KeNo's Housing and Economic Portal: Monday January 24 Housing and Economic stories

Sunday, January 23, 2011

Monday January 24 Housing and Economic stories

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TOP STORIES:

New Jersey Cuts Bond Sale After Christie’s Comments - (www.bloomberg.com) New Jersey Governor Chris Christie has learned that talking about state insolvency may have a cost. About 20 minutes after Christie, 48, told a town-hall meeting in Paramus today that health-care costs “will bankrupt” the state, the New Jersey Economic Development Authority cut its tax-exempt school-related bond offering by more than half to $712.3 million. “It doesn’t help to try and sell a $1 billion deal on the same day the governor is talking about the state going bankrupt due to health-care costs,” said Mike Pietronico, who oversees $360 million as chief executive officer of Miller Tabak Asset Management in New York. Michael Drewniak, a spokesman for Christie, said the bond-sale cut wasn't connected to the governor's comments. Health-care spending “will bankrupt” the state unless it requires workers to pay more for medical coverage, Christie said. New Jersey will spend $4.3 billion on health insurance this year, and that cost will rise 40 percent within four years, Christie, a first-term Republican, said at the town-hall meeting.

BUSTED: Unsealed Docs Show The Fed Was Fully Warned Of A Housing Crisis - (www.businessinsider.com) New minutes released today show Fed members were fully aware of the growing housing bubble in the U.S. in June of 2005. The materials include several presentations made on the subject of the emerging housing bubble in the U.S. economy. They have titles like "Is Housing Overvalued?" by Joshua Gallin and "Monetary Policy Implications of a House Price Bubble" by John C. Williams of the San Francisco Fed. In October of 2005, future Federal Reserve Chairman Ben Bernanke told Congress he didn't think we were in a housing bubble. Bernanke was not at the June 2005 meeting, having recently become Chairman of President George W. Bush's Council of Economic Advisers.

Vanguard Pulls Three Planned Muni-Bond Funds Amid ‘Volatility’ - (www.bloomberg.com) Vanguard Group Inc., the world’s largest mutual-fund company, withdrew a request filed last year with regulators to open three municipal-bond index funds amid concern that state finances may deteriorate. “We’ve deferred the launch for an indefinite period of time because we believe market volatility could impact the funds’ ability to track their benchmarks and deliver their objectives,” John Woerth, a spokesman for the Valley Forge, Pennsylvania-based company, said today in a telephone interview. Permission from the U.S. Securities and Exchange Commission for the offerings and associated exchange-traded funds to open was set to expire tomorrow, he said. Analyst Meredith Whitney said on CNBC yesterday that she expected accelerated withdrawals from the municipal-bond market as state finances deteriorate in the next six months. Last month Whitney, who correctly predicted Citigroup Inc.’s dividend cut in 2008, forecast 50 to 100 significant muni-bond defaults this year totaling “hundreds of billions” of dollars. Investors have pulled a net $22.7 billion from municipal- bond mutual funds in the past nine weeks, according to data from the Investment Company Institute in Washington.

Wisconsin’s Borrowing Costs Climb as Subsidy Ends: Muni Credit - (www.bloomberg.com) Wisconsin, whose 2011 tax revenue is forecast to increase 4.7 percent, is paying two-thirds more to borrow money this week than in an August sale of taxable Build America Bonds as it returns to the tax-exempt market. Wisconsin is selling $429 million in tax-free debt this week with yields of 3.75 percent on bonds maturing in May 2021, according to data compiled by Bloomberg. Last year, its sale of Build Americas included 10-year securities priced to yield 3.45 percent. Minus the 35 percent federal subsidy on interest costs, Wisconsin paid 2.24 percent, Bloomberg data show. The Build America Bonds program wasn’t extended by Congress and expired on Dec. 31. The subsidy was created under President Barack Obama’s economic-stimulus legislation as a means of driving down borrowing costs for localities and funneling money to job-creating construction projects. More than $187 billion of the bonds were sold.

SIMON JOHNSON: Bill Daley’s Appointment Proves "The Bankers Have Won" - (www.businessinsider.com) President Obama's new chief of staff, Bill Daley has been greeted with cheers and jeers - from both sides of the aisle - for his strong business and banking ties. To some, like Sen. Mitch McConnell, it's a positive sign the President has taken more pro-business stance. To Simon Johnson, author of 13 Bankers and the former IMF chief economist, it's a sign "the bankers have won completely." The fact that President Obama's top aide is the former Midwest chairman of JPMorgan Chase proves "the White House fails to understand that, at the heart of our economy, we have a huge time-bomb," according to Johnson. (See: Obama Shows His True Colors ... and They're PRO-Business (Still). Why is Daley's appointment so troubling to Johnson? "These banks again have unfettered access to the very top of the political decision making in the United States and, reflects the fact their status is completely undiminished, despite all the mistake they made and all the damage they did to the rest of the economy," he tells Henry in this clip.