KeNo's Housing and Economic Portal: Saturday June 11 Housing and Economic stories

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TOP STORIES:

Fed Gave Banks Crisis Gains on $80 Billion Secretive Loans as Low as 0.01%- (www.bloomberg.com) Credit Suisse Group AG (CS), Goldman Sachs Group Inc. (GS) and Royal Bank of Scotland Group Plc (RBS) each borrowed at least $30 billion in 2008 from a Federal Reserve emergency lending program whose details weren’t revealed to shareholders, members of Congress or the public. The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. Units of 20 banks were required to bid at auctions for the cash. They paid interest rates as low as 0.01 percent that December, when the Fed’s main lending facility charged 0.5 percent. “This was a pure subsidy,” said Robert A. Eisenbeis, former head of research at the Federal Reserve Bank of Atlanta and now chief monetary economist at Sarasota, Florida-based Cumberland Advisors Inc. “The Fed hasn’t been forthcoming with disclosures overall. Why should this be any different?”

The world's most reckless central bankers - (fortune.cnn.com) Should the guys at the European Central Bank have to sit through a screening of "Too Big to Fail"? It might remind them that a lesson of 2008 meltdown is that you can't extend and pretend your way out of the abyss, even if you're brandishing a bazooka. If Europe's central bankers accept this fact, they aren't showing it. Take the ECB's decision this month to oppose a restructuring of Greek debt. By now everyone who isn't employed in a policymaking role acknowledges that Greece's finances are unsustainable and getting worse. Even some politicians are coming around. As Ireland's post-bailout death spiral makes clear, austerity alone simply is not going to do the trick. Balancing a budget that is as out of whack as Greece's "has been known to cause riots if done in a single year," warns Paolo Manasse, an economics professor at the University of Bologna.

FHA insured loans now exceeding $1 trillion in book value at risk - (www.doctorhousingbubble.com) Cash strapped home buyers have quietly shifted to financing their home purchases with FHA insured loans since the crisis accelerated in 2007 after pocket lint was discounted as sufficient collateral to secure a mortgage. The reason for the alteration in loan volume is both disturbing and simply reflects the reality that American households are still broke and addicted to debt. The FHA total book value of loans has soared to over $1 trillion. These are loans made with 3.5 percent down payments and carry laxer lending standards. So it should be no surprise that defaults for FHA insured loans are hitting record levels.

Federal grand jury in San Jose indicts six in mortgage fraud scheme - (www.contracostatimes.com) An unfolding Silicon Valley mortgage fraud investigation has netted six more targets who've been charged in San Jose federal court with orchestrating a multimillion-dollar mortgage and real estate scam. In a 32-count indictment unsealed Wednesday, federal prosecutors accuse the defendants of duping banks into extending loans to unqualified homebuyers, siphoning off more than $1 million in illicit commissions for themselves. The indictment was handed down by a federal grand jury earlier this month, but made public this week. Three of the defendants appeared before U.S. Magistrate Judge Howard Lloyd on Wednesday and pleaded not guilty to the charges, which include bank fraud and money laundering. Norma and Claudia Valdovinos, of San Jose, and Elaine "Queenie" Ly, also of San Jose, were released on bonds ranging from $50,000 to $125,000. Linda Dung Tran and Pablo Curiel, of San Jose, and Jesus Chavez, of Gilroy, are slated to make their first court appearances on May 26. Federal prosecutors say the indictment is the fifth connected to the same probe into South Bay mortgage fraud activity. This week's indictment alleges that between 2004 and 2007, Norma Valdovinos and Chavez solicited low-income homebuyers to purchase homes typically priced more than $500,000, even though they did not have the financial clout to qualify for the home loans. At the time, they were both working as real estate agents for Century 21 Golden Hills Real Estate.

Economist who forecasts NV state finances filed for bankruptcy - (www.lasvegassun.com) The economist who helps predict how much money state government can expect to fund its budget has declared personal bankruptcy, telling the Sun he didn't foresee his own financial meltdown. John M. Restrepo, chairman of the five-member State Economic Forum, filed for bankruptcy protection in November, citing $905,000 in debt and $360,000 in assets. In the wake of his filing, Restrepo had to complete an Internet course on personal financial management offered by a nonprofit consumer credit counseling agency. Restrepo's bankruptcy, triggered by the collapse of his Las Vegas consulting business, symbolizes the depth of the recession in Southern Nevada, which has hit blue-collar and white-collar workers alike and has also struck the state's government and corporate elite. "I guess like all of us, who could have predicted the depth of this recession?" Restrepo said Friday. "We knew there was (an economic) correction coming. I saved some money for a recession but not for the depth of this depression in Southern Nevada and the impact it had on our clients and our company. I tried to do the best I can to continue to pay off all of the smaller local vendors I can."