KeNo's Housing and Economic Portal: Tuesday August 10 Housing and Economic stories

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Golf clubs suffer in recession as membership dwindles - (www.usatoday.com) For $6,000 a year, Tom Bennett enjoyed the privileges of being a member of an exclusive, private golf course in northeast New Jersey. He golfed pristine grounds and reveled in socializing with other duffers. But last year, Bennett ended his six-year membership at the private Stanton Ridge Golf and Country Club in Whitehouse Station, N.J. "Cost was part of it, but service had fallen and upkeep was suffering because membership was down, a death spiral if you will," says Bennett, 48, who runs a financial-management consulting firm in California but still owns a house at the club. "The recession (hurt) membership, and that affected the social aspect," Bennett says. "With fewer people and dues, the club didn't do as good a job taking care of non-golf parts of the course." As Tiger Woods, Phil Mickelson and other members of golf's royalty prepare to tee off at the PGA Championship — the fourth, and final, major championship of 2010 — in Wisconsin next week, the business of golf faces an economic outlook that is sinking like a downhill putt.

Dual Role in Housing Deals Puts Spotlight on Deutsche - (online.wsj.com) Federal probes of the collapsed mortgage-bond boom are shedding light on how Wall Street firms sometimes created securities and sold them to one set of investors, while advising others to bet against them. One firm that was a major player in mortgage securities, Deutsche Bank AG, illustrates a pattern investigators are looking at. While creating and selling mortgage securities to some of its clients, the big German bank was not only advising other clients to bet the other way, but also sometimes doing so itself. A Deutsche trader helped create an index that made it easy to bet against housing, and the bank itself then used the index to do just that. After the collapse of mortgage securities led to a costly bailout of the firm that insured many such securities—American International Group Inc.—some of the federal cash that was sunk into AIG flowed to Deutsche, to cover bearish bets by its hedge-fund clients. Deutsche's actions are a vivid example of potential conflicts on Wall Street—the way big financial firms play both sides of the fence with investors. The issue became more extreme during the mortgage bubble and subsequent bust because of the size of the bets on Wall Street and subsequent losses on Main Street.

Fort Worth council considers eliminating guaranteed pension for newer workers - (www.star-telegram.com) City Council members are considering doing away with a guaranteed pension for newer employees as the council struggles to bring Fort Worth's spending in line with the drop in taxes. No decisions have been made. And Assistant City Manager Karen Montgomery said the city would still have to deal with a big backlog in pension costs even if the council decides to cut benefits. But pensions have been a sacred cow among state and local governments, and few others have even discussed cutting them. By law, the city can't change the benefits that it's already paying retirees or those that it has promised to employees who have worked long enough to be vested in the pension system. Also, police and firefighter pensions are guaranteed under labor contracts. The city could be forced to pour tens of millions of dollars into the pension system over the next few years, and pension costs are a major contributor to Fort Worth's projected $73 million budget gap. "This is the elephant in the room for not only this budget but all future budgets," Mayor Mike Moncrief said. Montgomery suggested moving new employees and perhaps even unvested employees to a "defined contribution" plan. The specifics of the plan haven't been determined, but Montgomery suggested a range of options, including annuities or accounts similar to a private-sector 401(k). That would be a game-changer for municipal employees, who often stay in their jobs because of the pension and other benefits.
"In our current pension, employees cannot outlive their benefit," Montgomery said. "In a defined contribution, that risk is on the employee to manage their money until they die."

US State Funding Plan Stalls in Senate - (www.reuters.com) The U.S. Senate on Monday killed a plan to send $26.1 billion dollars to states due to deficit concerns, marking a setback for those counting on federal help with budget gaps. The plan would have been paid for by closing tax loopholes enjoyed by big multinational companies. The U.S. Senate will likely consider a revised version in coming days. The plan, which would have provided states with $16.1 billion through June for Medicaid and also give them $10 billion to avert teacher layoffs, went down in defeat because it would have added $5 billion to the deficit. Senate Majority Leader Harry Reid said that when he introduced the legislation he had anticipated it would be deficit neutral. Upon learning it would put the country deeper into debt he began drafting a new version, he told the Senate. "That amendment will fund hundreds of thousands of jobs and will be fully paid for according to CBO," he said. The Congressional Budget Office estimates the costs of legislation. State budget deficits could total more than $120 billion this fiscal year. Pennsylvania State Senate Majority Leader Dominic Pileggi told reporters a vote on the new legislation could happen as early as Wednesday, and that his state would put off implementing its budget contingency plan.

Taylor Finds ‘Implausibility’ in Blinder-Zandi Stimulus Report - (www.bloomberg.com) Economists Alan Blinder and Mark Zandi say fiscal and monetary stimulus measures taken by the U.S. government staved off a depression. Stanford University economist John B. Taylor disagrees.... “There’s a bit of implausibility to the whole case,” Taylor said in a separate interview yesterday with Tom Keene. “They’re finding that the policy actions did a lot of good, and I just disagree with that.” Congress authorized $700 billion for the Troubled Asset Relief Program in October 2008, during the presidency of George W. Bush, aimed at preventing a collapse of the U.S. financial system. Taxpayer bailouts of companies including Citigroup Inc. and Bank of America Corp. ensued. The program has been criticized by lawmakers from both parties, including Senator Maria Cantwell, a Democrat from Washington state, and Representative Jeb Hensarling, a Texas Republican, for helping big banks more than average citizens. Blinder, a former Fed vice chairman who’s now a vice chairman at Washington-based banking consultant Promontory Interfinancial Network LLC, said in the radio interview that his analysis with Zandi found “considerably stronger effects on the economy from the financial policies than from the fiscal stimulus -- which is not to say the fiscal stimulus didn’t have a large effect. It did. But the financial policies had an enormous effect.”