KeNo's Housing and Economic Portal: Friday August 26 Housing and Economic stories

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TOP STORIES:

European regulator floats continent-wide short selling ban - (www.insideinvestorrelations.com) The European Securities and Markets Authority (ESMA) is thinking about coordinating a continent-wide ban on short selling, according to an article in the New York Times. ESMA, the independent markets regulator, does not have the power to impose a ban itself, but could organize action among European states. The regulator is considering proposing a ban on all stocks, or just on financial stocks, states the NYT, citing two people familiar with the situation. A ban on naked short selling is also being considered, adds the paper. ‘We are discussing with national authorities and together we will decide whether we need coordinated action,’ says Victoria Powell, an ESMA spokesperson, reports the NYT. Short selling bans, which were utilized by governments during the financial crisis in 2008, are making a comeback following the market volatility of the last two weeks. Greece banned short selling for two months on Monday following steep declines in Greek stocks. The next day, South Korea announced its own three-month ban.

Government-owned homes may get ‘for rent’ signs - (www.washingtonpost.com) The Obama administration Wednesday went searching for creative answers to a perplexing question: How can the government rid itself of the glut of foreclosed properties it now owns in a way that nudges the housing market toward recovery? As the housing crisis has persisted, government-backed mortgage giants Fannie Mae and Freddie Mac, along with the Federal Housing Administration, have taken possession of hundreds of thousands of foreclosures throughout the country. But selling those homes at decent prices in an abysmal market has proven difficult. That quandary led the Treasury Department, the Federal Housing Finance Agency (which oversees Fannie and Freddie) and the Department of Housing and Urban Development on Wednesday to put out a “request for information” seeking imaginative ways to clear the backlog, particularly by turning foreclosed properties into rentals. “It’s critical that we support the process of repair and recovery in the housing market,” Treasury Secretary Timothy F. Geithner said in a statement. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets and support neighborhood and home price stability.” Officials said they are hoping to identify private-sector partners that could purchase pools of foreclosed properties and turn them into rental units. If successful, the effort could help the government clear the backlog on its books, meet increasing rental demands and help relieve pressure on local housing prices.

Italy Debt Risk Rises to Record, Leading European Swaps Higher Amid Crisis - (www.bloomberg.com) The cost of insuring corporate debt surged to its highest in more than two years in Europe amid the region’s deepening sovereign debt woes. “The coming weeks are likely to be challenging for risk assets,” said Shahzada Omar Saeed, the Zurich-based global head of high-yield at Swisscanto Asset Management, which manages about 1.2 billion euros ($1.7 billion) of assets. The Markit iTraxx Europe Index of credit-default swaps linked to 125 companies with investment-grade ratings surged 14 basis points to 163 basis points, the highest since April 2009, according to JPMorgan Chase & Co. at 1:30 p.m. in London. The Markit iTraxx Crossover Index linked to 40 companies with mostly high-yield ratings jumped 60 basis points to 678, the highest since July 2009.

Banking Sector Punished Over European Debt - (www.nytimes.com) Fear is on the rise again that worsening problems at some of Europe’s biggest banks may wind up hurting financial institutions in the United States. The clearest signs of the anxiety are in the stock market, where shares of American banks plunged again on Wednesday. Bank of America dropped almost 11 percent. Citigroup sank 10.5 percent. Goldman Sachs fell 10 percent, while Morgan Stanley was down 9.7 percent. All told, bank stocks have fallen more than 30 percent since the beginning of the year — and have swung wildly up and down over the last week — as the weakening economy is expected to take a toll on business and reduce earnings. But concerns about European banks are driving the latest wave of selling. Société Générale’s share price dropped 14.7 percent on Wednesday, the most of any European bank, as its chief executive “denied all rumors” that he said caused the stock to fall.

Some states and cities could face stress: Moody's - (www.reuters.com) Moody's Investors Services said on Wednesday that most state, local government and public authorities that issue debt in the municipal bond market are "well insulated from shock," but added that some could be vulnerable to risk during major market volatility. "Most municipal issuers are somewhat weaker than they were prior to the last major market disruption," said Moody's Managing Director Timothy Blake in a statement. "This is why some may face significant stress if hostile market conditions emerge."

OTHER STORIES:

Dollar funding pressures heat up in FX swaps - (www.reuters.com)

EU financial watchdog holds call on bank shares - (www.reuters.com)

Gold Futures Margins Increased 22% by CME as Investors Drive Record Rally - (www.bloomberg.com)

Turkey Curbs Short Selling After Greek Ban - (www.bloomberg.com)

French banks under renewed pressure - (www.ft.com)

Hedge Funds Get Unfamiliar Taste of Losing - (www.nytimes.com)

Financial Turmoil Evokes Comparison to 2008 Crisis - (www.nytimes.com)

ECB Says Professional Forecasters Expect Faster Inflation - (www.bloomberg.com)

Rice Is Next Japan Food Risk From Fukushima Nuclear Meltdown - (www.bloomberg.com)

Greek unemployment at 16.6 percent in May - (finance.yahoo.com)

Japan May Cut Its Growth Forecast to 0.5% as Global ‘Headwinds’ Intensify - (www.bloomberg.com)