KeNo's Housing and Economic Portal: Friday November 25 Housing and Economic stories

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Fannie, Freddie Regulator Defends Huge Bonuses - (www.cnbc.com) The regulator for Fannie Mae and Freddie Mac on Thursday defended their million-dollar executive bonuses which have come under fire given huge losses at the government-owned mortgage firms. Federal Housing Finance Agency's acting director Edward DeMarco said in a Nov. 10 letter to U.S. lawmakers the salaries and deferred compensation awarded to executives are necessary if the firms are to attract and keep talent required to run operations effectively. Slammed by losses from the precarious U.S. housing market, Fannie and Freddie have requested new aid on top of hundreds of billions of dollars in government support propping them up, raising questions about the bonuses. DeMarco was responding to a bipartisan group of 60 U.S. senators that wrote last week and demanded changes to the executive compensation practices that were put in place two years ago. "I need to ensure that the companies have people with the skills needed to manage the credit and interest rate risks of $5 trillion worth of mortgage assets and $1 trillion of annual new business that the American taxpayer is supporting," DeMarco wrote.

Alabama County Files Largest US Municipal Bankruptcy - (www.cnbc.com) Alabama's most populous county chose bankruptcy as a path to wrest control of its beleaguered sewer system from a court-appointed receiver, bolster its pleas for legislative action to prop up a massive revenue shortfall, and wipe away as much of its whopping $4.15 billion in debt as possible. Jefferson County's Chapter 9 bankruptcy protection filing on Wednesday — the largest municipal bankruptcy in U.S. history — gives it protection from its creditors while it develops and negotiates a plan for adjusting its debts. It could accomplish that by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan. But there are risks. Perhaps the biggest is the potential impact on the county's 658,000 residents, who could be asked to endure even higher sewer rates than were contemplated under the out-of-court deal with creditors that fell through. That's because the sewer debt, which represents the bulk of what the county owes, is secured against net revenues from the sewer system, and the court will determine how much of that debt remains on the books and how the county will repay it.

Solar Glut Worsens as Supply Surge Cuts Prices 93%: Commodities - (www.bloomberg.com) The cost of solar cells and microchips has nowhere to go but down because of a supply glut for the commodity they’re made from, a brittle charcoal-colored semiconductor baked in ovens at 600 degrees centigrade. Polysilicon has plunged 93 percent to $33 a kilogram from $475 three years ago as the top five producers more than doubled output, data compiled by Bloomberg shows. The industry next year will produce 28 percent more of the raw material than will be consumed, up from 20 percent this year, said Robert Schramm- Fuchs and Shai Hill, analysts at Macquarie Group Ltd. “Polysilicon is a grossly, grossly, grossly oversupplied commodity product,” said Paul Leming, director of research at Ticonderoga Securities in New York. “We’re staring at years of stability where polysilicon pricing sits at something approaching cost of production and doesn’t move.”

Permanent EU Bailout Fund Said to Face Delay on Bond Loss Clash - (www.bloomberg.com) European efforts to speed the setup of a permanent rescue fund have lost momentum amid a clash between Germany and France over provisions to force bondholders to share losses, three people involved in the negotiations said. Finance ministers failed to bridge divisions this week over the European Stability Mechanism, lessening the chances of activating its 500 billion-euro ($680 billion) war chest next July, said the people, who declined to be identified because the talks are in progress. Officials had hoped to bring the ESM’s start date forward to mid-2012 from its ultimate deadline of July 2013, the people said. Germany and the Netherlands are resisting pleas by France, Spain,Portugal and Ireland for the bondholder-loss provisions to be stripped from the ESM treaty, the people said. It’s possible that officials will still beat the July 2013 deadline, the officials said.

Too Big to Rescue Italy Forces EMU to Crossroads - (www.bloomberg.com) Italy is forcing Europe to choose between increased bond buying by theEuropean Central Bank or a possible breakup of the euro. Italian 10-year yields have breached the 7 percent level that locked Greece, Portugal and Ireland out of the capital markets and forced them to seek aid. With debt of 1.9 trillion euros ($2.6 trillion), more than those three countries combined, Italy has to refinance about 200 billion euros of maturing bonds next year and more than 100 billion euros of bills. The future of the European monetary union is at stake after bond vigilantes claimed their fifth political scalp by driving Italy’s borrowing costs to records, prompting Prime Minister Silvio Berlusconi to offer his resignation. ECB member Jens Weidmann said Nov. 8 his institution cannot print money to bail out governments.