KeNo's Housing and Economic Portal: Thursday September 16 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Fears Grow over the Fate of Irish Economy, Banks - (www.cnbc.com) The fate of the Irish economy is back in focus for investors across the world, after the former Celtic Tiger extended guarantees to its banking industry and depositors and with the spread on Irish bonds hitting record highs. The country is also waiting for a decision from the European Commission on the fate of Anglo Irish, the troubled bank that was nationalized two years ago; uncertainty on whether Anglo Irish will be wound down or allowed to survive has weighed on sentiment towards the country. Ireland is an example of a Western economy adjusting to both the banking crisis and, crucially, the emergence of Asia, Amit Kara, an economist at Morgan Stanley, said. "Ireland has taken steps to overcome the hangover from the credit boom, but a successful outcome requires the economy to become more competitive and also, and more crucially, a global economic recovery," Kara said. He is confident the Irish economy will be able to roll over debt in the coming weeks and sees the chance for Irish debt to outperform the likes of Spain.

Homebuilders Revive Stalled U.S. Projects as Banks Unload Lots - (www.bloomberg.com) Shea Homes, a builder based in Walnut, California, bought the remaining 761 lots from Bank of America Corp. in June and reopened the project Aug. 25 with a new sales office, lower prices and a changed name: “Trilogy.” Residents, who had taken over the guardhouse for mahjong, bingo and poker games, will get a 38,000-square-foot (3,530-square-meter) recreational center with indoor and outdoor pools, tennis courts and a card room. “For the people here, the activity of construction equipment is music to their ears,” said Eric Sorkin, 61, president of the homeowners association at the development, 35 miles northwest of Walt Disney World. “There’s a future.” Builders are buying lots at less than half their original prices from lenders eager to move distressed construction loans off their books. Developments are being resuscitated from Florida, California, and Las Vegas to Utah and the suburbs of Washington, D.C., according to Brad Hunter, chief economist for Metrostudy, a Houston-based housing researcher. “This is a natural progression of the cycle,” Hunter said. “Projects fail, the price of the asset drops until it reaches a point where it’s profitable for someone else to pick it up and remarket it. They reposition the project and then what was formerly infeasible, is feasible.”

'Bankrupt' Western Governments Need 'Ruthanasia' - (www.cnbc.com) Western governments are bankrupt and central banks' quantitative easing policies will only make matters worse, Ruth Richardson, the former New Zealand Finance Minister whose anti-welfare message and austerity cuts were dubbed "Ruthanasia," warned in a CNBC interview. During the interview, Richardson was challenged on this view by London & Capital’s chief investment officer Ashok Shah. "The risk is precisely the opposite, I think the role of the government is going to expand in the near future as it will be the one to provide capital to banks," Shah said. But Richardson, who described her own 1990 reforms "the mother of all budgets," said governments should stop wasting money and concentrate on structural reforms. "The British government is bankrupt. I ask, where's the capital going to come from? All the Western economy governments are in a bankrupt state," she said. Nobel Prize winning economist Joseph Stiglitz said European governments got it wrong because their austerity measures will only extend the global economic downturn.

Greek Deals Hidden From EU Probed as 400% Yield Gap Shows Doubt - (www.bloomberg.com) Four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt. “We have not seen the real documents,” Walter Radermacher, head of the European Union’s statistics agency Eurostat, said in a Sept. 2 interview in his Luxembourg office. Eurostat first requested the contracts in February. Radermacher vows new toughness when officials from his staff head to Greece this month to come up with a “solid estimate” of the total value of debt hidden by the opaque contracts. “This is a new era,” he said. Greece is the only euro country that lied about using these complex swap contracts after Eurostat told countries to report them in 2008, Radermacher, 58, said. It also likely signed a greater number of individual agreements than any other euro member, based on information it has provided to Eurostat, he said. Greece’s debt was 115.1 percent of its total economic output last year, second among the 16 counties that share the euro, behind Italy’s 115.8 percent.

Ireland Default Swaps Surge to Record on Bank Funding Concerns - (www.bloomberg.com) The cost of insuring against losses on Irish sovereign debt surged to a record on concern the government will struggle to support the nation’s banks. Investors are losing confidence in the ability of governments to absorb mounting costs from bank bailouts. Ireland’s cabinet is today discussing the future of nationalized Anglo Irish Bank Corp., which last week said it needs about 25 billion euros ($32 billion) in state funding. “The problems of Irish banks are seen as the problems of Ireland,” said Zoso Davies, a credit strategist at Barclays Capital in London. “The market is focused on debt coming due at Irish banks and the impact this could have on the Irish government.” Credit-default swaps on Ireland surged 21 basis points to a 402.5, surpassing a previous closing high of 396 in February 2009, according to data provider CMA. Bank of Ireland Plc and Allied Irish Banks Plc, the country’s two biggest lenders, have 16.7 billion euros of debt maturing this year, according to data compiled by Bloomberg. Banks in Europe’s most indebted nations need to refinance $122 billion of bonds this year.