Friday June 1 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Confidence Sinks as Progress in U.S. Job Market Stalls: Economy - (www.bloomberg.com)  Consumer confidence fell last week to the lowest level in almost four months and more people than forecast filed claims for unemployment benefits, showing a lack of progress in the job market is rattling Americans. The Bloomberg Consumer Comfort Index dropped in the week ended May 13 to minus 43.6, a level associated with recessions or their aftermaths, from minus 40.4 in the previous period. Jobless applications were unchanged at 370,000 in the week ended May 12, Labor Department figures showed today in Washington. Diminishing employment gains, falling stock prices and the prospect of government gridlock over the budget heading into the November presidential election may continue to hurt household sentiment. The lack of a sustained rebound in hiring damps the outlook for consumer spending, which accounts for about 70 percent of the world’s largest economy.

JPMorgan's future losses at the mercy of an obscure index - (www.reuters.com) It's the biggest parlor game on Wall Street: Estimating how large JPMorgan Chase & Co's (JPM.N) trading loss will be from a hedging strategy that went wrong. The biggest U.S. bank by assets has already disclosed $2 billion of paper losses, and Chief Executive Jamie Dimon said it could lose another $1 billion or more. The losses will grow, some traders say, because it appears JPMorgan has only sold a small portion of its position, leaving it vulnerable to price swings in a thinly traded market. Others are not so sure the bank will suffer much more than it already has. Dimon said the bank won't rashly sell, and any additional losses could arise throughout the year. A JPMorgan spokeswoman declined comment.

JPMorgan’s Trading Loss Is Said to Rise at Least 50% - (www.nytimes.com) The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank. A spokeswoman for the bank declined to comment, although Mr. Dimon has said the total paper trading losses will be volatile depending on day-to-day market fluctuations.

Bankia IPO Causes Shareholders $2 Billion Loss Post Bailout - (www.bloomberg.com) Bankia SA (BKIA), the Spanish lender taken over by the government in a bailout this month, struggled to convince money managers to take part in its initial public offering less than a year ago. The bank instead relied on individuals, investors who are typically less equipped to analyze stock risks, to fill orders for the IPO in July. About 347,000 investors, most of them individuals like Josefa Rodriguez, an 86-year-old retired housewife from Madrid, bought Bankia’s shares. “My aunt is a lady with almost nil knowledge of financial products and this wasn’t an appropriate product for her,” said Marta Rodriguez, her niece, who spoke on her behalf in a phone interview as Josefa lives in a residential nursing home. “Staff at the bank was under a lot of pressure themselves to sell the shares.”

Spain Debt Fight Intensifies as Valencia Test Looms: Euro Credit - (www.bloomberg.com) Spanish Prime Minister Mariano Rajoy’s bid to fight off the European debt crisis is about to intensify as his government wields new powers to tame the country’s indebted regions. Regional officials from Rajoy’s People’s Party will today face their first attempt to persuade Budget Minister Cristobal Montoro that Valencia, which accounts for 10 percent of the Spanish economy, can avoid default without intervention. Deficits beyond the grasp of Madrid helped push the nation’s 10-year bond yields to a five-month high of 6.5 percent yesterday. The collapse of regional finances is pushing Rajoy to reverse 35 years of devolution that saw public spending soar for projects in Valencia such as Formula One racing events and a new opera house. The European Union predicted last week thatSpain will miss deficit-reduction goals this year and in 2013.

OTHER STORIES:

Jobless Claims in U.S. Were Unchanged at 370,000 Last Week - (www.bloomberg.com)

As G-8 world leaders head to Camp David, a test looms for the euro zone - (www.washingtonpost.com)

Fed Minutes Reflect Wariness About Recovery's Strength - (online.wsj.com)

Facebook Raises $16 Billion in Biggest Technology IPO on Record - (www.bloomberg.com)

Hewlett-Packard Said to Consider Cutting as Many as 25,000 Jobs - (www.bloomberg.com)

Facebook Insiders Boost Plans to Cash Out in IPO - (online.wsj.com)

Ahead of Facebook I.P.O., a Skeptical Madison Ave. - (www.nytimes.com)

