KeNo's Housing and Economic Portal: Thursday May 6 Housing and Economic stories

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Another Obama favor for unions - (www.washingtonexaminer.com) Barely 15 percent of all construction-industry workers in the United States are union members, while the remaining 85 percent are nonunion, according to the U.S. Department of Labor's Bureau of Labor Statistics. So why has President Obama signed Executive Order 13502 directing federal agencies taking bids for government construction projects to accept only those from contractors who agree in advance to a project labor agreement that requires a union work force? Obama's new order applies to all federal construction projects with price tags of $25 million or more, and it means all such contracts will only be awarded to companies with unionized work forces. By eliminating the vast majority of potential bidders on federal construction projects, Obama guarantees two things. First, the projects will cost taxpayers more because union labor is always more expensive. And with mandated PLAs, the cost premium for union contractors will be even greater because fewer bidders always means less competition and higher prices. Second, by guaranteeing unions a bigger stream of federal contracts, Obama is making sure that Big Labor, already among the Democrats' biggest sources of campaign cash, will have even more money to hand out for the 2010 and 2012 elections. You scratch our back with taxpayers dollars gleaned through PLA-based federal construction jobs, and we'll scratch your back with campaign contributions. That's the way it works in Obama's business-as-usual Washington. It's also known in some quarters as "the Chicago Way."

8 banks close in Calif., Fla., Mass., Mich., Wash. - (finance.yahoo.com) Regulators on Friday shut down eight banks -- three in Florida, two in California, and one each in Massachusetts, Michigan and Washington -- putting the number of U.S. bank failures this year at 50. The Federal Deposit Insurance Corp. took over the three Florida banks: Riverside National Bank in Fort Pierce, with $3.4 billion in assets; First Federal Bank of North Florida in Palatka, with $393.3 million in assets; and AmericanFirst Bank in Clermont, with assets of $90.5 million. TD Bank Financial Group, a division of Canada's TD Bank, agreed to acquire the deposits and nearly all the assets of the three Florida banks. The FDIC also seized Innovative Bank, based in Oakland, Calif., with about $269 million in assets; Tamalpais Bank of San Rafael, Calif., with about $629 million in assets; City Bank, based in Lynnwood, Wash., with about $1.1 billion in assets; Butler Bank in Lowell, Mass., with $268 million in assets; and Lakeside Community Bank in Sterling Heights, Mich., with $53 million in assets.

Straining the FHA's umbrella - (www.washingtonpost.com) A District nonprofit organization that says it helps cash-strapped homeowners avoid foreclosure is under federal investigation for instead helping lenders make high-risk loans that leave the government on the hook if they go bad, according to sources familiar with the probe. Federal officials say they are concerned that the Rainy Day Foundation could be thwarting government efforts to weed out mortgage lenders that make too many precarious loans. The Federal Housing Administration, which encourages homeownership by guaranteeing mortgages made by qualified lenders, has long struggled to keep companies from slipping risky loans under its protective umbrella. The agency has done this in part by barring lenders if too many of their borrowers default. The Rainy Day Foundation advertises that it can help lenders remain in the FHA's good graces. For a fee of about $600 per borrower, paid by lenders, home builders and real estate firms to cover the cost of making mortgage payments for distressed borrowers, the group promises to limit defaults during the two years after a loan is made, the period watched most closely by the FHA. Rick Del Sontro, chief executive of the Rainy Day Foundation, said in an interview that his group provides an important service to borrowers and lenders.

California's jobless rate hits high of 12.6% in March - (www.latimes.com) California's unemployment rate reached a new high of 12.6% in March, bolstering fears that a weak labor market will remain a drag on the state's economy at least through the end of the year.
The unemployment rate in February was 12.5%. Despite hints of an economic turnaround, some of the 2.3 million unemployed in the state found March the toughest month yet. That's because tens of thousands have been out of work so long that their unemployment checks will be cut off within the next few weeks. They're not helped by the $18-billion measure signed Thursday by President Obama that extends jobless benefits for many Americans through June 2. The Employment Development Department estimates that about 100,000 Californians will have exhausted their benefits by this weekend. "Jobs have not been quickly multiplying, so there's a lot of people who are still in need of assistance," said Loree Levy, a spokeswoman with the Employment Development Department.

Firefighter Ad Attacks City of North Las Vegas - (www.8newsnow.com) The battle between the union and the city is loud and clear. In the ad, the union says they offered to take more than $3 million in wage and benefit cuts to help the city. They use words like "stubborn" and "refusal" to describe the actions of some members of the city council. "They walked away from fiscal responsibility. They walked away from staffing this engine. They walked away from response times and we felt the citizens needed to know what was going on," said Jeff Hurley with the union. Councilman Richard Cherchio calls the ad nothing more than a scare tactic, saying the whole story isn't being told to the public. "This is the type of fear factor and media hype that gets results, or have gotten results in the past. It's not going to get results this time with me," he said. He says the union is offering only to defer cost of living adjustments, not forfeit them. The ad is coming out on the same day 16 firefighters were given pink slips, many of them from one station. "Come to the table with something reasonable to save your member jobs and I would be more than happy to step up to the plate," said Cherchio.

Abacus Allowed Goldman to Shuffle Mortgage Risk Like Beads - (www.bloomberg.com) From July 2004 through April 2007, as credit markets boomed, Goldman Sachs Group Inc. created 23 financial transactions called Abacus, the word for a relatively crude counting tool involving the shuffling of beads. Yesterday, the Securities and Exchange Commission sued the bank for securities fraud in what would be the penultimate offering in the series, according to Bloomberg data. The bank used the deals to off-load the risk of mostly subprime home loans and commercial mortgages to investors, either as hedges for similar positions or to bet against securities itself. While the data show New York-based Goldman Sachs issued at least $7.8 billion of Abacus notes, the risk passed to investors was multiples higher. The Abacus transactions are so-called synthetic collateralized debt obligations, which marry two financial innovations that contributed to the worst collapse in financial markets since the Great Depression.