KeNo's Housing and Economic Portal: Thursday November 4 Housing and Economic stories

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TOP STORIES:

If we all smoke a lot of dope, we can close California's budget gap - (money.cnn.com) Cash-strapped California would get some relief by legalizing pot, but the biggest boost would be thanks to massive law enforcement cuts, not new tax revenue, experts say. The state's marijuana legalization initiative known as Proposition 19 goes to the polls on Nov. 2. And there's been a lot of talk about taxing it to rescue the state from its budget woes. But even legalization's top advocates say the drug won't be a financial cure-all. "No one's promising that this is going to solve everything economically," said Quintin Mecke, spokesman for Assembly Member Tom Ammiano, D-San Francisco, who was the lead sponsor on two earlier efforts to legalize marijuana. Most of the financial benefit would actually come from budget cuts - which means job cuts -- according to a report from the Cato Institute, a libertarian think tank in Washington, D.C. The institute estimates that legalization could add $1.312 billion annually to California's coffers. But the forecast's breakdown calls for a savings of $960 million in law enforcement costs and an additional $352 million in tax revenue.

Banks' legal troubles mount as everyone seeks payback - (www.miamiherald.com) Major U.S. banks are facing a double whammy from the subprime mortgage debacle: They're under siege over their mishandling of home loan foreclosures and confronting mounting investor demands that they repurchase billions of dollars in failed mortgage securities. Amid revelations of the banks' potentially massive legal problems, Housing and Urban Development Secretary Shaun Donovan said Wednesday that 11 federal agencies are examining aspects of the home foreclosure and financing messes that have stalled the U.S. economy. He said the inquiries would ensure that banks, loan servicers and other institutions follow the law. If investigators find that people were wrongly evicted from their homes, Donovan said, "We will take actions to ensure that banks make them whole and make sure that their rights have been protected and defended." Donovan said an initial review of the Federal Housing Administration's five largest loan servicers found that some had breached the agency's foreclosure procedures, but that nationwide reviews so far haven't identified "systemic issues." The HUD secretary addressed a White House news briefing after he and Treasury Secretary Timothy Geithner led an interagency meeting to address the latest fallout from the subprime mortgage meltdown that sent the economy reeling.

Mortgage Mess: Shredding the Dream; Major Fight over Enormous Losses Yet to Come - (Mish at globaleconomicanalysis.blogspot.com) The foreclosure crisis isn't just about lost documents. It's about trust—and a clash over who gets stuck with $1.1 trillion in losses say BusinessWeek writers Peter Coy, Paul M. Barrett and Chad Terhune in a comprehensive 7 page article called Mortgage Mess: Shredding the Dream. The article kicks off with a high-profile case of Joseph Lents who has been in default for 8 years and is still living in his home because no one can come up with the note. Such cases are extremely rare, yet highly publicized as if they widely occur.The article continues with a discussion about MERS including this interesting comment: "The Florida Bankers Assn. told the state Supreme Court last year that in many cases the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file."

Credit Card Use Bolsters Self-Worth - (www.miller-mccune.com) New psychological research finds credit cards make people more likely to bolster their fragile egos by purchasing luxury items. As a society and as individuals, we’re still feeling the effect of the credit-fueled consumption bingeof the past decade. While the dubiousness of digging ourselves into debt is now obvious, it’s not clear what drove us to make so many foolish-in-retrospect choices. Newly published research suggests part of the answer can be found in a deep-seated desire to prop up one’s threatened feelings of self-worth. Nathan Pettit of Cornell University and Niro Sivanathan of the London Business School report people whose feelings of self-value are endangered are more likely to purchase ego-boosting luxury items — but only if they have access to credit. Having the option of plunking down plastic minimizes “the psychological cost of payment,” making the transaction even more tempting.

Fannie, Freddie bailout could nearly double in size. No surpise there. - (www.washingtonpost.com) The bailout of Fannie Mae andFreddie Mac is likely to cost taxpayers an additional $19 billion and may cost as much as $124 billion more if the economy starts shrinking again, according to a government projection released Thursday. The rescue of the mortgage giants, which has helped keep the housing market alive amid economic crisis and recession, already has a price tag of $135 billion. The money went to cover losses on defaulted home loans. The ballooning price of the Fannie and Freddie bailout comes as the Obama administration celebrates news of lower costs on other financial rescues. Administration officials are also preparing to release a plan for reforming the two companies in coming months. In its projection Thursday, the Federal Housing Finance Agency sought to indicate how much more money the companies may need in the next three years under different economic scenarios.