Thursday May 31 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Why Have American Small-Business Jobs Gone Missing? - (www.bloomberg.com) Big business, we keep being told, has been so hampered by regulatory uncertainty over the past few years, it has been reluctant to hire workers. So it is surprising to read the results of a little-known survey from the Bureau of Labor Statistics: Very large businesses, it turns out, have been expanding their domestic workforces relatively rapidly. If, since January 2011, businesses of all sizes had hired at the same rate as those with 5,000 or more employees, we would have almost 4 million more jobs today.  The BLS data show that the overall weakness in the U.S. labor market reflects slow employment growth among smaller businesses, following a recession that hit them especially hard. The data come from the bureau’s Job Openings and Labor Turnover Survey (JOLTS), which is commonly used to examine trends in rates of hiring and job loss. 

Rajoy warns Spain faces debt market exile - (www.ft.com)  Spain’s prime minister warned his country risked being shut out of the financial markets unless it was allowed to press ahead with its package of deficit cuts, as yields on the country’s debt jumped. Speaking in parliament on Wednesday, Mariano Rajoy said: “We must reduce the public deficit because there is a serious risk that we will not be able to borrow, or borrow at astronomical prices ... All these measures are to get out of the hole we find ourselves in.” Yields on Spanish 10-year bonds touched 6.5 per cent for the first time since November, taking them closer to levels that prompted bailouts for Greece, Portugal and Ireland. Italy’s comparable benchmark bonds were trading at 5.94 per cent.

INCREDIBLE: Lawyers For The Major Banks Accidentally Leaked E-mails About Their Clients Naked Short-Selling Overstock.com - (www.businessinsider.com)  For years, Overstock.com has been in a legal battle with Goldman Sachs, Bank of America, Merrill Lynch and more. The online retailer accuses the banks of naked short-selling its stock. Overstock.com lost that battle, but they're still trying to get the banks to unseal documents that would prove their case. According to Rolling Stone's Matt Taibbi, who posted the Plaintiff's motion on his blog, his publication, as well as The Economist, Bloomberg, and the New York Times, have been fighting to see the documents too.  Fighting the banks is not easy, we know, but then recently, something magic happened. The Defendants' law firm, Morgan Lewis, committed a colossal screw up. During the discovery period, they neglected to redact sensitive e-mails from their clients. Then they sent them off to Overstock.com's legal team.

U.S. Said to Start Probe of $2 Billion JPMorgan Loss - (www.bloomberg.com) The U.S. Justice Department and the Federal Bureau of Investigation in New York have begun a criminal probe of JPMorgan Chase & Co. (JPM)’s $2 billion trading loss, a person familiar with the matter said. The U.S. is looking into whether criminal wrongdoing occurred in relation to the losses the bank reported last week, said the person, who declined to be identified because the matter isn’t public. The inquiry is in its most preliminary stage, the person said. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, which regulates derivatives trading, also are examining New York-based JPMorgan’s trading activities, according to people familiar with those probes.

Obama Now Claims The Power To Freeze Your Assets If You Oppose The New Government In Yemen - (www.businessinsider.com)  Over at Salon, Glenn Greenwald has the goods on the latest astounding power grab by the Obama Administration. According to The Washington Post, Obama has just issued an executive order claiming the power to freeze any assets you own, if you "directly or indirectly" obstruct the new government of Yemen.  There are hardly any criteria for judging just how broadly this order can be interpreted.  Here's the background: Abed Rabbo Mansour Hadi is the new Yemeni president, and the former Vice President of long-time dictator Ali Abdullah Saleh. Hadi was recently installed after an "election" where he ran unopposed, prompting celebrations about a new blooming democracy in the Middle East. Subsequently, the U.S. has sent millions in aid and military assistance to the Hadi government, despite its unpopularity among observers in the West and most importantly, the Yemeni people.

