KeNo's Housing and Economic Portal: Friday September 17 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Anglo Irish Bank to Be Split, One Part to Be Sold or Wound Down - (www.bloomberg.com) Anglo Irish Bank Corp., nationalized by Ireland’s government last year, will be split into two banks and part of it wound down or sold. Dublin-based Anglo Irish will be broken into a “Funding Bank” and an “Asset Recovery Bank,” the Finance Ministry said in a statement today. “It is intended that in due course the Recovery Bank will be sold in whole or in part or that its assets will be run off over a period of time,” it said. Standard & Poor’s last month said Ireland may have to pump as much as 35 billion euros ($45 billion) into Anglo Irish, which collapsed last year as the country’s property market slumped. Ireland is seeking to resolve the issue as its sovereign borrowing costs soar on concern the weight of bank bailouts will cripple the nation. “Any decision that provides clarity on Anglo is a positive,” said Oliver Gilvarry, head of research at Dolmen Securities in Dublin. “The sooner we see the final bailout figure for Anglo Irish and the Irish financial system in general, the better.” The finance ministry said the central bank will determine by October how much capital will be needed by the two Anglo Irish institutions it creates from the split.

Olympic Disaster In Vancouver As Taxpayers Get Billed For $1 Billion "Ghost Town" - (www.businessinsider.com) It boggles the mind to think that anyone can possibly think of Olympics as doing anything more than throwing taxpayer money straight down the toilet. Of course vendors and real estate agents do not give a damn about the long-term consequences as long as a quick buck can be made. Now it's payback time as Vancouver taxpayers on hook for $1-billion as most Olympic Village units unsold: Sixty-six per cent of Vancouver’s pricey Olympic Village condos remain unsold — a total of 483 units at the massive False Creek development that served as athletes’ housing during the two-week 2010 Games. Vancouver Mayor Gregor Robertson, whose city remains on the hook for more than $1.03 billion of the cost of the project, predicts it will take a “full two-year term” to sell the remaining units. The suites, which are priced anywhere from $400,000 to $5 million each, have been subject to the HST since July. The city’s investment in the project includes a $750-million loan plus undisclosed interest payments, $120 million still owed to the city for the land and a $110-million outlay for 252 affordable housing units. Today, six months after the 2010 Olympic Games, the village resembles a ghost town. Walking down the empty streets last Saturday afternoon, it was hard to find anyone actually living in the $1.2-billion former Olympic Village. Even the security guards conceded there’s not much to do at the “showcase” Millennium Water development, where only 254 condos have been sold.

US Attorney Launches New Offensive Against Small-Time Wall Street Fraud - (www.businessinsider.com) US Attorney Preet Bharara is planning a new front in the war against Wall Street fraud -- civil cases. Baharara will announce the new offensive tomorrow, FT reports: Mr Bharara will announce the appointment of Heidi Wendel, a former New York state deputy attorney-general, to head a six-strong unit focused on taking civil enforcement action against fraud. Her remit covers “every single type of fraud”, including complex financial misconduct, mortgage deals, abuse of the government’s troubled asset relief programme and healthcare scams, Mr Bharara said. Aggressive action from Bharara could lead to a surge in post-financial crisis convictions. Less spectacle about Fabrice Tourre and Raj Rajatnaram. More prosecution of quote stuffers and other small-time scams.

Democratic Money Woes Mean Some Candidates Are About To Get Cut Loose - (www.businessinsider.com) With a GOP landslide forecast, the national party faces tough choices on where to spend and who to cut loose. Samuel P. Jacobs on the anxiety of incumbents who may soon lose their lifeline. Over the weekend, The New York Times published a story claiming that the Democratic Congressional Campaign Committee was set to bail on a number of House colleagues who seemed likely to lose their seats to Republican challengers. Rep. Chris Van Hollen, the committee chairman, quickly denied that any sort of retrenchment was under way. Still the story wasn’t a happy one for Democratic campaign workers, facing down an already brutal fall election season. “There are good days and bad days,” Will Brown, campaign manager for Rep. John Spratt, the long-serving South Carolina Democrat, said about hearing the news. “I feel better now than when I first saw it.” Spratt, who heads the House Budget Committee, wasn’t the only high-profile Democrat said to be in danger of losing national party love. North Dakota Rep. Earl Pomeroy, running for his 10th term, could also see a softening in support. A handful of freshman Democrats—Rep. Betsy Markey of Colorado, Rep. Tom Perriello of Virginia, Rep. Mary Jo Kilroy of Ohio, and Rep. Frank Kratovil Jr. of Maryland—were also seen as likely candidates for abandonment. The calculus is pretty simple. With so many tight races, there’s only so much money to go around. Even though the DCCC had $36 million on hand in July (almost $14 million more than the National Republican Congressional Committee), there’s an abundance of needy candidates. All signs point that group growing over the coming weeks. Despite the scare put into him by the story in the Times, Brown, Spratt’s campaign manager, says that he’s since been told not to worry.

The New Ghost Towns - (www.financialsense.com) Ghost towns can be created through grandiose schemes as well. California City is the third largest municipality in the state by size, but it’s unlikely you’ve ever heard of it. Although it spreads over 185 square miles, only 14,000 people live there. In 1958, a sociology professor named Nathan Mendelsohn purchased 82,000 acres of land about 100 miles from Los Angeles. California City has a huge network of unpaved streets etched into the desert to support the 52,000 planned homes that were never built. Instead of laughing children, the lots are filled with rattlesnakes and jackrabbits. Sadly enough, this sleepy town became a trap for speculators in the most recent housing boom. The price of lots soared from $3,000 to $20,000 and then crashed back to earth as the bubble burst. Today, most of the land is used for camping or other recreation, not houses. Bangkok’s skyline is marred by ghost towers unfinished after the Asian Financial Crisis of 1997-8. Hot money streamed into Thailand, strengthening the baht currency and pushing up asset prices. With GDP expanding and real estate appreciating so fast, banks weren’t picky about who they made loans to. When foreign investors decided to take their capital elsewhere, the Thai economy experienced a sudden, vicious contraction. Prices collapsed and builders declared bankruptcy, leaving rusty shells of skyscrapers. While some of the towers have been redeveloped, many are too dilapidated to be financially feasible to finish. The next wave of ghost towns has already started due to the real estate bust. I’ve frequently discussed the massive amount of malinvestment in housing fueled by easy credit. This became a global phenomenon. Many consumers believed the propaganda that homes could only appreciate, so they applied for risky mortgages and dabbled in “flipping” properties. They lied about their income, and many banks and appraisers winked and went along with the scam. Others were pressured into loans they didn’t understand and quickly became insolvent. At the same time, bankers didn't care about credit worthiness as they planned to package these loans into derivatives and sell them to the next fool. Rating agencies validated these toxic instruments as fiscally sound since their fees were paid by the lenders themselves. Many of these “too big to fail” banks ranging from Canada to Switzerland were bailed out of their reckless behavior by reluctant taxpayers.