KeNo's Housing and Economic Portal: Wednesday May 18 Housing and Economic stories

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TOP STORIES:

All Around The World, People Are Getting PAID To Borrow Money – (www.businessinsider.com) From Catalpa Capital Advisors, a very good reminder of what uber-low interest rates mean to markets all around the world. Left and right, people are getting paid to borrow: Of the 53 central banks in Bloomberg’s database, 31 have negative real interest rates (the red dots in the chart). In the US, the Fed funds rate remains at all‐time lows of 0.2% while inflation, as measured by the consumer price index, is running at 2.7%, leaving the real rate at ‐2.5%. The ECB, which itself sets policy for 17 countries and just raised rates by a quarter point, has a real rate of ‐1.5%. At the extreme (and off this chart), Venezuela’s rate of 16.2% is far behind a roaring inflation of 28.7%, leaving real rates at ‐12.5%.

Borrowing Costs Rise for Portugal Despite Deal on Bailout - (www.nytimes.com) Portugal was forced Wednesday to offer higher rates to sell short-term debt, suggesting that investors were still nervous about the country’s finances even after its caretaker government agreed with international creditors on a rescue plan. The bond auction, which raised €1.1 billion, or $1.6 billion, came after José Sócrates, the Portuguese prime minister, announced Tuesday night that he had agreed to terms for a €78 billion loan package from the European Union and the International Monetary Fund. Under the three-year financial assistance package, €12 billion will be channeled as fresh capital to Portuguese banks that have been shut out of the financial markets for more than a year because of investors’ concerns about Portugal and other suffering euro economies, according to a draft of the agreement published on the Web site of Expresso, a Portuguese magazine.

Dash of Change Coming to Salt-Site Plan - (www.online.wsj.com) The company behind a massive housing development proposed here along San Francisco Bay plans to adjust its pitch in coming months, partly in response to concerns raised by local groups. The land at stake, owned by Cargill Inc., has been used for the past century to produce salt. The company and developer DMB Associates Inc. now want to transform half of the 1,400-acre salt works into a 12,000-unit housing development, with schools and offices, while restoring half of the land as tidal marsh, recreational areas and other open space. The project, which would boost Redwood City's population an estimated 30% from about 76,000 now, has drawn opposition from environmental groups and some officials in the region concerned about the scope and environmental impact of the project. "Building anything of this scale on this site is so out of bounds, so out of step with the last 50 years of the bay's history, that the conversation shouldn't even need to go past that," said Davis Lewis, executive director of Save the Bay.

U.S. May Pursue More Lenders After Suing Deutsche Bank on Loans - (www.bloomberg.com) The U.S. Department of Justice may pursue claims against other lenders after suing Deutsche Bank AG for more than $1 billion, alleging the firm lied while arranging federal insurance on faulty mortgages. The Housing and Urban Development Department is examining loans insured through the Federal Housing Administration and may refer additional cases to the Justice Department, HUD’s general counsel, Helen Kanovsky, said yesterday in an interview. “We go where the evidence takes us, and if it takes us to the larger players on Wall Street, so be it,” Kanovsky said. U.S. Attorney Preet Bharara said it wouldn’t be a “fantastical stretch” for prosecutors to scrutinize other lenders.

Bipartisan effort to reach deal to control national debt stalls - (www.washingtonpost.com) A bipartisan effort to rein in the national debt stalled Tuesday, as members of the Senate’s so-called Gang of Six signaled that an agreement is unlikely to come this week in time for the start of White House-led budget talks. The absence of a deal deprives policymakers of a bipartisan centerpiece that could smooth the way toward agreement in the contentious battle between Democrats and Republicans over the appropriate size and shape of government. Members of the Gang of Six said Tuesday that they are continuing to meet daily and that a deal is still possible. However, one of the six, Sen. Tom Coburn (R-Okla.), left town abruptly Tuesday because of a family emergency, leaving lawmakers and the White House as they begin negotiations over whether to allow the government’s debt to keep rising. Treasury Secretary Timothy F. Geithner has said Congress must act by Aug. 2 to raise the legal limit on borrowing, currently set at $14.3 trillion, or risk the United States defaulting on its obligations. With the two parties far apart, work is proceeding on parallel tracks to forge an agreement on long-term deficit reduction, which many lawmakers on both sides say will be necessary to win their vote for a higher debt ceiling.