OTHER STORIES:

Bank of Japan Stimulus Hits Wall as Bond Buying Falls Short for First Time - (www.bloomberg.com)

BOE Sees Near-Term U.K. Inflation Pressure - (www.bloomberg.com)

Japan’s Growth Seen Peaking as BOJ Pressed to Stimulate - (www.bloomberg.com)

Euro-Region Inflation Slowed in April as Debt Crisis Hit Consumer Demand - (www.bloomberg.com)

Australia’s Weak Consumer Confidence, Wage Growth Spur Rate Bets: Economy - (www.bloomberg.com)

Greece fails to form unity government - (www.ft.com)

New U.S. Housing Construction in April Exceeds Forecasts - (www.bloomberg.com)

Industrial Production in U.S. Climbs More Than Forecast - (www.bloomberg.com)

JPMorgan Said to Consider Clawing Back Bonuses - (www.bloomberg.com)

JP Morgan's $2 Billion-Plus Loss Came On Three-Legged Trade - (online.wsj.com)

Wednesday May 30 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Homeowners encroaching onto public sand - (www.latimes.com)  California has ordered homeowners along some of Orange County's most coveted coastline to rip out the landscaping, sprinklers and other upgrades that have crept steadily seaward. On the tip of Balboa Peninsula, where multimillion-dollar homes sit snug against the sand and the legendary waves draw crowds of bodysurfers, an unlikely battle is taking shape. At the center are the lawns, lounge chairs, hedges and playground equipment — even a rusty metal shark sculpture — that for years have sprawled out from oceanfront homes onto the public sand. It's all illegal, says the state of California, which has ordered homeowners along some of Orange County's most coveted coastline to rip out the landscaping, sprinklers and all the other upgrades that have crept steadily seaward.

Foreclosure activity declines hurting investors, says report - (www.centralvalleybusinesstimes.com) The pace of foreclosures in California is slowing to a crawl, according to figures for the month of April compiled by foreclosure information company ForeclosureRadar Inc. of Discovery Bay. In California, Notice of Default filings were down 69.8 percent from the peak in March 2009, and 15.8 percent from April 2011. Foreclosure sales also declined, however, foreclosure investors purchased a record percentage of the limited inventory that was actually sold. California investors purchased 41.3 percent of foreclosure sales last month, the report says. Here are ForeclosureRadar’s figures for April for Central Valley counties. The first figure is the number of homes entering the foreclosure pipeline. The second is the percentage difference from April 2011.

Don't Forget About JPMorgan's Other Huge Derivatives Losses - (www.businessinsider.com)  In an August 2010 commentary about JPMorgan's losses in coal trades I wrote: "The commodities division isn't the only area in which JPMorgan is vulnerable. Credit derivatives, interest rate derivatives, and currency trading are vulnerable to leveraged hidden bets. Ambitious managers strive to pump speculative earnings from zero to hero." At issue is corporate governance at JPMorgan and the ability of its CEO, Jamie Dimon, to manage its risk. It's reasonable to ask whether any CEO can manage the risks of a bank this size, but the questions surrounding Jamie Dimon's management are more targeted than that. The problem Jamie Dimon has is that JPMorgan lost control in multiple areas. Each time a new problem becomes public, it is revealed that management controls weren't adequate in the first place.

"Realtor Charged with Embezzlement, Grand Larceny and Fraud" - (www.patrick.net) A Watsonville real estate agent charged with nearly 50 counts of embezzlement, forgery and theft pleaded not guilty to all charges in court Friday morning and now faces trial. Grimaldo L. Sanchez Jr., 29, was arrested in October and is accused of bilking clients out of thousands of dollars. According to the criminal complaint filed against him, Sanchez is accused of committing these crimes over a period of at least three years, with the most recent incident named in the complaint having occurred on or about March 8, 2011. Among the 49 counts listed in the complaint, Sanchez is accused of numerous charges of embezzlement by a public or private officer, in which he allegedly misappropriated clients' funds in his capacity as a real estate agent with Quintero Realty. According to Assistant District Attorney William Atkinson, in the case of one of the victims, Sanchez allegedly bilked them out of approximately $48,000, although he later repaid that money to them.

This Is Clearly Going To Cost JPMorgan Much More Than $2 Billion - (www.businessinsider.com)  JPMorgan announced a $2 billion loss Friday. When compared to its market cap and other indicators, that goes Ouch!, but not much more. However, there’s more going on. The bank has refused to state where in its operations the loss was incurred. For good reason perhaps: the positions that caused the loss are still rumored to be open. The main problem JPMorgan may be facing, and the 8% loss in pre-market trading may be a sign players are on to this, is that we probably already know where the loss is. A few weeks ago, the financial sphere was full of stories about the London Whale, a JPM trader in London named Bruno Michel Iksil, who had taken such massive - synthetic - derivative (gambling) positions in a 125 company index that they were moving the market itself.

