KeNo's Housing and Economic Portal: Monday October 10 Housing and Economic stories

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Ex-labor chief's 1-day rehire nets $158,000 city pension - (www.msnbc.msn.com) A retired Chicago labor leader secured a $158,000 public pension — roughly five times greater than what a typical retired public-service worker in the Windy City receives — after being rehired for just one day of active duty on the city payroll, local news reports said. According to The Chicago Tribune, Dennis Gannon stands to collect approximately $5 million in city pension funds during his lifetime. He now draws the pension while working for a hedge fund, the Tribune reported. Gannon, former president of the Chicago Federation of Labor, was able to take a long leave from a city job to work for a union and then receive a city pension based on a high union salary. That arrangement is allowed under a state law signed by Gov. Jim Thompson on his last day in office in 1991, according to an investigation by the Tribune and WGN-TV. The change has enabled a couple dozen labor leaders to become potential millionaires. What is different in Gannon’s case is that he became eligible for the especially lucrative pension deal only because the city rehired the former Streets and Sanitation Department worker for one day in 1994, before granting him an indefinite leave of absence, according to the investigation. He retired from the city job in 2004 at age 50. Gannon’s pension is so high that it exceeds federal limits and required Chicago’s pension fund to file special paperwork with the Internal Revenue Service to give it to him, the Tribune reported.

Mayor Bloomberg predicts riots in the streets unless more jobs - (www.nydailynews.com) Mayor Bloomberg warned Friday there would be riots in the streets if Washington doesn't get serious about generating jobs. "We have a lot of kids graduating college, can't find jobs," Bloomberg said on his weekly WOR radio show. "That's what happened in Cairo. That's what happened in Madrid. You don't want those kinds of riots here." In Cairo, angry Egyptians took out their frustrations by toppling presidential strongman Hosni Mubarak - and more recently attacking the Israeli embassy. As for Madrid, the most recent street protests were sparked by widespread unhappiness that the Spanish government was spending millions on the visit of Pope Benedict instead of dealing with widespread unemployment.

Realtors want to keep taxpayers on hook for house purchases in flood zones - (www.somdnews.com) Fearing another blow to a still-fragile housing market, real estate agents are pushing Congress to grant a long-term extension to the National Flood Insurance Program, which is set to expire this month for the 10th time in two years. Established by Congress in 1968, the program provides coverage to more than 5.6 million home and business owners in more than 21,000 communities nationwide that have adopted floodplain management plans in an effort to mitigate flood damage. Though private insurers sell the policies and administer claims, the federal government sets rates and assumes liability for coverage. The program has bipartisan support — the Senate Committee on Banking passed a bill last week that would grant a five-year extension. But the program fell into heavy debt after Hurricane Katrina and disagreements over how to reform it have stalled a long-term solution, leading to nine short-term extensions and five lapses since September 2008. Many mortgage lenders require flood insurance for homes inside the floodplain. Private flood insurance is too expensive for most homebuyers, so floodplain homes have a hard time selling during lapses in the federal program, said Paula Martino, government affairs director for the Southern Maryland Association of Realtors. During a June 2010 lapse, 47,000 home sales were delayed or canceled, according to the National Association of Realtors.

Ridiculous title fees - (www.latimes.com) Low interest rates have spurred many homeowners to refi. And each time, title firms cash in. Although the fees seem unfairly high, regulators have done little about an industry dominated in California by just four companies. Like many homeowners, Immanuel Spira decided to take advantage of record low interest rates by refinancing his Westwood home more than once over the last year. Spira, 47, an entertainment-industry lawyer, thought he had a sweet deal when he refinanced into a loan under 5% last summer. But he's now doing it again to secure a rate below 4%, which he figures could save him about $600 a month. Spira's willing to again pay the roughly $1,000 lender fee for a refi, as well as the $500 appraisal fee and the almost $600 escrow fee. What gets him, though, is having to pay more than $1,000 for title insurance — that is, a fee for a record check to ensure that his property is still his. "It's ridiculous," Spira said. "Public records are readily available, and not much could have changed since the last time I had to pay this fee." Title insurance fees represent one of the more onerous charges homeowners face when they refinance a loan, especially within a relatively short space of time. "It's 100% gravy for the title companies," said Steven Maizes, a West Los Angeles mortgage banker who says he's now handling about 25 refis for clients who had previously refinanced their homes within a year. "I wish I had a nickel for every time a client asked why they had to pay the title fee again."

Does California need a state bank? - (www.commondreams.org) AB 750, California’s bill to study the feasibility of establishing a state-owned bank that would receive deposits of state funds, has passed both houses of the legislature and is now on the desk of Governor Jerry Brown awaiting his signature. It could be the governor’s chance to restore the state to its former glory. As noted in TIME Magazine: [I]n the 1950s and ‘60s, California was a liberal showcase. Governors Earl Warren and Pat Brown responded to the population growth of the postwar boom with a massive program of public infrastructure—the nation’s finest public college system, the freeway system and the state aqueduct that carries water from the well-watered north to the parched south. But that was before Proposition 13, a California constitutional amendment enacted by voter initiative in 1978. Prop 13 limited real property taxes to one percent of the full cash value of the property and required a two-thirds majority in both legislative houses for future increases of any state tax rates. Prop 13 radically reduced the tax base, and as economist Michael Hudson observes, it is too late to raise property taxes now. The tax savings simply drove property prices up, getting capitalized into additional debt service to the banks. Today, he says, “so much urban property is sinking into negative equity territory that a rise in property taxes will lead to even more foreclosures and abandonments, and hence even lower fiscal returns.”