KeNo's Housing and Economic Portal: Friday December 2 Housing and Economic stories

Thursday, December 1, 2011

Friday December 2 Housing and Economic stories

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Pension guaranty agency sees deficit swell - (www.washingtonpost.com) The federal agency that guarantees private-sector pensions saw its deficit swell to $26 billion in the past year — the largest in its 37-year history. The agency guarantees the pensions of 44 million workers. The Pension Benefit Guaranty Corp. reported the growing deficit in its latest annual report, released Tuesday. The disclosure adds new urgency to the agency’s efforts to persuade Congress to change its premium structure in ways that could triple pension guarantee costs for businesses whose retirement funds have the greatest risk of running out of money. Without a new round of fee increases, the PBGC — which is funded by a combination of company premiums and investment returns on its $81 billion in assets — could eventually require a taxpayer bailout, according to its director, Joshua Gotbaum. “The PBGC has never taken a dime of taxpayer money,” he said. “Part of the reason we are asking that our premiums be reformed and raised is so we can continue avoiding to ask for taxpayer money.”

F.H.A. Audit Sees Possible Bailout Need - (www.nytimes.com) Chances are nearly 50 percent that the Federal Housing Administration will need a bailout next year if the housing market deteriorates further, the agency’s independent auditor said in a report released Tuesday. The F.H.A., which offers private lenders guarantees against homeowner default, has just $2.6 billion in cash reserves, the report found, down from $4.7 billion last year. The agency’s woes stem from the national foreclosure crisis. In the last three years, the F.H.A. has paid $37 billion in insurance claims against defaulting homeowners, shrinking its cash cushion.

Government Bonds Bids, Offers Show Market ‘Frozen,’ Italian Official Says - (www.bloomberg.com) Spreads between bid and ask government bond prices indicate markets are “frozen,” said Franco Passacantando, Bank of Italy’s Managing Director for Central Banking, Markets and Payment System in Milan today. The European Central Bank is “almost exclusively buying Spanish and Italian bonds,” he added.

Postal Service loses $5.1 billion in fiscal 2011 - (www.reuters.com) The Postal Service reported a net loss of $5.1 billion for its 2011 fiscal year and on Tuesday warned that could run out of cash by September of next year if Congress did not offer relief. The rise of e-mail and online bill payments combined with the recession has eroded mail volume, which fell by 3 billion pieces, or 1.7 percent, during 2011. The Postal Service, which receives no taxpayer money for operations, says it is limited in how it can respond to shrinking revenues and high labor costs. Operating revenue for the 2011 fiscal year ended September 30 was $65.7 billion, down 2.1 percent from 2010. Revenue from First Class Mail, the Postal Service's most profitable product, fell 5.8 percent, overwhelming gains in shipping and advertising mail.

Moody's blasts plan to curb ratings agencies: report - (www.reuters.com) A European Union plan to impose tougher rules on credit rating agencies is "dangerous" as it is bound to limit the "quality and independence" of the rating process, the president and chief operating officer of Moody's Investor Services told Le Figaro newspaper. "I see it as reflecting an obsession to challenge the rating process itself, and to hold rating agencies responsible for the European debt crisis," Michel Madelain said in an interview. "These proposals cannot make investors confident again nor facilitate the access of companies and European states to credit markets," he added. The European Union on Tuesday unveiled plans to shake up credit rating agencies, although it shelved for now a divisive move for temporary "blackouts" on some sovereign ratings.

JPMorgan Joins Goldman Keeping Italy Debt Risk in Dark - (www.bloomberg.com) JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS), among the world’s biggest traders of credit derivatives, disclosed to shareholders that they have sold protection on more than $5 trillion of debt globally. Just don’t ask them how much of that was issued by Greece, Italy, Ireland, Portugal and Spain, known as the GIIPS. As concerns mount that those countries may not be creditworthy, investors are being kept in the dark about how much risk U.S. banks face from a default. Firms including Goldman Sachs and JPMorgan don’t provide a full picture of potential losses and gains in such a scenario, giving only net numbers or excluding some derivatives altogether. “If you don’t have to, generally people don’t see the advantage to doing it,” said Richard Lindsey, a former director of market regulation at the U.S. Securities and Exchange Commission who worked at Bear Stearns Cos. from 1999 through 2006. “On the other hand, if there were a run on Goldman Sachs tomorrow because the rumor was that they had exposure to Greece, you’d see them produce those numbers.”