OTHER STORIES:

Greeks Withdraw Nearly $1 Billion From Local Banks - (www.cnbc.com)

Banks Withholding Foreclosure Properties to Boost Sales - (www.eforeclosuremagazine.com)

JCPenney Loss Double What Expected; Stock Plunges - (www.cnbc.com)

Ryan Seacrest Buys Ellen DeGeneres’s Beverly Hills Estate - (www.online.wsj.com)

Older Unemployed Americans Face Tough Job Hunt - (www.cnbc.com)

Why buy a used house when you can buy a new one for 40% less? - (www.patrick.net)

JPMorgan’s Dimon Confronts Angry Shareholders - (www.cnbc.com)

Greece to Hold New Election, Jolts Euro Markets - (www.cnbc.com)

Tuesday May 29 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Ally’s Residential Capital Files for Bankruptcy - (www.bloomberg.com) Residential Capital LLC, the unprofitable mortgage company whose parent Ally Financial Inc. (ALLY) is trying to repay a U.S. government bailout, filed for bankruptcy and plans to sell most of its assets to Fortress Investment Group LLC. (FIG) ResCap listed assets of $15.7 billion and debt of $15.3 billion in a petition filed today in U.S. Bankruptcy Court in Manhattan. ResCap’s Chapter 11 filing is the biggest so far this year, based on liabilities, according to data compiled by Bloomberg. “The action by ResCap will enable Ally to achieve a permanent solution to its legacy mortgage risks and put these issues behind us,” Ally Chief Executive Officer Michael A. Carpenter said today in a statement. Ally said it also may sell its international auto-finance and insurance operations to help repay a $17.2 billion U.S. bailout.

GARY SHILLING: Home Prices Will Plummet 20% From Here - (www.businessinsider.com)  Despite growing consensus that it is now cheaper to buy a home than rent one, Gary Shilling, president of A. Gary Shilling & Co. says by previous standards home prices are still high relative to rents. In his latest editorial in The Wall Street Journal, Shilling writes while home prices have fallen 34 percent since their peak in early 2006, they are not cheap if prices continue to fall: "But even if homeownership was cheaper than renting, as some claim, buying a house now would be a disastrous investment if prices fall another 20% or more." Shilling says homes are going to lose market value in coming years because of excess inventories. He says there are an excess of 2 million inventories and that it will take at least four years to work off this excess and quite some time for those surplus homes to bring down prices:

European austerity bites deep into Spain - (www.washingtonpost.com) When officials in Madrid slashed support for alternative-energy programs this year as part of the campaign of government austerity sweeping Europe, ripples quickly hit this rural town with the cancellation of plans for a solar energy plant. The decision forced several dozen layoffs at the company that would have built and run the project, adding to an unemployment rate that is running at 30 percent in the region. The move also undercut hopes at local firms that had expected to provide heavy equipment and fencing for the plant. At a cement company that was to supply material for the project, mixers now sit idle and the fear of further layoffs looms. Hours after police in Madrid arrested 18 people, thousands of demonstrators reassembled to protest the government's harsh austerity measures. Police say the protests drew more than 70-thousand people nationwide this past weekend. The economic debate consuming Europe comes down to the question of whether struggling countries should choose austerity by clamping down on government spending to rein in unsustainable deficits or pursue growth stimulated by more spending.

Credit-Default Swaps in U.S. Rise on Talk Greece May Exit Euro - (www.bloomberg.com) A gauge of corporate credit risk increased for an eighth day, the longest streak since January 2010, on concern that Greece will exit the single European currency. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses on corporate debt or to speculate on creditworthiness, added 3.6 basis points to a mid-price of 112.2 basis points at 8:25 a.m. in New York, according to prices compiled by Bloomberg. The swaps index rose as Greek leaders struggled to form a government following inconclusive elections May 6. The nation’s exit from the euro “is not necessarily fatal, but it is not attractive,” European Central Bank Governing Council member Patrick Honohan said May 12.

