KeNo's Housing and Economic Portal: Monday February 21 Housing and Economic stories

Sunday, February 20, 2011

Monday February 21 Housing and Economic stories

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New Jersey Rating Cut Shows Pension Gaps May Boost State Risks - (www.bloomberg.com) New Jersey’s rating cut by Standard & Poor’s yesterday shows how rising pension costs for states and local governments that borrow in the $2.86 trillion municipal- bond market are increasing risks to investors. Municipal-debt issuers from New Jersey to California are grappling with possible rating reductions because of pensions, which would devalue their bonds and raise borrowing costs. U.S. cities, counties and states face a $3.6 trillion gap between their assets and what they’ve promised pensioners, according to an academic study published last year. As pension liabilities rise, investors such as Allstate Corp., the largest publicly traded U.S. home and auto insurer, are reducing municipal-bond holdings. Allstate began cutting back those investments about 18 months ago because of issuers’ financial statements and the way they were being managed, said Thomas Wilson, chief executive officer of Allstate Corp.

Fed's Warsh Resigns; Bernanke Adviser Questioned Stimulus - (www.bloomberg.com) Federal Reserve Governor Kevin Warsh, who was one of Chairman Ben S. Bernanke’s closest financial-crisis advisers before becoming the only governor to question the expansion of record monetary stimulus in November, resigned after five years at the central bank. Warsh, 40, a former investment banker who was the youngest- ever Fed governor when then-President George W. Bush appointed him in 2006, will leave “on or around March 31,” he said in a letter today to President Barack Obama that was released by the Fed in Washington. His departure may give Bernanke a stronger hand to complete or potentially expand $600 billion in Treasury purchases through June. At the same time, Bernanke loses a link to Wall Street executives and Republican politicians as he carries out Congress’s overhaul of financial regulation and faces criticism from a political party that in the midterm election gained control of the U.S. House.

Overhaul of state's collective bargaining law proposed in Ohio Senate - (www.cleveland.com) The fight over changes to Ohio’s collective bargaining law escalated Wednesday with the introduction of a Republican proposal that labor groups say is a direct attack on public-sector workers across the state. Hundreds of those workers, including nurses, firefighters and prison guards, packed the statehouse in protest as Ohio Sen. Shannon Jones, a Republican from Springboro, described details of her plan for the first time. Collective bargaining would be eliminated for state workers and reformed for employees of local governments under the proposal, which also includes changes to teachers’ contracts and benefits, bargaining timelines, layoff procedures and binding arbitration rules for police and firefighters. Jones testified to the Senate panel that changes to the law are needed to help local governments deliver necessary services to taxpayers while dealing with declining revenues. The plan is not a political attack on unions, she said.

Ireland’s Lenihan Wants Senior Bank Debt Discounts - (www.bloomberg.com) Irish Finance Minister Brian Lenihan said the government is pressing for a “substantial discount” on 20 billion euros ($27.2 billion) of unsecured senior bank bonds, a push resisted by the European Central Bank. “We put the 20 billion euros on the table in the EU-IMF negotiations, and the ECB ruled it out,” Lenihan said in a debate on RTE television late last night. “But it’s still there in debate, it’s still there in discussions. We’re pressing for substantial discounts and burden sharing.” ECB President Jean-Claude Trichet said yesterday that Ireland needs to press ahead with its fiscal austerity measures and imposing “haircuts” on investors isn’t part of the plan. Lenihan told reporters today he “couldn’t see the European Central Bank contemplating” discounts on senior bondholders. “But again in the context of the winding up of an institution or the gradual winding down of an institution these options can be put on the table,” Lenihan said at a press conference in Dublin. “It is an issue and we have an ongoing dialogue with the bank and with the European authorities.”

Paul slams Fed’s bond-buying program – (www.marketwatch.com) Outspoken Federal Reserve critic Rep. Ron Paul, R-Texas, slammed the central bank’s latest $600 billion bond-buying program on Wednesday, saying it and near-zero interest rates haven’t led to job creation in the United States. “Over $4 trillion in bailout facilities and outright debt monetization, combined with interest rates near zero for over two years, have not and will not contribute to increased employment,” Paul said at a hearing of a House Financial Services subcommittee he heads. “Debt monetization” is a reference by Paul and other Fed critics to the Fed’s latest bond-buying program — a characterization rejected by Fed Chairman Ben Bernanke.