KeNo's Housing and Economic Portal: Wednesday October 5 Housing and Economic stories

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TOP STORIES:

IT FINALLY COMES OUT: Why The Original Obama Stimulus Was Such A Disaster - (www.businessinsider.com) The Recovery Act (the '09 Obama stimulus plan) arguably helped staunch the economic bleeding, but unfortunately we now know that it failed to create a lasting recovery. The mainstream thinking now is that it was too small, at less than $1 trillion. This isn't just some after-the-fact point: Economists like Paul Krugman were making this point from the very beginning. But the question is: Why was the original stimulus so feeble? We've had hints before (The administration assumed that the recession was like any other, Geithner was always worried about the deficit, etc.) but a new book from Ron Suskind sheds totally brand new light on what was going on in the administration during those early days. Now what's funny is that this book is "controversial" because it has anecdotes about Obama supposedly encouraging Geithner to draft a plan for the liquidation of Citigroup, and Geithner supposedly disobeying (something that everyone's denying him). There's also a line (supposedly taken out of context) about the Obama White House being hostile towards women.

Siemens shelters up to €6bn at ECB - (www.ft.com) Siemens withdrew more than half-a-billion euros in cash deposits from a large French bank two weeks ago and transferred it to the European Central Bank, in a sign of how companies are seeking havens amid Europe’s sovereign debt crisis. The German industrial group withdrew the money partly because of concerns about the future financial health of the bank and partly to benefit from higher interest rates paid by the ECB, a person with direct knowledge of the matter told the Financial Times. In total, Siemens has parked between €4bn ($5.4bn) and €6bn at the ECB’s facilities, mostly through one-week deposits, this person said. Only a handful of large companies have the banking licences that allow them to deposit cash directly with the ECB. Siemens’ move demonstrates the impact of the eurozone’s deepening sovereign debt crisis

on confidence in European banks. It was not clear from which bank Siemens withdrew its deposits. A person familiar with BNP Paribas said, however, that it was not the bank involved.

Bank of China halts FX swaps with some European banks - (www.reuters.com) Bank of China, a big market-maker in China's onshore foreign exchange market, has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, three sources with direct knowledge of the matter told Reuters on Tuesday. Another Chinese bank has also halted interest rate swaps trading with some European banks, a source at the bank said, indicating Chinese lenders have joined the growing ranks of institutions cutting exposure to the crisis-hit euro zone. This source requested that he nor his bank be identified because of the sensitivity of the matter. While the sources said Bank of China had stopped trading the forwards and swaps with several European banks, they only identified French lenders Societe Generale (SOGN.PA), Credit Agricole (CAGR.PA) and BNP Paribas (BNPP.PA).

Worry About a New Wave of Layoffs - (www.nytimes.com) Not again. That is the plea of many Americans fearful about their jobs as the economy falters. “I don’t have any more savings or anything like that,” said Terrance Myricks, 21, who was dismissed for the second time in less than three years on Sept. 1. “I’ll probably have to rely on unemployment, which I’d really rather not do. And that’s assuming I can even get it.” Job growth halted entirely in the nation last month. And asEurope’s debt crisis acts as a drag on global growth and Washington debates another jobs bill, the possibility of asecond recession is increasing in the United States along with the prospects of corresponding layoffs. Mr. Myricks’s tale of pain the second time around, economists fear, could become all too familiar. With headlines like the 30,000 layoffs planned at Bank of America and the United States Postal Service asking Congress to cut 120,000 workers, it is perhaps not surprising that workers’ concerns about job security are near the peak they reached during the last recession, according to a recent Gallup survey. At least one anecdotal study found that layoff announcements were greater in August than a year earlier.

Greek Default Specter Leaves Germans Facing Bad-Bank Bill - (www.bloomberg.com) Germany’s bad banks, backed by the state to prevent the collapse of Hypo Real Estate Holding AG and WestLB AG during the credit crisis, would be the hardest hit in the event of a Greek default, leaving taxpayers to shoulder the bill a second time. Hypo’s FMS Wertmanagement, with 8.76 billion euros ($12 billion) in Greek sovereign investments and loans, and WestLB’s Erste Abwicklungsanstalt, with 1.21 billion euros, bear more than half of German banks’ Greek debt, according to data compiled from company reports and statements. By contrast, Deutsche Bank AG (DBK) andCommerzbank AG (CBK), Germany’s two biggest lenders, hold a combined 3.35 billion euros. The specter of a Greek insolvency was raised this month by members of Chancellor Angela Merkel’s coalition, when Economy Minister Philipp Roesler said there can be no “taboos” when considering action “to stabilize the euro in the short term.” The German government is considering a “Plan B” to help shield banks and insurers from losses if Greece defaults, three coalition officials said on Sept. 9. “A Greek haircut or default will especially hit both state-owned bad banks,” said Klaus Fleischer, a professor for banking and finance at the University of Applied Sciences in Munich. “Their bills are ultimately being paid by the German taxpayer. Private lenders have an advantage because their exposure is comparatively small.”