions against speculators will take various forms "including legal action, when there is proof." "We are ready to increase the sanctions against abnormal speculative action," he said. "Regulatory authorities need to be extremely severe with those that are launching rumors to manipulate stock prices in order to make money on the back of the suffering of the people," Barnier said. "I think that all inquiries made by the European authorities need to be rigorous, fast and coordinated...and the sanctions need to be exemplary," he said, adding that he will discuss the matter during his trip to New York and Washington, D.C., which starts Sunday. Tasked with improving regulation in the wake of the global financial crisis, Barnier is due to meet with senior U.S. regulators and U.S. financial industry executives, including Goldman Sachs Group Inc. (GS) chief Lloyd Blankfein and Kohlberg Kravis Roberts & Co. head Henry Kravis during his trip to the U.S. He is in charge of numerous legislative efforts that will have a profound impact on the industry. Among these are proposals to tighten regulation of derivatives, hedge funds and private-equity firms, bank leverage and credit-ratings agencies.

French President Nicolas Sarkozy Vows to "Confront Speculators Mercilessly" via Secret Plan he cannot Reveal - (Mish at globaleconomicanalysis.blogspot.com) Every time officials in Europe starts yapping about containing the European debt crisis, the market makes complete fools of them. The latest comments from French President Nicolas Sarkozy may take the cake. Please consider a few snips from the New York Times article Europeans Move to Head Off Spread of Debt Crisis: Leaders from the euro zone countries signed off on a support package for Greece on Friday night and pledged to take steps to stanch a spreading debt crisis before markets opened on Monday morning. During a late-night meeting at European Union headquarters, the leaders described the debt crisis as “systemic,” but President Nicolas Sarkozy of France insisted that the bloc could defend the euro by directly attacking speculators. Speaking at a news conference, Mr. Sarkozy vowed to “confront speculators mercilessly” and warned them that they would soon “know once and for all what lies in store for them.” The leaders said they would create a so-called European stabilization mechanism, but Mr. Sarkozy declined to give details of the plan on the basis that doing so could undermine its effectiveness.

San Diego Sues Its Pension System - (www.signonsandiego.com) The city of San Diego is suing its retirement system in a dispute regarding how much financial responsibility, if any, city workers should bear for a pension deficit topping $2 billion. If successful, the lawsuit could lead to city workers helping pay for the pension fund’s investment losses rather than the current practice of having taxpayers make up for any deficiencies. The potential taxpayer savings have been estimated at $40 million for the fiscal year that begins July 1. The lawsuit is based on City Attorney Jan Goldsmith’s interpretation of the city charter. He says that document, essentially a city constitution, states that the city and its employees shall contribute “substantially equal” amounts to pension obligations each year. Labor leaders strongly disagree with Goldsmith and say his theory runs contrary to how past city attorneys have interpreted the charter for decades. They fear that Goldsmith’s reading could result in lower-level workers being hit with an extra $4,000 bill for their pensions in years when investments slump. The City Council unanimously approved the lawsuit in closed session last week, and Goldsmith filed it Monday in Superior Court. He is asking Judge Joan Lewis to force the San Diego City Employees’ Retirement System to increase employee contribution rates so workers will pay what he says is their fair share of $80 million. That is the portion of this year’s $232 million city pension payment that Goldsmith estimates can be attributed to investment losses.

British taxpayers ordered to bail out euro - (www.telegraph.co.uk) Britain faces paying out billions of pounds under a European Union deal intended to prevent another financial crisis like the one in Greece. All 27 EU finance ministers have been summoned to Brussels on Sunday to sign up to a “European stabilisation mechanism. Britain will be unable to veto this as it will be put through under the “qualified majority voting” system. The deal, effectively to shore up the euro, was denounced as a “stitch-up” last night after it emerged Nicolas Sarkozy, the French President and Angela Merkel, the German Chancellor, had devised it behind closed doors and were attempting to push it through at a time when there is no clear government in Britain. It was declared a "done deal” by the 16 euro zone leaders who met in the early hours of Saturday morning. The decision was taken as David Cameron was locked in talks with the Liberal Democrats to try to form a government. Alistair Darling, the Chancellor, will fly to Brussels for the meeting after promising to keep George Osborne and Vince Cable, his Tory and Lib Dem counterparts, informed. EU finance ministers have been given the deadline of midnight tonight to agree the highly sensitive but rushed proposals to protect the single currency from financial turbulence from the Greek debt crisis. “When the markets reopen Monday we will have in place a mechanism to defend the euro,” said President Sarkozy yesterday. “This is a full-scale mobilisation.” Euro-zone leaders are attempting to get round objections from countries such as Britain by invoking Article 122 of the Lisbon Treaty, intended to enable a collective response to natural disasters. This does not need unanimous agreement.

Gamble Sours for Many Kentucky Horse Breeders - (www.nytimes.com) The for-sale signs on horse farms are as common as the bluegrass and the limestone fences here, and breeders have grown accustomed to sending horses through the auction ring and feeling fortunate when they fetch half of their asking price — or anything at all. The run-up to the Kentucky Derby is normally an exciting time for lawyers playing matchmaker between deep-pocketed clients and owners of can’t-miss stallion prospects. No more. “The rails are quiet,” said Mike Meuser, a Lexington lawyer who is usually in the forefront of such deals. “Collecting, or trying to collect money, is the bulk of my business these days.” The bankers have disappeared here as well. Lending to buy horses, the grease in the deal-making machine for many years, has dropped 60 percent to about $400 million from an estimated $1 billion in 2007, according to the Kentucky Thoroughbred Association. The decline is no small matter here in bluegrass country, where horses, all kinds, are responsible for 100,000 jobs and $4 billion in economic impact, according to association figures, and are the cornerstone of Kentucky’s $8.8 billion tourism trade. It is one reason the racing industry has lobbied for casinos in the state’s racetracks, a position that would have been unthinkable not too long ago. Kentucky is also the heart and soul of the nation’s thoroughbred industry, and when it hurts, so do farms across the country.

OTHER STORIES:

Goodbye, stimulus. Hello, state budget cuts - (money.cnn.com)

Europe prepares nuclear response to save monetary union - (www.telegraph.co.uk)

E.U. Details $957 Billion Rescue Package - (www.nytimes.com)

Ignoring the Elephant in the Bailout - (www.nytimes.com)

British taxpayers ordered to bail out euro - (www.telegraph.co.uk)

FDIC closes twice as many banks so far this year - (finance.yahoo.com)

Freddie Mac asks U.S. for $10 billion as losses pile up - (www.washingtonpost.com)

Republicans seek vote on future of Fannie, Freddie - (www.reuters.com)

President Obama's Cooper Union speech and the Goldman case - (www.nypress.com)

Cronyism and gambling of financial sector - (www.doctorhousingbubble.com)

Stock market trouble, Fed impotent - (www.patrick.net)

Greece bailout just the beginning? - (www.edition.cnn.com)

Land rezoned for 800,000 more houses than needed in Ireland - (www.independent.ie)

As England Votes, Economic Clouds Hover - (www.nytimes.com)

Bailed out homebuilders collect fat paychecks - (www.reuters.com)

Big mystery is economists' failure to see housing bubble - (www.interest.co.nz)

Was It Really a Bubble? - (www.Economist still in denial!) - (www.economix.blogs.nytimes.com)

ML-Implode Wins Reversal In Court Case; Re-Posts Censored Materials - (www.blog.ml-implode.com)

Prior restraint - (www.en.wikipedia.org)

Real Estate Rescue Scammers Tortured - (www.laweekly.com)

Va. launching portable housing for aging relatives - (www.washingtonpost.com)