KeNo's Housing and Economic Portal: Sunday April 10 Housing and Economic stories

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In Prison for Taking a Liar Loan - (www.nytimes.com) A few weeks ago, when the Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis. Soon after that column ran, I received an e-mail from a man named Richard Engle, who informed me that I was wrong. There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. It was his 48-year-old son, Charlie. On Valentine’s Day, the elder Mr. Engle said, his son had entered a minimum-security prison in Beaver, W.Va., to begin serving a 21-month sentence for mortgage fraud. He then proceeded to tell me the tale of how federal agents nabbed his son — a tale he backed up with reams of documents and records that suggest, if nothing else, that when the federal government is truly motivated, there is no mountain it won’t move to prosecute someone it wants to nail. And it was definitely motivated to nail Charlie Engle. Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?

FDIC May Seek $1 Billion From Failed-Bank Executives - (www.bloomberg.com) The Federal Deposit Insurance Corp. has authorized lawsuits against more than 50 officers and directors of failed banks as the agency aims to recoup more than $1 billion in losses stemming from the credit crisis. The lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC’s acting general counsel, said in an interview. “We’re ready to go,” Osterman said. “We could walk into court tomorrow and file the lawsuits.” The FDIC, which reviews losses for every bank failure, has brought only one case against officers or directors tied to recent collapses -- a suit filed in July seeking $300 million in damages from four executives of IndyMac Bancorp Inc.

In union strongholds, residents wrestle with cuts - (www.finance.yahoo.com) In Midwestern union strongholds, residents torn over proposals to curb union benefits, powers. There once was a time when Harry and Nancy Harrington -- their teenage children in tow -- walked the picket line outside the nursing home where she was a medical aide, protesting the lack of a pension plan for the unionized work force. But those days of family solidarity are gone. Harry now blames years of union demands for an exodus of manufacturing jobs from this blue-collar city on the shore of Lake Michigan. He praises new Wisconsin Gov. Scott Walker for attempting to strip public employee unions of nearly all of their collective bargaining rights. "I'm sorry, but the unions want to yell, they want to intimidate," says Harry Harrington, 69, as he sets a coffee cup down next to another newspaper headline about the union demonstrations. "They want to be heard," retorts Nancy Harrington, 66, who fears a weakened union would jeopardize the teaching career of their now 38-year-old daughter. The Harringtons typify the new national reality for labor unions. Support is no longer a sure thing from the middle class -- not even in a city long considered a union stronghold in a state that gave birth to the nation's largest public employee union. National polls show that the portion of the public that views unions favorably has dropped to near historic lows in recent years, dipping below 50 percent by some accounts.

Old overdue bills still an issue for Illinois - ( illinois.statehousenewsonline.com) The state’s stack of unpaid bills will soon double despite an income tax increase, according to state Comptroller Judy Baar Topinka. The four year, temporary personal income tax hike of 67 percent was approved on the final day of the previous Legislature and recently signed by Gov. Pat Quinn. In part, the income tax hike is designed to help Illinois catch up on past-due bills and stop being delinquent on its payments. “Our current backlog of bills stands at $6 billion, and the increased revenues will help address this backlog,” said Kelly Kraft, spokeswoman for the governor’s Office of Management and Budget. Not quite, according to Topinka, who is in charge of Illinois’ checkbook. “By the time we get through four years from now and all of this and what they’re able to spend, we will probably have a debt of $12 billion of unpaid bills that have yet to be dealt with,” the Riverside Republican said. Topinka said her office is now working on getting last August’s bills paid. Shortly after the income tax increase passed the state House of Representatives, House Republican Leader Tom Cross said his caucus would be willing to consider voting for borrowing, but not without some concessions. “We’ll look at it to pay our vendors, but we’re going to look at it a different way. It might be a smaller amount, we might say you’ve got to cut somewhere else, we might say you have to look at (workers’ compensation), I don’t know what else we might say,” Cross said.

WHY IS CALIFORNIA BROKE? Because They Tax The Rich... - (www.businessinsider.com) The budgets of states like California and New York have been blown to hell since the financial crisis, and even in the lukewarm "recovery," they're miles from being balanced. Why? One big reason, Robert Frank points out in the WSJ, is that these states depend enormously on the welfare of their richest residents. Almost half of California's income taxes come from the top 1% of earners. In New York, the percentage is now 41%, up from 25% in 1994. In Connecticut and New Jersey, the top 1% pay more than 40%. Being so dependent on super-rich people is great when times are good, because revenues soar. But the trouble is that the earnings of super-rich people are super-volatile, so when times are bad, or even mediocre, tax revenues plummet.