KeNo's Housing and Economic Portal: Tuesday July 20 Housing and Economic stories

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Spanish banks rage at end of ECB offer - (www.ft.com) Spanish banks have been lobbying the European Central Bank to act to ease the systemic fallout from the expiry of a 442 billion euros ($542 billion) funding program this week, accusing the central bank of “absurd” behavior in not renewing the scheme. On Thursday, the clock runs out on the ECB financing program – the largest amount ever lent in a single liquidity operation by the central bank – under the terms of the one-year special liquidity facility launched last summer. One senior bank executive said: “Any central bank has to have the obligation to supply liquidity. But this is not the policy of the ECB. We are fighting them every day on this. It’s absurd.” Another top director said: “The ECB’s policy is that they don’t want to provide maturity of more than three months. But they have to adapt.” Banks across the euro zone, but in Spain in particular, have found it hard in recent weeks to secure liquid funding in the commercial markets, with inter-bank funding virtually non-existent. The 442 billion euro ECB facility, which charges interest at a rate of 1 percent, is not set to be renewed, something that banks in Spain and elsewhere in Europe say ignores current commercial realities.

Greeks Stage Nationwide Strike to Protest Overhaul of Pensions, Labor Laws - (www.bloomberg.com) More than 9,000 protesters marched through Athens today as Greek unions staged their fifth general strike of the year to challenge government plans to cut pension benefits and loosen labor laws. The walkout halted state services including public transport and tax offices and disrupted some hospitals. The 24- hour stoppage hit ferry lines at Piraeus, Greece’s largest port, as the Panhellenic Union of Merchant Marine Engineers demanded changes to “anti-social measures.” “We are faced with almost the total destruction of Greece’s social security and labor system,” Spyros Papaspyrou, chairman of ADEDY union for civil servants, said by telephone before the march. “We remain committed to this struggle.” Greece is in the midst of its biggest upheaval since joining the euro nine years ago after being forced to take action to avoid a debt default. Reforms to pensions and the way workers are hired and fired are required by the European Union and International Monetary Fund in return for the 110 billion euros ($135 billion) of emergency loans agreed in May.

Princeton as `Hedge Fund' Foils Residents Seeking Relative Share of Taxes - (www.bloomberg.com) Princeton University, the fourth- richest institution of higher education in the U.S., paid more than $10 million last year to its prosperous New Jersey community. Municipal officials and residents say the college should do more. The university would pay about $28 million in additional property taxes if all of its land were taxed, said Princeton Borough Councilman Kevin Wilkes. The college owns 43 percent of the borough’s assessed land value and 13 percent of adjoining Princeton Township’s, Wilkes said. “The town budget is strapped and schools are looking at laying off teachers,” said Princeton Borough resident Peter Kann, former chairman and chief executive officer of Dow Jones & Co. and the co-chair of Princeton Future, a civic organization. “Then there is this enormously rich university. They give the appearance of being wonderful donors to the town, but compared with what they would be giving if they were paying property taxes it’s really trifling.” It’s the latest round in the town-gown faceoff, as U.S. municipalities still reeling from the economic crisis turn to their local universities, whose land holdings are mostly tax- exempt, to close budget shortfalls. Those institutions say they aren’t in a position to help: They are also scrimping to save money through program and job cuts after record endowment declines. Princeton University’s investments lost 24 percent in the year ended June 30, 2009. The total value of the endowment fell 23 percent to $12.6 billion, from $16.3 billion the previous year.

Delay looms as Wall St bill seen "too big to fail" - (www.reuters.com) Democratic backers of the bill scrambled on Monday to replace a crucial vote of support that was lost when Byrd, 92, passed away, with the bill's fate turning on the views of a handful of swing-vote senators. In the give-and-take of securing their support, reform advocates warned the bill could be further watered down. "If they have to reopen the bill to make concessions to get additional votes ... the bill will get weaker, not stronger," said Barbara Roper, director of investor protection at the Consumer Federation of America, a watchdog group. The bill is the biggest overhaul of financial regulation since the 1930s and a top priority of President Barack Obama following a severe banking crisis that slammed the economy. It would force banks to reduce, but not cease, risky trading and investing; set up a new government process for liquidating troubled financial firms; and impose a $19 billion fee on the largest firms to pay for these and other changes.

New York Fed probes Wall Street exposure to BP: sources - (www.reuters.com) The Federal Reserve Bank of New York has been probing major financial firms' exposure to BP Plc to ensure that if the oil giant buckles under the costs of the Gulf oil spill, it won't put Wall Street or the global financial system at risk, according to two sources familiar with the matter. After poring over documents and asking banks about their exposure to BP over the past two weeks, the Fed found no systemic risk, and hasn't asked firms to alter their credit relationships with BP, the sources told Reuters. "The Fed gave banks' exposure to BP a passing grade," said one of the sources on condition of anonymity. Beyond's BP survival prospects, the Fed examination underscores market uncertainty about how the spill's staggering clean-up bill might affect Wall Street, a fragile economic recovery, or the multitrillion dollar energy market. BP until recently had stellar credit ratings and generated $30 billion of cash from its oil and gas production and trading over the last year, making it a golden counterparty for many financial firms that trade in energy, including the largest Wall Street banks. Since April, when it began trying to plug an oil spill that has spewed up to 60,000 barrels a day into the U.S. Gulf, the company has lost $100 billion in stock market value and suffered several credit downgrades. The soaring liability risk raised concern in banking circles that the company's financial woes could spread outside BP, prompting the Fed's examination.

Fannie-Freddie Bailout Could Cost Taxpayers $1 Trillion - (www.cnbc.com) For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg. According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, the cost to the taxpayer could hit as much as $1 trillion. Two things are clear: Taxpayers don’t want to foot the bill, and Fannie and Freddie, taken over by the government in 2008 to stanch the financial bloodletting, need a major overhaul. “Some of us who don’t even own homes are paying to support others and their home ownership, and they ask ‘why?’ said Robert J. Shiller, a Yale University economics professor and co-creator of the S&P/Case-Shiller Home Price Indices.