KeNo's Housing and Economic Portal: Wednesday July 13 Housing and Economic stories

Tuesday, July 12, 2011

Wednesday July 13 Housing and Economic stories

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Connecticut Legislature Exacts Revenge On Unions - (www.businessinsider.com) Connecticut lawmakers showed no mercy on public employee unions today, calling for another 1,000 layoffs beyond the 5,500 Gov. Dannel Malloy (D) requested to close a $1.6 billion budget shortfall. Malloy, who was elected with the enthusiastic support of public sector unions, initially proposed a 2 percent cut to state aid to municipalities, in addition to the layoffs to close the gap. But the Democrat-controlled legislature rejected the spending cuts as politically unfeasible, the CT Mirror reported, because most cities and towns have already finalized their budgets. Last week the unions voted down an agreement for a two-year salary freeze — which would have avoided layoffs for at least four years — forcing the legislature back into special session to reach a deal before the new fiscal year begins tomorrow. Instead 6,500 public employees will be laid-off beginning in September, unless the unions can revive the concessions package. Malloy has stated he will not renegotiate the deal he reached with union leaders. The House and Senate are expected to pass the new budget shortly.

Fannie Mae Silence on Taylor Bean Opened Way to $3 Billion Fraud - (www.bloomberg.com) The first sign of what would ultimately become a $3 billion fraud surfaced Jan. 11, 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else. Fannie Mae, the government-sponsored enterprise which issues almost half of all mortgage-backed securities, determined over the next two years that more than 200 loans acquired from Taylor Bean were bogus, non-performing or lacked critical components such as mortgage insurance. That might have been the end of Taylor Bean and its chairman and principal owner, Lee Farkas. He was sentenced today in federal court in Alexandria, Virginia, to 30 years in prison for orchestrating what prosecutors call one of the “largest bank fraud schemes in this country’s history.” Instead, it was just the beginning. Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, court papers, and public testimony show it sought only to rid itself of liabilities and cut ties with a mortgage firm selling loans “that had no value,” as Smith, the former vice president of Fannie Mae’s single family operations, said in a 2008 deposition.

NY Fed Halts Controversial AIG Bond Auctions - (www.bloomberg.com) The Federal Reserve Bank of New York is halting its sales of mortgage bonds acquired in the rescue of American International Group Inc. (AIG)after coming under criticism that auctions were damaging credit markets. “Given prevailing market conditions” for residential mortgage-backed securities, “we do not anticipate any sales of bonds in the near term or until such time as the New York Fed deems it will achieve value for the public,” Jack Gutt, a New York Fed spokesman, said in an e-mail. The New York Fed began unloading the bonds piecemeal after rejecting a $15.7 billion bid from New York-based AIG for the entire pool in March. As traders blamed declines in debt from high-yield bonds to subprime-mortgage securities on the sales, the bank slowed their pace. Its last auction ended June 9.

A couple more reasons to walk away - (www.sfgate.com) Earlier this week, the topic of homeowners giving their keys back to the banks sparked a lot of comments. Many readers posted their opinions and shared their thoughts about this growing trend, now that more and more underwater homeowners are choosing to let their homes go into foreclosure, despite having the economic means to keep paying the mortgage. Strategic defaulting, walking away - whatever term you choose to call it, and whether you believe it's financially or morally right or wrong, is happening more and more. The crux of whether a homeowner should consider leaving their house behind centers around the economics. For those homeowners who decide that is the right option, it is because they view making their monthly mortgage payments on a house that lost so much value is akin to throwing more money into a money pit. If you lost money because your jeans had a hole in the pocket, would you keep putting money in that pocket?

1.3 Million Ohioans Sign Up To Put Anti-Union Bill On The Ballot - (www.businessinsider.com) Opponents of Senate Bill 5, Ohio's new collective bargaining bill, have submitted an astonishing 1.3 million signatures to put repeal of the law to a vote on this year's November ballot. Thousands of union supporters and other opponents marched through Columbus yesterday to deliver the signatures to the Secretary of State, according to the Columbus Dispatch. Although the signatures are still unverified, the number is more than five times what is required to qualify for a ballot referendum. Senate Bill 5 — which severely limits collective bargaining rights for more than 350,000 public employees — has sharply divided the state since it was passed by the Ohio's Republican state Legislature in March amid huge union protests.