KeNo's Housing and Economic Portal: Tuesday January 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Christie Hopes to Lure Businesses Fleeing Illinois Taxes – (www.nytimes.com) Watch out, Illinois: New Jersey wants your businesses. It is a time-honored tradition for mayors and governors of neighboring cities and states to compete for large corporations with tax breaks and other incentives. And so it was no surprise that the steep new tax increases approved this week by the governor of Illinois inspired the kind of trash talking heard more often from athletes than from state chief executives. “Escape to Wisconsin,” chortled Scott Walker, the state’s Republican governor. Mitch Daniels, the Republican who runs Indiana, compared Illinois to the Simpsons — “you know, the dysfunctional family down the block?” But New Jersey? Trenton is about 900 miles from Springfield, Ill. Jersey City is a 13-hour drive from Chicago. None of that deterred Gov. Chris Christie, a New Jersey Republican who spent much of last fall stumping around the country, from speaking up even before Gov. Patrick J. Quinn of Illinois, a Democrat, had signed the legislation. “I’m going to Illinois,” Mr. Christie said in an interview on Wednesday. “I mean soon. I’m going to Illinois, personally, and going to start talking to businesses in Illinois and get them to come to New Jersey.”

GM and Chrysler, owned by the government, lobby the government - (www.washingtonpost.com) General Motors and Chrysler, the bailed-out automakers still partially owned by the government, have joined an industry coalition that this week lobbied against proposed federal rules on fuel efficiency. The attempt to push back against regulations pursued by environmental groups follows the automakers' efforts last year in which they opposed measures in an auto safety bill, which had been supported by the Obama administration. The notion of federally owned companies lobbying the government - at times on the opposite side of the architects of their bailout - has drawn repeated criticisms from environmental organizations, safety advocates and watchdog groups. They say the government should have used its influence to block the companies from interfering with legislation that could improve the public welfare, such as environmental controls and safety enhancements. "Even when the government owned 61 percent of General Motors, the company was arguing against government proposals on auto safety and pollution controls," said consumer advocate Ralph Nader. "As the owner of the world's second largest auto company, the government could really have made the company a model."

New Hit to Strapped States - (online.wsj.com) With the market for municipal bonds tumbling, cities, hospitals, schools and other public borrowers are scrambling to refinance tens of billions of dollars of debt this year, another sign that the once-safe market is under duress. The muni bond market was hit with the latest wave of bad news Thursday, prompting a selloff that sent the market to its lowest level since the financial crisis. A New Jersey agency was forced to cut the size of a bond issue by about 40% because of mediocre demand, and pay a higher rate than expected. And mutual fund giant Vanguard Group shelved plans for three new muni bond funds, citing market turmoil. "We believe that this delay is prudent given the high level of volatility in the municipal bond market," said Rebecca Katz, spokeswoman for the nation's biggest fund company. The market has fallen every day this week, and investors have been net sellers of their holdings in municipal-bond mutual funds for nine straight weeks, according to fund tracker Lipper FMI. Yields on 30-year triple-A rated general obligation bonds shot higher to 5.01% on Thursday, reflecting a spike in perceived risk, according to Thomson Reuters Municipal Market Data. The last time those bonds yielded 5% was Jan. 30, 2009, during the financial crisis. Amid the selloff, public borrowers such as states and utilities face a wave of refinancing stemming from deals cut mostly during the crisis. The deals involved letters of credit from banks that were designed to keep financing costs down for government entities in need of cash.

Uncle Sam Wants His AAA Rating - (www.nytimes.com) Is Wall Street listening to the Tea Party? Two major credit ratings agencies warned Thursday that the United States might tarnish its triple-A credit rating if its national debt kept growing. It was not the first time the agencies, Standard & Poor’s and Moody’s Investors Service, warned that the nation’s gilt-edged rating might fall into jeopardy. But the two statements, made within hours of each other, were seized on by deficit hawks as further evidence that the government must reduce spending and debt to avert disaster. That is just what many Tea Party supporters insist. But many economists say the reckoning, if it comes, is still years or even decades away. The bond market shrugged at Thursday’s news. Indeed, even some experts who want to see the deficit reduced said now is not the time to cut federal spending drastically, given the weakness in the economy and high unemployment. But others see the mounting national debt as a potential danger. What once seemed unthinkable — that one day the United States government would no longer be accorded the highest credit rating — is now not only thinkable, but increasingly probable.

Pack Mentality Grips Hedge Funds - (online.wsj.com) Hedge funds scooped up shares of credit-card companies like big spenders on a shopping spree, making Visa Inc. and MasterCard Inc. among the most popular hedge-fund trades. The bets paid off for a while. But when bad news hit in May, many funds—including 10 hedge funds run by investors connected to the well-known Tiger Management LLC—rushed for the exits, together. Shares plunged. Hedge funds are crowding into more of the same trades these days, amplifying market swings during crises and unnerving investors. Such trading has stoked market jitters in recent months and helped to diminish the impact of corporate fundamentals on stock-market movements. Droves of small investors have reacted by pulling money from the market, questioning its stability and whether fast-moving traders are distorting prices. The pack behavior undermines the image of hedge-fund chiefs as savvy money managers who sniff out investment opportunities that others don't see—thereby justifying the hefty fees they charge clients. It also suggests that hedge funds are having a harder time coming up with money-making ideas in rocky markets.