KeNo's Housing and Economic Portal: Friday April 6 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Government assuming 100 percent of the credit risk on new mortgages - (www.reuters.com) Last week, I spotlighted three ominous trends in consumer banking. The last one spotlighted a brewing war “between the private bank sector and the government over who exactly controls the allocation of consumer credit in this country.” By far, the most important front in this battle is over the future of housing finance. Today, the government is underwriting or assuming 100 percent of the credit risk on practically every new mortgage that’s originated. With regard to outstanding mortgages, the government is responsible for 100 percent of the default risk on about $6 trillion of the roughly $10 trillion market.

Soldier's rampage explained - (www.news.yahoo.com) Robert Bales, the staff sergeant accused of massacring Afghan civilians, enlisted in the U.S. Army at the same time he was trying to avoid answering allegations he defrauded an elderly Ohio couple of their life savings in a stock fraud, according to federal documents reviewed by ABC News. "He robbed me of my life savings," Gary Liebschner of Carroll, Ohio told ABC News. Financial regulators found that Bales "engaged in fraud, breach of fiduciary duty, churning, unauthorized trading and unsuitable investments," according to a report on Bales filed in 2003. Bales and his associates were ordered to pay Liebschner $1,274,000 in compensatory and punitive damages but have yet to do so, according to Liebschner. "We didn't know where he was," Liebschner told ABC News. "We heard the Bahamas, and all kinds of places." Liebschner says he recognized Bales after news reports named him as the American soldier accused of killing 16 Afghan villagers in a shooting rampage.

Rich Neighborhood, Poor House - (www.smartmoney.com) It's easy to see why Jeff and Heidi Jackman coveted a home on Three Mile Drive in Grosse Pointe Park, Mich. Manicured lawns and gracious mansions flank the wide boulevard, which is less than a mile from the shores of Lake St. Clair but still just a short commute to Detroit. So when a large brick Tudor on the prestigious street hit the market for just under $500,000 -- a fraction of what most mansions in the area sell for -- Jeff Jackman jumped at the chance. The deal got even sweeter once he learned that the home, complete with maids' quarters and hand-painted bathroom tile, used to belong to the Kmart founding family and once served as a crash pad for pop stars the Black Eyed Peas. But the once-posh mansion wasn't exactly ready for move-in day. Overgrown shrubs masked much of the yard. The hardwood floors looked like they'd been ravaged by wolves. The kitchen had white laminate countertops (coffee cup stains included), there was peeling paint in the former ballet studio, and the laundry room appeared better suited to clean a stray cat than a dress shirt. "It needs some TLC," says Jeff, a local business owner.

Wall Street pays handsomely for Washington inside dope - (news.yahoo.com) In 2009, an unusual meeting took place at a federal government agency in Baltimore. For around 90 minutes, a group of financial industry professionals grilled staffers at the Centers for Medicare and Medicaid Services, seeking information about an obscure policy question: whether CMS, which oversees the two massive federal health programs, planned to change the reimbursement policies under Medicare for a class of medical devices. The decision stood to affect the bottom line of several companies that produce versions of the device, and the bankers wanted to use what they learned to make investment decisions. "They hammered us for an hour and a half to try to figure out where we were headed, what our process was, how we'd done things like this in the past," one CMS staffer at the meeting told Yahoo News. "It was theater of the obscene." The Wall Street crowd didn't learn whether the reimbursement policies would change, but they still got something out of the meeting. "They learned a great deal about the process," said the source. "So they had an enormous competitive advantage over others in the marketplace." After the meeting was first reported by the Project on Government Oversight, a good-government group, Sen. Charles Grassley, an Iowa Republican, sent a stern letter to CMS questioning whether the confab had served taxpayers' interests. The agency told POGO the meeting was "consistent with agency rules on contacts between CMS staff and members of the public." Still, this wasn't the kind of meeting that any concerned citizen could have set up. It was arranged by the Marwood Group, a "strategic advisory and financial services firm" focused on health care policy and founded in 2000 by Edward Kennedy Jr., son of the late Massachusetts senator. Marwood is one of an increasing number of players in the fast-growing "political intelligence" industry, which provides information or analysis about legislative developments or policy decisions to clients—usually Wall Street hedge funds or other financial institutions—whose business decisions are affected by what happens in Washington. And lately, it's attracted the attention of some federal lawmakers, who fear that it gives insiders an unfair leg up.

The New Suburban Poverty - (www.nytimes.com) In many of America’s once pristine suburbs, harbingers of inner-city blight — overgrown lots, boarded up windows, abandoned residences — are the new eyesores. From the Midwestern rust-belt to the burst housing bubbles of Nevada, California and Florida, even in small pockets of still affluent regions like Du Page County, Ill., the nation’s soaring poverty rates are visibly reclaiming last century’s triumphal “crabgrass frontier.” In well-heeled Illinois towns like Glen Ellyn and Elgin, unkempt, weedy lawns blot the formerly manicured, uniform and tidy landscape. The Brookings Institution reported two years ago that “by 2008 suburbs were home to the largest and fastest growing poor population in the country.” In the previous eight years, major metropolitan suburbs had seen poverty rates climb by 25 percent, almost five times faster than cities. Nationwide, 55 percent of the poor living in the nation’s metropolitan regions lived in suburbs.