KeNo's Housing and Economic Portal: Tuesday September 21 Housing and Economic stories

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Harrisburg, Pennsylvania, Gets Aid to Make Payments - (www.bloomberg.com) Harrisburg, Pennsylvania, will get an advance on state aid to cover $3.3 million in bond payments due Sept. 15, averting what would have been the second-largest general-obligation debt default in the U.S. this year. Three grants that were to have been transferred later this year, worth a total of $3.6 million, will be made early so the state capital can meet scheduled payments on its 1997 Series D and 1997 Series F bonds, Governor Ed Rendell said today. The state’s also working with the city and private lenders to secure a short-term tax- and revenue-anticipation note for operating funds, he said. Harrisburg is considering bankruptcy in the face of $68 million in debt-service payments due this year on loans it guaranteed to help the Harrisburg Authority retrofit a trash-to- energy incinerator. The bill is about four times what the city of 47,000 raises in property taxes, according to its budget. “We could not stand by and let the city default on these bonds,” said Rendell, 68, who leaves office at the end of this year. “What we did today gives us breathing space.”

Legislators feeling sting of Illinois' deadbeat ways - (www.herald-review.com) State Sen. Dave Luechtefeld was in session in Springfield earlier this year when he got a call from the secretary in his district office. She was calling from her cell phone because the district office phones, which are paid for by the state of Illinois, had been disconnected for nonpayment. "That was the first time," recalled Luechtefeld, R-Okawville. His office phones were later cut off again, with the state still months behind in paying for the service. He's now getting renewed threats from the phone company of a third cutoff. "It's laughable," he said, "but it's not." It's the same story at the district offices of Illinois' elected legislators across the state: Phone, utilities, garbage and rent payments months behind, prompting a monthly flurry of terse late notices and cutoff threats to offices with the state emblem on the doors. Of course, in a state where teachers are getting laid off, hospitals are struggling and small businesses are failing because the state isn't paying its bills, the office budget plight of a relative handful of politicians isn't going to cause anyone to take to the streets. But the news of a northern Illinois legislator who was forced to shut down her district office because the state had stiffed her landlord for so long certainly drives home the depth of Illinois' $13 billion budget crisis. "It's helped me focus on the fact that it's not a manufactured crisis," said Rep. Bill Black, R-Danville - who took over payment of his district office's garbage collection bill after the waste company threatened to withdraw service because the state wasn't paying. "It's real."

Borrowing by Europe’s banks soars - (www.ft.com) European banks are borrowing at their fastest rate in almost six months and are set to continue exploiting a positive market mood in spite of longer-term funding concerns and worries about the economic health of weaker eurozone governments. Financial institutions in the region last week raised $20.5bn, their busiest week since March, according to Dealogic. Bankers expect similar data this week. Institutions tapping the market included Santander unit Abbey National, BNP Paribas,UniCredit, Banesto, Banco Popolare and Lloyds Banking Group. The renewed investor appetite will come as a relief to many banks. The bank debt markets virtually froze in May and June as the eurozone sovereign debt crisis erupted, putting some banks behind with their funding plans. September is typically a busy month as investors and bankers return from summer breaks with only three full months left before activity subsides again in December. The borrowing comes as the Basel Committee on Banking Supervision met at the weekend to hammer out final capital rules that will force banks to raise their capital cushions further in the coming years.

U.S. banking group wants part of Basel plan dropped - (www.reuters.com) A leading U.S. banking group is urging Basel Committee negotiators working on new international capital standards to ditch part of their proposal. The American Bankers Association said on Friday it opposes requiring financial institutions to build up their reserves when the economy is going strong so that they can better handle eventual downturns. The proposal for a "counter-cyclical buffer," being considered this week by banking regulators from 27 countries, duplicates existing regulatory powers, the ABA said. The proposal would be difficult to implement, could lead to unintended consequences, and could "impose significant and unwarranted increases in the cost and permanent constraints on the supply of credit that would be a detriment to the broader economy," the group said. The ABA voiced its concern in a letter to members of the Basel Committee, the group of central bank and regulatory officials negotiating the new capital standards. The committee is set to meet Sunday in the Swiss town of Basel to agree on tougher bank capital and liquidity standards. Leaders of the Group of 20 countries are expected to adopt the new standards at a meeting in November. The idea behind a "counter-cyclical capital buffer" is that it can prevent the overheating of the economy during boom times while allowing banks to build up capital so they are in a better position to lend when a slowing economy needs a jolt.

Housing Doesn’t Need a Crash. It Needs Bold Ideas. - (www.nytimes.com) WE all know that most of us don’t tackle problems until they’ve morphed into full-blown crises. Think of all those intersections that get stop signs only after a bunch of accidents have occurred. Only now, after it has become all too clear that the government’s feeble efforts to “help” troubled homeowners have failed, are people considering more substantive approaches to tackling the mortgage and real estate mess. Unfortunately, it’s taken the ugly specter of a free fall or deep freeze in many real estate markets to get people talking about bolder alternatives. One reason the Treasury’s housing programs have caused so much frustration among borrowers — and yielded so few results — is that they seemed intended to safeguard the financial viability of big banks and big lenders at homeowners’ expense. For example, the government — in order, it believed, to protect the financial system from crumbling — has never forced banks to put a realistic valuation on some of the sketchy mortgage loans they still have on their books (like the $400 billion in second mortgages they hold).