KeNo's Housing and Economic Portal: Tuesday March 13 Housing and Economic stories

Monday, March 12, 2012

Tuesday March 13 Housing and Economic stories

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California's Stockton Strives to Avoid Vallejo's Bankruptcy Fate - (www.sfgate.com) After a man with a laptop walked into Best PC Value computer repair in Stockton, California, owner Richard La Frentz telephoned the police. Hours before, the same man had been recorded by a security camera hopping a locked gate behind the store and stealing the computer. The police didn't come. They told La Frentz to call his insurance company, he said. "It is the Wild West out here," said La Frentz, 47, who keeps two handguns at his store in Stockton's Miracle Mile shopping district. "When I call the police department, I don't get help. The city can't help me because of the condition that it's in." Stockton, an agricultural center of about 292,000, is fighting to avert bankruptcy by shrinking its payroll, including a quarter of the roughly 425-member police force. Twice since 2010 it has declared a state of fiscal emergency to force cuts on public employees.

Banks Win Reprieve on Home Equity Loans in Settlement - (www.bloomberg.com) Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and three other banks that settled a nationwide probe of foreclosure practices this month will get a bonus from the deal: protection for $308 billion of home-equity loans they hold. The banks that service about half the nation’s mortgages on behalf of investors will be able to share losses on their junior loans with bondholders and get credit toward the cash they pledged to spend in the settlement, said an Obama administration official involved in drafting the $25 billion agreement. Second liens would typically be wiped out before senior-mortgage investors take a loss, said Laurie Goodman, managing director at Amherst Securities Group LP in New York. It’s “a gift to the banks, at investors’ expense,” said Goodman, a member of the Fixed Income Analysts Society’s Hall of Fame. “A proportionate write-down of the first and second represents a reversal of normal lien priority.”

U.S. Governors Have Few Answers as Cities Teeter on Brink of Bankruptcy - (www.bloomberg.com) U.S. governors of states where municipalities filed for bankruptcy say there was little they could have done, even as cities such as Stockton (3654MF), California, crack under continuing fiscal pressures. Stockton, a Central Valley agricultural center with a population of 292,000, this week may take the first steps toward becoming the most populous U.S. city to file for bankruptcy, and will consider defaulting on $2 million of debt payments, officials have said. California (STOCA1)Governor Jerry Brown said yesterday he wasn’t prepared to discuss the situation. “I want to see what exactly there is,” Brown said in an interview at the National Governors Association meeting in Washington. “They’ve started a process, and that process will continue to proceed, and hopefully the city and the creditors will find some reasonable accommodation.” While an improving U.S. economy is helping boost revenue for states, cities face declining aid and a drop in the property-tax take since the housing crash.

Europe Gets Ready for Round 2 of Bank Loans - (www.nytimes.com) This week the bank will offer a second installment of the three-year loans. After the first injection of cash helped reopen bank financing markets in Europe and bolster stock and bond markets around the world, there is intense interest in how much money banks will borrow, and what the effect will be. A few analysts say borrowing could approach 1 trillion euros, a significant amount, but the majority expect about half that, in line with the first round of three-year loans. One unknown is how much healthy banks will draw on the central bank’s credit in order to make a profit by borrowing money at 1 percent and investing in assets that pay a higher return, like government bonds. The bank will announce the results Wednesday morning.

Default Risk in Europe Nine Times Higher Than Treasuries After Greek Pact - (www.bloomberg.com) The bailout that rescued Greece from a looming default has failed to restore confidence in credit markets, where traders are paying nine times more to insure European government bonds than they are for Treasuries. While European stocks are off to their best start since 1998, the relative cost of credit default swaps has risen to a record, more than double the July level, according to CMA. To obtain 130 billion euros ($175 billion) in aid to help pay interest on bonds due March 20, Greek Prime Minister Lucas Papademos agreed to reduce debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.