KeNo's Housing and Economic Portal: Friday August 12 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Cook County Is Sinking Deeper Into Financial Morass, Layoffs Are 'Inevitable' - (www.businessinsider.com) Already burdened by a huge public pension debt, Cook County, Ill., now faces a 16% shortfall in next year's budget as tax revenues continue to plummet. The county's $3.2 billion budget, unveiled late yesterday, faces a $315 million shortfall, county commissioners told the Chicago Tribune late yesterday. About $96 million of the deficit comes from the county's independent health and hospitals system. Budget pressures are also partly the result of the commissioners' decision to roll back part of a 1% sales tax increase, which will reduce revenue by $53 million. Layoffs are "inevitable," County Board President Toni Preckwinkle said last night. Employee costs make up about 80% of Cook County's budget. The county has not yet decided how many layoffs will be needed to close the budget gap. Furloughs, privatizing public assets, outsourcing contracts, and combining services with the City of Chicago are also on the table.

Detroit School Teachers to Take 10 Percent Wage Cut - (www.cnbc.com) Detroit public school teachers will take a 10 percent wage cut and pay more for health care in what the school system's manager on Friday said were "extreme measures" needed to address a financial emergency. The measures are designed to save nearly $82 million as part of the Detroit Public Schools' effort to address a $327 million deficit. "These wage concessions and health care cost-sharing plans are being implemented because we are in an extremely difficult financial period for Detroit Public Schools," Roy Roberts, the emergency manager for the school system, said in a statement. The changes overwrite the previous union contract. Keith Johnson, head of the teachers' union, could not be immediately reached for comment. The wage concessions became effective on Friday, and teachers will see the effect of this change in their paycheck starting Aug. 23. Teachers will also have to pay 20 percent of their health care benefits, starting Sept. 1. The school district will also suspend payments for sick days that remain unused after an employee's retirement, among other changes.

Lending Markets Feeling the Strain - (online.wsj.com) Rising signs of strain emerged across financial markets on Thursday as investors pulled out billions of cash out of money-market funds, in turn driving the funds to rein in lending in short-term markets. Financial markets have become increasingly alarmed at the deepening divide in Washington and the potential that the U.S. could be downgraded by credit-rating agencies or, worse, default on its debt. Banks, meanwhile, are scrambling to design emergency plans to avoid a trading logjam in the huge markets for Treasurys and short-term funding facilities if Congress fails to raise the U.S. borrowing limits by next Tuesday's deadline. Money funds are now largely restricting their lending to overnight, preferring the safety of stashing cash in banks, one senior trader said. That is reducing the pool of cash available to corporations, banks and investors. Money funds are also selling asset-backed securities and other debt, the trader said. Investors pulled $9 billion a day out of money funds this week, according Nomura Securities International Inc. The outflows in the past day could be even higher, traders say. Some $62 billion has left money market funds in the past two weeks, according to the Investment Company Institute.

Michigan Consumer-Sentiment Index Fell to 63.7 in July From 71.5 in June - (www.bloomberg.com) Confidence among U.S. consumers dropped more than forecast in July to the lowest level in two years, which may hold back the biggest part of the economy. The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 63.7, the weakest since March 2009, from 71.5 in June. The gauge was projected to decline to 64, according to the median forecast of economists surveyed by Bloomberg News. The preliminary June reading was 63.8. Limited payroll gains, reduced home values and higher gas prices may dissuade Americans from stepping up spending, which expanded in the second quarter at the slowest pace since 2009 when the economy was in recession. Partisan wrangling over cutting the nation’s budget deficit in time to raise the debt ceiling could also be souring moods.

Golden Era of Rock Star Traders Concludes - (www.bloomberg.com) Money can be dull. There are only so many denominations, and only so many ways to make it. What’s interesting are the people who risk it, and over the past four decades no one has made more of a spectacle of risk than George Soros, whose Quantum fund famously bet $10 billion that the Bank of England would be forced to devalue the pound. Soros earned $1 billion on that trade and incalculable legend points. Now, Soros is going to stop risking other people’s money. By the end of this year, his Soros Fund Management LLC will have no outside customers for the first time in 42 years. The shift concludes a process that began in 2000, when Soros stopped accepting new investments, Bloomberg Businessweek reports in its Aug. 1 issue. Four years later he turned management of the company over to his sons Robert and Jonathan. On July 26, after months of debate, the three men decided to return the less than $1 billion of outsiders’ money Quantum still oversees and convert the firm into a family office to manage almost $25 billion for George, his family, and foundations.