KeNo's Housing and Economic Portal: Saturday October 23 Housing and Economic stories

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N.Y. Faces $200 Billion in Retiree Health Costs - (www.nytimes.com) The cities, counties and authorities of New York have promised more than $200 billion worth of health benefits to their retirees while setting aside almost nothing, putting the public work force on a collision course with the taxpayers who are expected to foot the bill. The total cost appears in a report to be issued on Wednesday by the Empire Center for New York State Policy, a research organization that studies fiscal policy. It does not suggest that New York must somehow come up with $200 billion right away. But the report casts serious doubt over whether medical benefits for New York’s retirees will be sustainable, given the sputtering economy and today’s climate of hostility toward new taxes and taxpayer bailouts. The daunting size of the health care obligation raises the possibility that localities will be forced at some point to choose between paying their retirees’ medical costs and paying the investors who hold their bonds. Government officials aim to satisfy both groups, and have even made painful cuts in local services when necessary to keep up with both sets of payments.

More Fed easing likely won't help economy: Hoenig - (www.reuters.com) Kansas City Federal Reserve President Thomas Hoenig, who all year has steadfastly opposed the Fed's super-easy monetary policy, fleshed out his stance against further easing on Tuesday, saying it would do little to aid recovery and could spark inflation. The Fed has kept interest rates near zero since December 2008, and bought $1.7 trillion in mortgage-back securities and Treasuries to support economic recovery. Markets are pricing in expectations the Fed will move to drive down interest rates further to help boost the economy, restarting Treasury purchases as soon as next month in a new round of quantitative easing, or QE2 as it has come to be known. "We have to recognize that QE2, while a possibility, is not necessarily what we want to do given the benefits versus the risks," Hoenig told the National Association of Business Economics. "At this point, with a modest recovery under way and inflation low and stable, I believe the economy would be better served by beginning to normalize monetary policy."

A Wave Of Foreclosures Will Smash The New York City Home Price Fantasy - (www.businessinsider.com) In an article posted in June, I warned that a home price collapse in the New York borough of Queens was almost certain to occur. Let's take another look at Queens to see if there is any new evidence to support this assertion. 90-Day Pre-Foreclosure Notices: Last December, Governor Paterson of New York signed legislation which requires all lenders as well as loan assignees to send a 90-day pre-foreclosure notice to all delinquent homeowners. This notice must be sent at least 90 days before the lender commences any foreclosure proceedings against a seriously delinquent borrower. To aid owner-occupants, the notice informs the borrower of steps which can be taken to avoid foreclosure, especially counseling services. It also states clearly that if the borrower does not become current on the mortgage within 90 days of receiving this notice, the lender has a right to file a notice of default which is the start of formal foreclosure proceedings. On October 7, the New York State (NYS) Banking Department reported that between mid-February and the end of August, more than 400 bank servicers sent 134,000 pre-foreclosure notices to delinquent NYS homeowners. That is more than 20,000 per month.

Foreclosure halt could hit investors - (www.reuters.com) A U.S.-wide foreclosure moratorium could penalize pension funds, insurance companies and other investors and make new loans more expensive, an investor group and industry experts warned on Monday. Temporary pauses in foreclosures have expanded among major lenders as the courts, lawmakers and state attorneys general investigate whether banks supplied shoddy paperwork to support evictions of delinquent borrowers. While homeowners may cheer efforts to get tough with banks, an increasing number of analysts warn that that a blanket ban on foreclosures could further hobble the economy. A major securities lobbying group said on Monday that a U.S.-wide foreclosure moratorium would be "catastrophic."

Larry Summers and the Subversion of Economics - (www.chronicle.com) The Obama administration recently announced that Larry Summers is resigning as director of the National Economic Council and will return to Harvard early next year. His imminent departure raises several questions: Who will replace him? What will he do next? But more important, it's a chance to consider the hugely damaging conflicts of interest of the senior academic economists who move among universities, government, and banking. Summers is unquestionably brilliant, as all who have dealt with him, including myself, quickly realize. And yet rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy. For the past two years, I have immersed myself in those worlds in order to make a film, Inside Job, that takes a sweeping look at the financial crisis. And I found Summers everywhere I turned. Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.