KeNo's Housing and Economic Portal: Monday July 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

A lobbying tempest engulfs financial overhaul - (news.yahoo.com/s/ap) Congress' final tinkering with Wall Street overhaul this month offers lobbyists a last-ditch shot to reshape the package on behalf of clients with billions at stake.

Even as the legislation gets tougher on banks by the week, agents of influence are hardly strangers on Capitol Hill. Many once worked for the lawmakers they're lobbying. Rep. Barney Frank, chairman of a panel resolving differences in House and Senate bills, and Sen. Chris Dodd, who shepherded the Senate's measure, have their hands full fending off industry efforts to dilute the final legislation. They must do so while trying to hold together a fragile Senate coalition with only four Republicans. So sticking points in this legislative tempest, whether over big banks' exotic trades or the plastic in people's wallets, are awfully tricky. At least 56 industry lobbyists have served on the personal staffs of the 43 Senate and House members who will shape the legislation over the next two weeks, according to Public Citizen and the Center forResponsive Politics, two government watchdogs.

Greece Cut Four Steps to Junk by Moody’s on ‘Risks’ - (www.bloomberg.com) Greece’s credit rating was cut to non-investment grade, or junk, by Moody’s Investors Service, threatening to further undermine demand for the debt-strapped nation’s assets as it struggles to rein in its budget deficit. In making the four-step downgrade to Ba1 from A3, Moody’s cited “substantial” risks to economic growth from the austerity measures tied to a 110 billion-euro ($134.5 billion) aid package from the European Union and the International Monetary Fund. The lower rating “incorporates a greater, albeit, low risk of default,” Moody’s said in a statement yesterday in London. The outlook is stable, it said.

Europe’s Banks Face Second Funding Squeeze on Sovereign Crisis - (www.bloomberg.com) European banks at risk of writedowns from the sovereign debt crisis face a funding squeeze that may depress earnings, curb lending and imperil economic recovery in the region. Investors are shunning bank securities on concern Greek, Portuguese and Spanish bonds held by the lenders will plunge in value. Bank bond sales slowed in May to the lowest since Lehman Brothers Holdings Inc.’s failure in 2008 as the extra yield buyers demand to hold the securities over government debt soared to the highest this year. Firms are wary of lending to each other, depositing record funds with the European Central Bank. “There is a lot of mistrust,” said Christoph Rieger, co- head of fixed-income strategy at Commerzbank AG in Frankfurt. “Banks are trading with the ECB rather than with each other.”

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case - (www.bloomberg.com) The cost of fixingFannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history. Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts. “It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry. Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

America's Municipal Debt Racket - (online.wsj.com) New Jersey officials recently celebrated the selection of the new stadium in the Meadowlands sports complex as the site of the 2014 Super Bowl. Absent from the festivities was any sense of the burden the complex has become for taxpayers. Nearly 40 years ago the Garden State borrowed $302 million to begin constructing the Meadowlands. The goal was to pay off the bonds in 25 years. Although the project initially went according to plan, politicians couldn't resist continually refinancing the bonds, siphoning revenues from the complex into the state budget, and using the good credit rating of the New Jersey Sports and Exposition authority to borrow for other, unsuccessful building schemes. Today, the authority that runs the Meadowlands is in hock for $830 million, which it can't pay back. The state, facing its own cavernous budget deficits, has had to assume interest payments—about $100 million this year on bonds that still stretch for decades. This tale of woe has become familiar in the world of municipal finance. Governments have loaded up on debt, stretched out repayment times, and used slick maneuvers to avoid constitutional borrowing limits. While the country's economic troubles have helped expose some of these practices, a sharp decline in tax revenues has prompted more abuse as politicians use long-term debt to kick short-term fiscal problems down the road.