KeNo's Housing and Economic Portal: Monday March 14 Housing and Economic stories

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Post office faces cash shortage by end of year - (www.ap.com) The Republican-controlled House opened the envelope of postal finances on Wednesday and what it pulled out wasn't pretty. Unless things change, the post office will run out of money by the end of the fiscal year in October, Postmaster General Patrick R. Donahoe told the House Oversight subcommittee on the postal service. Donahoe said that as of Sept. 30 his agency will owe the federal government a payment of $5.5 billion to fund medical costs, in advance, for future retirees, and in November it will need to make a $1.3 billion payment for worker's compensation. "The Postal Service will not have the cash available to make both of these payments. We need legislation this year to address that fact," he said. If it does come down to crunch time, said Donahoe: "We will deliver the mail." Employees will be paid, as will suppliers, he said. "The thing we will not do is pay the federal government."

Federal support for home loans essential, Geithner warns - (www.washingtonpost.com) Treasury Secretary Timothy F. Geithner used his strongest language yet to warn on Tuesday about the dangers of a mortgage system that does not include a significant role for the government. Two weeks after releasing a white paper on how to overhaul the badly battered housing market, Geithner said scaling back the federal role too far could make housing more costly, keep taxpayers on the hook for losses and handcuff policymakers. "You would leave the government of the United States with a more limited set of tools to protect the economy and innocent victims in the face of the next severe recession," he said in testimony to the House Financial Services Committee. The nation's housing finance system now relies almost exclusively on federal support for funding new home loans - through the taxpayer-backed housing finance giants Fannie Mae and Freddie Mac and the Federal Housing Administration, which provides loans to home buyers without much money for a down payment.

Muni Default Estimate: $100 Billion - (online.wsj.com) A consulting firm founded by economist Nouriel Roubini said there could be close to $100 billion of municipal-bond defaults over the next five years as state and local government-debt problems damp the U.S. economic recovery. That figure would by most estimates represent a significant increase over defaults in recent history, but it doesn't appear to be as dire as a prediction last year by analyst Meredith Whitney.

Bernanke Doesn't Rule Out More Bond Buying to Aid Economy - (www.bloomberg.com) Federal Reserve Chairman Ben S. Bernanke didn’t rule out expanding the central bank’s asset purchases aimed at stimulating the economy, saying he doesn’t want to see the U.S. relapse into a recession. Asked at a House Financial Services Committee hearing today what conditions would warrant a third round of so-called quantitative easing, Bernanke said that “what we’d like to see is a sustainable recovery. We don’t want to see the economy falling back into a double dip or to a stall-out.” Bernanke’s testimony today and yesterday signaled that he will keep the Fed on course to complete $600 billion of Treasury purchases through June under the second round of quantitative easing, a policy criticized by Republican lawmakers as risking an inflation surge. He’s avoided saying what the central bank may do after that.

S&P warns of downgrades on Portugal and Greece - (finances.yahoo.com) Both Portugal and Greece could see their debts further downgraded in the next two months, ratings agency Standard & Poor's warned Wednesday, depending on what happens at a crucial European leaders' summit later this month. The agency said in a report it is maintaining its A- rating on Portugal and its BB+ rating on Greece but has kept both countries on so-called "CreditWatch with negative implications." Heavily indebted Greece accepted an EU-IMF bailout last year, as did Ireland, and ailing Portugal is widely expected to follow suit even though it managed to raise another euro1 billion ($1.38 billion) at a bond sale Wednesday.

Gadhafi Forces Retake Oil Plant as Lines Harden - (online.wsj.com) Senior U.S. defense officials tried to lower expectations of an international military intervention in Libya, as rebels, fighting off a key offensive by forces loyal to Col. Moammar Gadhafi, called for foreign airstrikes. Defense Secretary Robert Gates, testifying before Congress, criticized "loose talk" about any military intervention in Libya, where military rebels and civilian opponents of the government are trying to topple Col. Gadhafi. The U.S. and allies have discussed the prospect of imposing a no-fly zone over the North African country to prevent Col. Gadhafi from using air forces to strike at protesters. But Mr. Gates on Wednesday made clear the U.S. military would have to launch pre-emptive strikes to destroy Libya's air defenses if President Barack Obama ordered the imposition of a no-fly zone, "Let's just call a spade a spade," Mr. Gates said. "A no-fly zone begins with an attack on Libya."