Dimon Fortress Breached as Push From Hedging to Betting Blows Up - (www.bloomberg.com) David Olson, a former head of credit trading in JPMorgan Chase & Co. (JPM)’s chief investment office, learned about risk as a U.S. Navy nuclear submarine pilot. When he joined the bank in 2006, his new commander, Chief Executive Officer Jamie Dimon, was transforming the once- conservative unit from a risk manager to a profit center.  “We want to ramp up the ability to generate profit for the firm,” Olson, 43, recalled being told by two executives. “This is Jamie’s new vision for the company.” That drive has now shattered JPMorgan’s cultivated reputation for policing risk and undermined Dimon’s authority as a critic of regulatory efforts to curb speculation by too-big- to-fail banks. It also cost Chief Investment Officer Ina R. Drew, one of the most powerful women on Wall Street, her job. As U.S. and U.K. investigators descend on the firm following Dimon’s announcement last week of a $2 billion trading loss, lawmakers are pointing to the breakdown at the largest U.S. bank as evidence that tougher rules are needed.

OTHER STORIES:

Euro Officials Begin to Weigh Greek Exit - (www.bloomberg.com)

Hedge Funds Are Shadow Banks in Need of Regulation, Bafin Says - (www.bloomberg.com)

Greek Elections Loom as Key Bailout Opponent Defies Unity - (www.bloomberg.com)

Euro-Region Industrial Production Unexpectedly Fell in March - (www.bloomberg.com)

Despite Germany, euro zone sinks towards recession - (www.reuters.com)

India Inflation Unexpectedly Quickens, Curbing Rate-Cut Room - (www.bloomberg.com)

Yahoo’s Thompson Quits Amid Inquiry; Levinsohn Is Interim CEO - (www.bloomberg.com)

JPMorgan Names C.I.O. to Succeed Ina Drew - (www.nytimes.com)

As European Austerity Ends, So Could the Euro - (www.bloomberg.com)

Monday May 28 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Greeks May Hold $510 Billion Trump Card in Renegotiation - (www.bloomberg.com)  Greece’s next government may hold a trump card worth more than $510 billion if it heeds voters’ demands to renegotiate its bailout with the European Union. The nation owes about 400 billion euros ($517 billion) to private bondholders, public bodies such as the International Monetary Fund and European Central Bank and other creditors, according to data compiled by Bloomberg. About 252 billion euros of that’s due to official organizations that used their status to avoid the losses suffered by ordinary bondholders when Greece restructured its debt two months ago. Greek voters are demanding their leaders renegotiate the terms of rescue packages that have imposed unprecedented austerity on the country since 2010. One potential prime minister, Syriza party leader Alexis Tsipras, has pledged to tear up the EU-led bailout agreement. With Greece owing a sum roughly equal to Switzerland’s economy, the fallout for taxpayers could be calamitous if the country walks away.

In Spain, a Debt Crisis Rooted in Corporate Borrowing - (www.nytimes.com) In a country with one of the highest levels of company debt in the world, few businesses in Spain shoulder as big a burden asGrupo A.C.S., the global construction giant whose debt woes have become a mirror image of Spain’s own increasingly severe financial struggle. Saddled with a 9 billion euro ($11.7 billion) debt pile that is twice the size of the company’s shrinking market value, A.C.S. is in the midst of a frantic campaign to sell off assets, pay down debt and further distance itself from a Spanish economy caught in a spiral of austerity and deflation. The Spanish government’s harsh budget cuts and their depressive effect on the economy have prompted foreign investors to sell Spanish stocks and bonds in droves. On Tuesday, Spanish stocks plunged 2.8 percent and the government’s 10-year bond yields spiked to 6 percent as Spain moved to bail out its ailing banks, and uncertainty over Greece loomed.

