KeNo's Housing and Economic Portal: Thursday November 11 Housing and Economic stories

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Charlie Gasparino: Wall Street Is Terrified Of The Tea Party - (www.businessinsider.com) In an op-ed for WSJ, Charlie Gasparino predicts that by 2012 Wall Street will be out of love with the GOP, and will be heavily supporting Obama. A key reason: Bankers are terrified of Tea Partiers, who have made killing bailout a key part of their plank. Naturally some will question Gasparino's motives in writing this: He's a conservative, and it suits his ends to paint the Democrats as the party of the hated bankers. But we buy what he's saying. We've made the same observation before, and there's also plenty of evidence supporting his contention. We posted the chart last week showing Wall Street donation to "Tea Party" candidates. Note the pronounced lack of support for folks like Sharron Angle, Rand Paul, and Joe Miller. Those are the real rabble rousers in the bunch, and they've been shunned by the street. If you thought Wall Street really hated Democrats, you'd think it'd be piling money into Angle's campaign, given the opportunity to knock off the majority leader. But nope. Wall Street is staying out of that one. Yes, Wall Street likes the GOP right now, but not the true ideological base of the party.

Ambac Seeks Restructuring With Prepackaged Bankruptcy - (www.bloomberg.com) Ambac Financial Group Inc., whose bond insurance unit is being restructured by Wisconsin regulators, said it skipped a bond payment today and will pursue a pre-packaged bankruptcy with a group of creditors. Ambac shares plunged 50 percent after the company said in a regulatory filing it will miss an interest payment due today on $75 million of 7.5 percent notes maturing May 2023. The company, with total debt of $1.62 billion, has a 30-day grace period until a default is triggered and bondholders can accelerate full payment, according to the filing. If it’s unable to agree to a prepackaged filing by year-end, Ambac said it will seek bankruptcy protection without creditor approval. The company is seeking to restructure seven months after Wisconsin Insurance Commissioner Sean Dilweg seized $35 billion of the insurer’s policies backing mortgage securities. Dilweg said he was splitting the insurance unit in two to segregate contracts on which Ambac expects to pay significant claims, such as mortgage bonds, and preserve capital to protect municipal- bond policyholders.

How the Banks Put the Economy Underwater - (www.nytimes.com) IN Congressional hearings last week, Obama administration officials acknowledged that uncertainty over foreclosures could delay the recovery of the housing market. The implications for the economy are serious. For instance, the International Monetary Fund found that the persistently high unemployment in the United States is largely the result of foreclosures and underwater mortgages, rather than widely cited causes like mismatches between job requirements and worker skills. This chapter of the financial crisis is a self-inflicted wound. The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits. The result can be seen in the stream of reports of colossal foreclosure mistakes: multiple banks foreclosing on the same borrower; banks trying to seize the homes of people who never had a mortgage or who had already entered into a refinancing program.

Fed Helping Spanish Debt Keeps ECB Mum on Dollar: Euro Credit - (www.bloomberg.com) European governments are getting an unlikely assist from the Federal Reserve as the prospect it will buy more Treasuries helps the bonds of Greece, Portugal, Italy and Spain to their first simultaneous monthly gains since July. Speculation the U.S. central bank will pump more liquidity into the bond market has helped revive investor demand for higher-yielding European debt by driving Treasury yields down. The Fed has asked bond dealers and investors to estimate how much it might purchase in the next six months in its so-called quantitative-easing program and what the effect on yields will be, ahead of this week’s policy meeting. Portuguese bonds posted their first monthly gain in three in October, delivering returns of 2.6 percent, even as the government and opposition struggled to strike a deal on the 2011 budget until just days before parliament is scheduled to start discussions on the measure. Longer-dated Greek bonds recorded back-to-back monthly gains for the first time since March and the yieldon 10-year Italian bonds fell in October to the lowest level in more than four years. “I’m not convinced the recent outperformance of these bonds is being driven purely by improved fundamentals,” said Charles Diebel, the London-based head of market strategy at Lloyds Banking Group Plc. “The debt situation hasn’t changed much for a number of countries. In some cases, it’s getting worse. What has changed is the improvement in risk appetite and the expectation for another round of Fed QE may have had a lot to do with it.”

US Public Pensions Face Day of Reckoning - (www.cnbc.com) Today, there is a similar focus on the epic underfunding of defined benefit plans at US state and local governments, estimated at $1,000 billion to $3,000 billion, as accounting regulators have proposed more prominent disclosure of shortfalls on sponsors’ annual financial statements. Some observers caution, however, that the new principles will fall short and merely perpetuate current methods which greatly understate governments’ pension liabilities. The US public sector, excluding the federal government, employs more than 19 million people – 15 percent of the labor force – and their pension plan assets, according to the Federal Reserve, were $2,557 billion in June 2010, down from $3,198 billion at year-end 2007. By any measure that total is not enough. Wilshire Associates estimates that as of June 2009, state plans were just 65 percent funded, while local government plan funding stood at 74 percent. Wilshire’s estimates do not reflect the 30 percent rise in the broad US stock market since then, but few dispute that plans are still badly underfunded.