KeNo's Housing and Economic Portal: Tuesday December 14 Housing and Economic stories

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Crisis-hit banks flooded Fed with junk - (www.ft.com) Banks flooded the Federal Reserve with billions of dollars in “junk bonds” and other low-grade collateral in exchange for much-needed liquidity during the crisis, as the financial sector struggled under a crippling credit crunch, new data show. More than 36 per cent of the cumulative collateral pledged to the US central bank in return for overnight funding under the Primary Dealer Credit Facility was equities or bonds ranked below investment grade. A further 17 per cent was unrated credit or loans, according to a Financial Times analysis of Fed data released this week. Only 1 per cent of the collateral was Treasury bonds, which are normally used in transactions between banks and the monetary authorities. The Fed created the PDCF in March 2008 after the demise of Bear Stearns to ease investment banks’ liquidity problems. At the time, it allowed banks to pledge only investment grade-rated collateral. But after the failure of talks to save Lehman paved the way for its bankruptcy, the Fed broadened the collateral requirements to include any asset that could be used in the tri-party repo system.

Police may boycott NHL's Winter Classic - (www.post-gazette.com) City police officers are threatening to boycott the Winter Classic in dispute with the Pittsburgh Steelers over holiday pay, raising questions about whether there will be adequate security at the nationally televised outdoor hockey game, which is due to draw tens of thousands of fans to Heinz Field on New Year's Day. At issue is whether off-duty officers scheduled to work during the Jan. 1 Penguins game against the Washington Capitals will receive holiday pay, or 2 1/2 times their normal rate, which is what they are paid under their contract with the city to patrol on a holiday. Even though it's a hockey game, the pay dispute involves the Steelers, who have a lease on Heinz Field. The Steelers have proposed paying officers time-and-a-half, which is what they make working security at games that do not fall on holidays, said Sergeant John Fisher, who schedules 36 officers to work inside the stadium.

Al Gore's Cap-and-Trade Pumpkin Dies, No One Notices, Not Even Glen Beck - (Mish at globaleconomicanalysis.blogspot.com) After a decade of hype over what amounted to nothing more than a fraudulent taxpayer ripoff, Cap-and-Trade is about to turn into a pumpkin. Glen Beck did not even notice. This begs the rhetorical question If Al Gore’s Chicago Climate Exchange Suffers Total Failure, Does the MSM Make a Sound? Global warming-inspired cap and trade has been one of the most stridently debated public policy controversies of the past 15 years. But it is dying a quiet death. In a little reported move, the Chicago Climate Exchange (CCX) announced on Oct. 21 that it will be ending carbon trading — the only purpose for which it was founded — this year. Although the trading in carbon emissions credits was voluntary, the CCX was intended to be the hub of the mandatory carbon trading established by a cap-and-trade law, like the Waxman-Markey scheme passed by the House in June 2009.

Californians need water, but desalination projects are bogged down - (www.latimes.com) Officials blame the slow progress on red tape, a disorganized local industry and environmental opposition. Chugging a cool glass of California tap? It could be seawater flowing from that faucet. Desalination — the process of making salty water drinkable — is now producing a growing share of the national water supply as officials scramble to hydrate booming populations with dwindling fresh supply. "The availability of water is lessening and the cost is going up, to the point that desalination in California is becoming viable as an option," said Paul Shoenberger, manager of the Mesa Consolidated Water District in Costa Mesa. More than 15,000 plants are churning out tens of billions of drinkable gallons daily in more than 100 countries. But desalination has been lagging in California, where water woes are especially dire, industry and government officials say. They blame the slow progress on a disorganized local industry, litigious environmentalists and a thorny approvals process. Connecticut-based developer Poseidon Resources has been trying to build a $650-million plant in Carlsbad, but the project has wallowed in red tape for more than a decade. It also has battled a dozen legal challenges.

Cross Section of Rich Invested With the Fed - (www.nytimes.com) One investor, Kenneth H. Dahlberg, is a World War II flying ace who, as a volunteer in President Richard M. Nixon’s re-election campaign, was a minor figure in the Watergate scandal. Another investor, Magalen O. Bryant, runs a horse farm in Virginia and is active in steeplechase racing circles. A third, Ward W. Woods, is the chairman of the nonprofit organization that runs the Bronx Zoo. They were among scores of wealthy but lesser-known investors in an emergency lending program the Federal Reserve announced in November 2008, three weeks after President Obama’s election, to support the market for student, auto, credit card and small-business loans. The investors, whose identities were disclosed as part of a trove of 21,000 records released on Wednesday at the direction of Congress, are a cross-section of America’s wealthy — investors who, in the midst of the worst financial crisis since the Great Depression, heard about an opportunity and weighed the risk. The list, not surprisingly, includes famous Wall Street financiers like J. Christopher Flowers, John A. Paulson and Julian Robertson, demonstrating the extent to which the Fed relied on fast-moving hedge funds to keep credit flowing through the markets.