KeNo's Housing and Economic Portal: Saturday December 10 Housing and Economic stories

Friday, December 9, 2011

Saturday December 10 Housing and Economic stories

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TOP STORIES:

Corzine Pushed Fatal Bet on European Debt to $11.5 Billion - (www.bloomberg.com) Jon Corzine bet $11.5 billion on European sovereign debt in his bid to rebuild profits at MF Global Holdings Ltd., almost twice the net amount disclosed to investors, and relied on short-term hedges that left the firm exposed to larger losses if they couldn’t be rolled over. Corzine, who was chairman and chief executive officer of the futures broker before it went bankrupt last month, overcame resistance from directors, senior traders and risk managers to accumulate the bonds, according to two people with knowledge of the situation. He used the hedges, or offsetting trades, to cut the net risk reported to shareholders to $6.4 billion, according to an Aug. 3 regulatory filing by the company. A former New Jersey senator and governor, Corzine joined MF Global in March 2010 with a plan to remake the company into an investment bank in the image of Goldman Sachs Group Inc., where he had been co-chairman before entering politics. He repeatedly ratcheted up his wager on the debt of countries including Italy and Spain, booking gains along the way, according to filings. The short-term hedges matured before the bonds, meaning the net amount at risk could increase if investors lost confidence in either European sovereigns or MF Global and new hedges couldn’t be bought.

Shanghaied Home Buyers Turn Protesters as Shattered Dreams Vex Government - (www.bloomberg.com) Danny Deng and his bride-to-be dreamed of their lives together as they walked through the showroom for a Shanghai housing project almost three months ago. Pooling his own and his parents’ savings, a loan from his boss and a 1.1 million yuan ($172,000) mortgage, he bought an apartment and secured his fiancee’s hand. On Nov. 19, Deng faced off a ring of security guards three rows deep wearing camouflage and carrying shields as he joined more than 100 homeowners rallying in front of the development’s sales office. His transformation from newlywed to street protester came after China Vanke Co. (000002) slashed prices for future buyers at the Qinglinjing complex, erasing about 20 percent of the value of his three-bedroom unit overnight.

How Paulson Gave Hedge Funds Advance Word - (www.bloomberg.com) Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan. It was July 21, 2008, and market fears were mounting. Four months earlier, Bear Stearns Cos. had sold itself for just $10 a share to JPMorgan Chase & Co. (JPM). Now, amid tumbling home prices and near-record foreclosures, attention was focused on a new source of contagion: Fannie Mae (FNMA) and Freddie Mac, which together had more than $5 trillion in mortgage-backed securities and other debt outstanding, Bloomberg Markets reports in its January issue. Paulson had been pushing a plan in Congress to open lines of credit to the two struggling firms and to grant authority for the Treasury Department to buy equity in them. Yet he had told reporters on July 13 that the firms must remain shareholder owned and had testified at a Senate hearing two days later that giving the government new power to intervene made actual intervention improbable.

States face bleak economic forecast, report says - (www.washingtonpost.com) States are caught in a fiscal vise as weak economic growth, dwindling federal help and increasing appeals from hard-pressed local governments squeeze their budgets. Things have improved since the worst of the recession, but states still face a dire fiscal situation, according to a report to be released Tuesday by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO). The Fiscal Survey of States says that even as states struggle with tepid revenue growth, they will be called on to spend more because of the economic distress caused by continued high unemployment. “State budgets are certainly improving; however, growth is weak, and there is not enough money for all the bills coming in,” said NASBO Executive Director Scott Pattison. “State officials will still be cutting some programs, and increases in funding for any program except for health care will be rare.”

American Airlines Parent AMR Corp. Files for Bankruptcy - (www.bloomberg.com) American Airlines parent AMR Corp. (AMR) filed for bankruptcy after failing to secure cost-cutting labor agreements and sitting out a round of mergers that dropped it from the world’s largest airline to No. 3 in the U.S. With the filing, American became the last of the so-called U.S. legacy airlines to seek court protection from creditors. The Fort Worth, Texas-based company, which traces its roots to 1920s air-mail operations in the Midwest, listed $24.7 billion in assets and $29.6 billion in debt in Chapter 11 papers filed today in U.S. Bankruptcy Court in Manhattan. “It’s painful but probably necessary,” John Strickland, an aviation analyst at JLS Consulting in London, said today in a telephone interview. “They will have to go through the whole process that their peers have gone through.”