Norway Dumps Ireland, Portugal Bonds on Euro Crisis - (www.bloomberg.com)  Norway’s sovereign wealth fund sold all its Irish and Portuguese government bonds after rejecting the Greek debt swap and warned that Europe faces considerable challenges. The $610 billion Government Pension Fund Global returned 7.1 percent, or 234 billion kroner ($41 billion), as measured by a basket of currencies, in the first quarter, the Oslo-based investor said today. Its equity holdings gained 11 percent while its fixed-income investments rose 1.6 percent. The fund, which voted against Greece’s debt swap this year because it disagreed with being subordinated to the European Central Bank, also said it reduced debt holdings in Italy and Spain amid a broader strategy to cut investments in Europe. The fund added government bonds from emerging marketssuch as Brazil, Mexico and India.

Spanish Banks Erode Creditors With ECB Loans: Mortgages - (www.bloomberg.com) Spain’s lenders are pledging some of their best assets to raise record levels of secured funding, including from the European Central Bank, eroding creditor safeguards at the same time the government is planning the country’s largest bank bailout. Borrowing from the ECB rose 50 percent in March from the prior month to 227.6 billion euros ($294.3 billion). Bankia Group is among lenders that increased mortgage-backed debt issuance by 35 percent since December 2007 to 535.1 billion euros, or 53 percent of their real-estate loans, according to Spanish Mortgage Association data at the end of 2011. Rodrigo Rato, Bankia chairman, stepped down this week as part of a plan in which the government is willing to inject public funds. Spanish lenders are increasingly depending on the central bank and secured debt sales to lower funding costs after their return on equity in 2011 was the lowest in more than four decades following the country’s real-estate crash.

Mortgage legislation splits California Democrats - (www.sacbee.com) The "60 Minutes"-style video climaxes with an assemblyman hustling through a Capitol corridor and down a flight of steps, trailed by a constituent asking where the lawmaker stands on controversial mortgage legislation. Assemblyman Felipe Fuentes, the Sylmar Democrat who is the subject of "What Legalized Bribery Looks Like," says the piece produced by liberal activists is a "lie." It also highlights how the pitched political struggle over the future of California's mortgage law has roused labor and activist groups into using guerrilla tactics to call out moderate Democrats in an election year. "Embarrass and expose," said Steve Maviglio, a veteran Democratic strategist and campaign consultant. "It's a very effective tool."

OTHER STORIES:

Greek Government Mandate Passes to Venizelos’s Pasok - (www.bloomberg.com)

Greek unemployment up at 21.7 percent in February - (finance.yahoo.com)

Round 3 for Greek power-sharing talks - (finance.yahoo.com)

Merkel says "growth on credit" would deepen crisis - (www.reuters.com)

Europe signals openness to relaxing Greek timetable, lowering loan rates - (www.washingtonpost.com)

Trade Gap in U.S. Widens More Than Forecast as Imports Jump - (www.bloomberg.com)

Jobless Claims in U.S. Fell 1,000 Last Week to 367,000 - (www.bloomberg.com)

Goldman Sachs May Owe $2.21 Billion If Rating Falls Two Levels - (www.bloomberg.com)

Friday May 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

U.S. Millionaires Told Go Away as Tax Evasion Rule Looms - (www.bloomberg.com) Go away, American millionaires. That’s what some of the world’s largest wealth-management firms are saying ahead of Washington’s implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. HSBC Holdings Plc (HSBA), Deutsche Bank AG, Bank of Singapore Ltd. and DBS Group Holdings Ltd. (DBS) all say they have turned away business.  “I don’t open U.S. accounts, period,” said Su Shan Tan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender, who described regulatory attitudes toward U.S. clients as “Draconian.”

FHA New Foreclosures Jump as Modified Loans Default - (www.bloomberg.com) The number of Federal Housing Administration-insured home loans entering foreclosure jumped in March after half the mortgages it modified to ease repayment terms were in default again a year or more later. The FHA’s role in lending to first-time buyers with poor credit and limited cash expanded after the 2008 collapse of the mortgage market put it at the center of government efforts to revive housing. The FHA allows down payments as low as 3.5 percent for borrowers with a credit score of 580, below the 640 defined as subprime by the Federal Reserve. “The credit standards are way too loose -- you can get into a house with very little skin in the game, and if home prices drop by a small amount, you’re underwater,” said David Lykken, managing partner at Mortgage Banking Solutions, an Austin, Texas-based consulting firm. “We’ve got to start getting reasonable about standards. What they’ve done so far, some very slight attempts at tightening, don’t really count.”

