KeNo's Housing and Economic Portal: Saturday April 9 Housing and Economic stories

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TOP STORIES:

US Banks in 'Cash for Keys' Foreclosure Talks - (www.cnbc.com) The five biggest US mortgage servicers were told this week at a private meeting with regulators to consider paying delinquent borrowers up to $21,000 each as part of a broader settlement of the foreclosure crisis. People who attended the meeting, chaired by the Federal Deposit Insurance Corporation on Monday, said the industry-wide “cash for keys” program would involve the biggest servicers, led by Bank of America paying borrowers as an incentive to leave their homes. Banks would pay borrowers who are more than 90 days behind on mortgage payments up to $1,000 to seek independent financial advice and up to $20,000 in cash as a “fresh start” payment towards living costs in a new home. They would have to vacate their properties quickly and leave them in good condition. Sheila Bair, FDIC chairman, raised the idea but people involved said it was not an official government proposal and was rejected strongly by some of the banks. The Department of Justice; state attorneys-general; banking regulators, including the FDIC; the Treasury; and the new Consumer Financial Protection Bureau are among the agencies trying to come to a settlement with the industry. A combined penalty of about $20 billion has been discussed, with one idea to use the money to write down the outstanding debt of struggling homeowners.

Small Illinois bank fails; 26th shuttered in 2011 - (www.google.com/hostednews/ap) Regulators on Friday shut down a small bank in Illinois, boosting to 26 the number of U.S. bank failures this year after 157 succumbed in 2010 to the sputtering economy and piles of soured loans. The Federal Deposit Insurance Corp. seized Bank of Commerce, with one office in Wood Dale, Ill., $163.1 million in assets and $161.4 million in deposits. Advantage National Bank Group, based in Elk Grove Village, Ill., agreed to assume the assets and deposits of the failed bank. In addition, the FDIC and Advantage National Bank Group agreed to share losses on $145.7 million of Bank of Commerce's loans and other assets.

Note to Banks: It’s Not 2006 Anymore - (www.nytimes.com) NOSTALGIA is running high on Wall Street for the days when junk mortgage underwriting and opaque derivatives trading juiced bank profits. As regulators continue to devise the machinery of the Dodd-Frank regulatory reform law, major financial institutions are working overtime in Washington to bring the good times back again. Unfortunately for taxpayers, some of these efforts are gaining traction, particularly regarding the regulation of derivatives and mortgages. As you may recall, Dodd-Frank was supposed to shed light on derivatives trading so that the risks and costs of these instruments would be clear to regulators and market participants. To this end, the law required derivatives to be cleared and traded on exchanges or through other approved facilities. But Dodd-Frank contained a big loophole: the Treasury secretary can exempt foreign-exchange swaps from the regulation. Currency trading is enormous: on average, about $4 trillion of these contracts change hands each day. Major banks are huge in this market. According to the Comptroller of the Currency, trading in foreign-exchange contracts generated revenue of $9 billion in 2010 at the nation’s top five banks. That’s more than was produced by any other type of derivative.

Tens of thousands march in London to protest budget cuts - (www.uk.ibtimes.com) Violence has broken out on the streets of central London, England has tens of thousands of people have demonstrated to express their opposition to drastic spending cuts by the British government. Organizers claim that more than a quarter of a million people have appeared at the march, far more than expected. It is believed to be the largest union-organized event in Britain in more than two decades years; and the biggest overall public march in the nation since the invasion of Iraq in March 2003. The Conservative-Liberal Democrat coalition led by Prime Minister David Cameron plans spending cuts of about $131-billion over the next five years, including slashing about 300,000 public sector jobs. Protesters marched from Victoria Embankment to Hyde Park, where Brendan Barber, the general secretary of the Trades Union Congress (TUC), which organized the march, spoke. Many protesters held up banners which read: "Don't Break Britain", "No to Cuts" and "Defend Our Public Services", "The noise in Whitehall was deafening as thousands of protesters banged drums, blew whistles and shouted anti-cut slogans, slowly making their way towards Trafalgar Square,” a BBC reporter said.

Britain's leaders should come clean on the true depth of the fiscal crisis - (www.telegraph.co.uk) The UK's fiscal retrenchment, we are told, is being conducted at an "extraordinarily ambitious pace". Last week's annual Budget statement pledged to "eliminate the structural deficit by 2014/15". George Osborne told the House of Commons that "Britain has a plan and is sticking to it". The Chancellor won't be cowed by claims his efforts to get the UK back on the fiscal straight and narrow will do more harm than good. He is right, of course – but only up to a point. The Labour party's most senior figures, in defiance of their education and intelligence, keep claiming that Osborne's actions are "driven by ideology, rather than necessity". This is absurd. Anyone who argues that rapidly addressing the fiscal catastrophe Labour left behind is anything other than absolutely crucial either knows nothing about global bond markets, or is so blindly ambitious, so determined to close their eyes to the facts, as to be unfit for public office. Having said that, Osborne is also ignoring the facts – if to a slightly lesser degree. Because the UK's fiscal retrenchment won't be over by 2015 – when the deficit, on last week's numbers, falls roughly to zero. That won't be the end of our budgetary problems. It won't even be the beginning of the end. It will merely be, if we're lucky, the end of the beginning.