KeNo's Housing and Economic Portal: Tuesday May 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Defaults Rise in Loan Modification Program - (www.nytimes.com) The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government’s modification program nearly doubled in March, continuing a trend that could undermine the entire program. Data released Wednesday by the Treasury Department and the Housing and Urban Development Department showed that 2,879 modified loans had been ended since the program’s inception in the fall, up from 1,499 in February and 1,005 in January. The Treasury Department said it could not explain the growing number of what it called cancellations, almost all of which were apparently prompted by the borrower’s being unable to make the new payment. A scant number — 37 — were because the loan had been paid off, presumably because the borrower sold the house. About seven million households are behind on their mortgage payments.

Debt Crisis Watch Turns to Portugal - (www.nytimes.com) Next target: Portugal. Speculators have begun to zero in on another small member of Europe’s troubled monetary zone, highlighting the same economic flaw that brought Greece to the verge of insolvency: a chronically low savings rate that forces a reliance on the now-diminishing appetite of foreign investors to finance persistent deficits. Just as investors are turning their attention to the next vulnerable country, Greece moved a step closer on Thursday to activating a $61 billion rescue package, as Prime Minister George A. Papandreou asked the European Union and the International Monetary Fund to meet in Athens next week. The aid package agreed on last weekend — aimed at calming fears of a Greek default — has not yet had its desired effect. The yield on Greek 10-year bonds briefly topped 7.3 percent Thursday, not far from the 7.5 percent it was at before the rescue package was announced. Interest rates on 10-year government bonds for Portugal have also been rising, hitting a high of 4.5 percent on Thursday.

Congress passes jobless benefits extension - (www.latimes.com) President Obama signed an extension of jobless benefits for the long-term unemployed Thursday night that will allow those whose aid expired to apply retroactively. When Congress passed the measure earlier in the day, it ended, at least for now, a partisan stalemate that highlighted election-year differences over federal spending. The Senate passed the $18-billion measure, 59 to 38, with the support of 54 Democrats, three Republicans and two independents. Every other Republican opposed it; the other three Democrats were absent. Hours later, the House passed the bill, 289 to 112. The measure extends jobless aid through June 2. Democrats, anxious about high unemployment in an election year, are working on separate legislation to extend benefits through the end of the year.

Unions offer plan to avoid layoffs of L.A. city workers - (www.latimes.com) Days before Los Angeles Mayor Antonio Villaraigosa is scheduled to release his plan for balancing the budget, a coalition of labor groups said Thursday that it had found a way to cut $432 million without resorting to layoffs. The Coalition of L.A. City Unions, which represents about 22,000 workers, said the city could erase its projected shortfall if it pursued a series of recommendations for the fiscal year that starts July 1, including a halt to hiring at the Los Angeles Police Department. Deputy Mayor Ben Ceja said this week that Villaraigosa plans to keep hiring enough officers next year to replace those who resign or retire. The coalition opposed that idea, saying public safety is also provided by agencies that are being targeted for cuts. "Public safety means libraries that are open after school, parks that keep kids busy and fire services that respond to an emergency," said Julie Butcher, regional director of Service Employees International Union Local 721, which is part of the coalition. An LAPD hiring freeze would save $7.7 million, Butcher said. Other proposals include early retirement for 363 city workers, higher fees for ambulance service and dog licenses, collecting on $38.2 million in outstanding debts and spreading out investment losses in a city pension fund over 10 years instead of five. One mayoral aide said some of the union proposals are overly optimistic about the amount of money that could be generated. "The mayor's always open to constructive solutions from labor," said Villaraigosa Deputy Chief of Staff Matt Szabo. "But he also must operate within the realm of reality." Under its contract, coalition members would automatically receive $32.2 million in raises if its members were laid off. That money could be saved if no layoffs occur, the coalition said. City Administrative Officer Miguel Santana said the upcoming budget already assumes that the pay increases will occur. "We cannot balance the budget without layoffs," he said. "There has to be a permanent reduction in the workforce."

Greek Bonds Show EU Aid May Be Tapped as Yields Rise - (www.bloomberg.com) Greek bonds show the nation may have to tap a 45 billion-euro ($61 billion) international bailout to convince investors it can avoid a default. The 10-year securities fell for a third day today, and the yield premium investors demand to hold them instead of benchmark German bunds rose above 400 basis points for the first time since euro-region finance ministers announced the aid plan last weekend. The parliaments of Germany, France and Ireland must vote on whether to contribute their share of the loans, government spokesmen said yesterday. Dutch lawmakers will discuss Greek aid today. “There are concerns that the money will not be available,” said Toby Nangle, who helps oversee 46 billion euros as director of asset-allocation research at Baring Investment Services Ltd. in London. “There are people who are willing to place their own money at risk in anticipation of this thing not going through.”

Lehman's Alter Ego - How Lehman Hid Risk In Shell Corporations; Where is The Indictment of Ex-CEO Dick Fuld? - (Mish at globaleconomicanalysis.blogspot.com) A 2,200 page Report Shows How, Collapsing, Lehman Hid Woes: According to the report, Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money. Senior Lehman executives, as well as the bank’s accountants at Ernst & Young, were aware of the moves, according to Mr. Valukas, the chairman of the law firm Jenner & Block and a former federal prosecutor, who filed the report in connection with Lehman’s bankruptcy case. Richard S. Fuld Jr., Lehman’s former chief executive, certified the misleading accounts, the report said. “Unbeknownst to the investing public, rating agencies, government regulators, and Lehman’s board of directors, Lehman reverse engineered the firm’s net leverage ratio for public consumption,” Mr. Valukas wrote. Mr. Fuld was “at least grossly negligent,” the report states, adding that Henry M. Paulson Jr., who was then the Treasury secretary, warned Mr. Fuld that Lehman might fail unless it stabilized its finances or found a buyer. The report says Dick Fuld, CEO of Lehman was “at least grossly negligent”. The key words are "at least". The reality is Dick Fuld makes Bernie Madoff look like a rank amateur. This begs at least two questions.

1. Where is the criminal indictment of Dick Fuld?
2. How many other Repo 105, leverage hiding, market manipulation, and tax evasion schemes are banks engaged in that we do not know about yet?

OTHER STORIES:

Obama calls together congressional leaders in push for new financial regulation - (www.washingtonpost.com)

Expiring Tax Cuts’ Fate Has Parties Strategizing - (www.nytimes.com)

Fed fund rates rise points to policy shift - (www.ft.com)

Lumber Rises to Highest Price Since 2006 on Economic Outlook - (www.bloomberg.com)

Greece Closer to Aid Request; IMF, EU Due in Athens - (www.bloomberg.com)

China GDP Grows 11.9%, Highlighting Overheating Risk - (www.bloomberg.com)

ECB warns of global imbalances threat - (www.ft.com)

EU needs long-term fix for fiscal trouble: Juncker - (www.reuters.com)

U.K. Consumer Confidence Plunges Most Since July 2008 - (www.bloomberg.com)

India’s Inflation Rate Held at 17-Month High in March - (www.bloomberg.com)

Jobless Claims in U.S. Increased 24,000 Last Week to 484,000 - (www.bloomberg.com)