KeNo's Housing and Economic Portal: Saturday October 22 Housing and Economic stories

Friday, October 21, 2011

Saturday October 22 Housing and Economic stories

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TOP STORIES:

Banker Proposes More Taxpayer Money to Prop Up House Prices. Shocker! - (www.bayarearealestatetrends.com) Citigroup banker and former Obama adviser Peter Orszag proposing transferring more taxpayer money to banks like Citigroup in order to “solve” our problem of excess housing inventory. Bankers and politicians are desperately trying to find a ways to sell millions of foreclosures without driving down home prices in the process. Not only would lower prices lead to enormous losses for banks, but they would create millions more foreclosures as more even homeowners would chose to walk away. So, how do you sell millions of foreclosures while still propping up bank profits? Massive taxpayer subsidies of course… Orszag writes: No matter what the government might try to do to break the housing-economy cycle, the deleveraging process will still be painful and take some time. But that’s not an argument against action; just because a headache can still hurt some even if you take aspirin doesn’t mean you should skip the aspirin. One thing the Obama administration could do now — probably with Republican support — would be to attack the oversupply of housing stock by allowing a tax write-off for investors who buy empty properties and rent them out.

A Complete Guide To The Ponzi Scheme That Is Suburban America - (www.businessinsider.com) Suburban America is a Ponzi scheme. A report out today from Strong Towns makes this bold claim. It argues that the mass migration from cities to suburban areas following World War II has seen two cycles of growth and maintenance. The first cycle was paid for outright, the second is heavily financed, and the third cycle is poised at the brink of an abyss. City planners, like Bernie Madoff, swapped long-term obligations for short-term cash to expand at an unsustainable rate, developing land they could never afford to maintain. Strong Towns backs up this argument with real-world case studies from the following U.S. municipal projects.

British Bank Ratings Lowered by Moody’s After Government Shift on Bailouts - (www.bloomberg.com) Moody’s Investors Service cut the senior debt and deposit ratings of 12 British lenders including Royal Bank of Scotland Group Plc (RBS) andLloyds Banking Group Plc (LLOY), saying the government would be less likely to provide support in the event of failure. Lloyds TSB Bank Plc, Santander UK Plc and Co-Operative Bank Plc had their ratings lowered one step by Moody’s, while RBS and Nationwide Building Society were cut two levels. Seven smaller building societies were cut from one to five levels, the rating company said in a statement today. Clydesdale Bank was confirmed at A2, with a negative outlook. “Moody’s has pulled the trigger a little early,” said Michael Symonds, a credit analyst at Daiwa Capital Markets Europe Ltd. said in a note today. “The escalation of the sovereign and banking crisis” will “result in a broad government-backed recapitalization of the continent’s banks,” he said.

Merkel-Sarkozy Divided on Greek Default Threat to Their Banks: Euro Credit - (www.bloomberg.com) Angela Merkel and Nicolas Sarkozy are running out of road. Whether to allow Greece to default and how to manage the fallout, questions they have tried to avoid for more than a year, may finally require answers as European officials turn to fortifying banks and consider ways of easing Greece’s debt load. It costs $6 million plus $100,000 a year to insure $10 million of Greek securities for five years, with credit-insurance prices pointing to a 91 percent chance of default. As the German chancellor and French president prepare to meet in two days for their eighth bilateral summit in 20 months, Merkel has cited the need to prepare for the default that investors see as a sure thing. Sarkozy, whose banks have the most to lose, is unwilling to gamble on letting Greece go.

Georgia woman stole luxury houses in broad daylight - (www.ajc.com) A Cobb County woman was arrested Tuesday morning for stealing million-dollar homes in three metro counties and renting them. A DeKalb County grand jury indicted Susan Loraine Weidman on racketeering charges, claiming she and two other men set up an elaborate scheme to seize vacant, foreclosed homes and keep the banks that owned the homes at bay. Weidman used the courts to claim squatters’ rights, then put fraudulent tenants in homes in well-to-do Cumming, Sandy Springs and Decatur neighborhoods using phony leases while warding off attempts to bounce them with letters threatening litigation, prosecutors alleged. “Everything was fake,” DeKalb County District Attorney Robert James said. “The lease is bogus. The property management company is bogus. They had a bogus law firm calling to threaten legal action if they foreclosed. No one could accidentally do this.”