Spain wants banks to find an extra $45 billion: sources - (www.reuters.com) Spain stepped up efforts to save its troubled banks on Thursday with a plan to make them recognize huge losses from a property crash, but uncertainty over the final cost of a rescue hit the euro, Spanish debt and global stock markets. The centre-right government will demand that banks set aside 35 billion euros ($45 billion) against loans to the moribund building sector, on top of 54 billion euros the banks are already provisioning, financial sources said late on Tuesday. This would mark the latest in a string of reform plans in the past week which include moving toxic assets out of some banks and staging an estimated 10 billion euro state rescue of Spain's most exposed bank, Bankia.

Spanish Credit Risk Surges to Record on Bankia ‘Zombie’ Peril - (www.bloomberg.com) The cost of insuring against a Spanish default surged to a record on concern a bailout of Bankia SA (BKIA), the nation’s third-biggest lender, won’t fend off a banking crisis triggered by bad real estate loans. “While there is no danger of an imminent collapse at Bankia, there is a risk that it becomes a zombie bank, which has to rely on the European Central Bank to fund it over the long term,” said Roger Francis, an analyst at Mizuho International Plc in London. There is growing speculation Spain may become the fourth European nation to seek a rescue as its lenders become overwhelmed by 184 billion euros ($239 billion) of what the nation’s central bank terms “problematic” assets linked to property. Of the 38 billion euros of real estate the Bankia group held at the end of 2011, about half was classed as either “doubtful” or at risk of becoming so, according to the lender’s annual report.

Too broke to go bankrupt - (money.cnn.com)  This year, hundreds of thousands of Americans are expected to be too broke to file for bankruptcy. The average cost to file for Chapter 7 bankruptcy protection, the most common form of consumer bankruptcy, is more than $1,500, according to recent research submitted to the National Bureau of Economic Research. As a result, anywhere between 200,000 and one million consumers are estimated to be unable to afford that steep cost this year. The research, conducted by a group of professors from Columbia University, the University of Chicago and Washington University in St. Louis, examined how bankruptcy filings spiked after people received their tax rebates in previous years.They estimate that another 200,000 consumers, who would otherwise not have enough money to file, will use their tax refunds to pay for bankruptcy this year.

OTHER STORIES:

Brazil Bulls Capitulate as Rousseff Intervention Spurs Outflows - (www.bloomberg.com)

Moody’s Bank Downgrades Risk Choking European Recovery - (www.bloomberg.com)

Turmoil in Greece Raises Euro Risk - (online.wsj.com)

Spain's Bank-Investor Ties Stir Worry - (online.wsj.com)

Greek Elections Force Germany to Weigh Austerity Endgame - (www.bloomberg.com)

Bankia Shake-Up No Spain Panacea Without Action on Assets - (www.bloomberg.com)

Analysis: Turning point emerges for Chinese central bank's market operations - (www.reuters.com)

Cameron says Euro needs single government: report - (www.reuters.com)

U.K. Retail Sales Drop Most in More Than a Year, BRC Says - (www.bloomberg.com)

German Patience With Greece on the Euro Wears Thin - (www.nytimes.com)

Few Options if Europe Turns Away From Austerity - (www.nytimes.com)

Morgan Stanley’s Michael Grimes Is Where Money and Tech Meet - (www.nytimes.com)

Thursday May 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Greek Default Risk Returns as Bond Maturity Nears - (www.bloomberg.com) Two months after forcing through the biggest-ever sovereign bond restructuring, Greece once again faces the prospect of becoming the first developed nation to default on its debt. The government taking office after this weekend’s election has 30 days to decide whether to make today’s interest payment on 20 billion yen ($250 million) of 4.5 percent notes maturing in 2016, or default. Then, by May 15, officials must decide if they’re going to repay the 436 million euros ($555 million) due on a floating-rate note issued a decade ago. These are among about 7 billion euros of bonds whose holders took advantage of being governed by foreign rather than Greek law to sidestep losses suffered under the private-sector involvement rescheduling, or PSI. Paying the holdouts in full would arouse the ire of Greek taxpayers, as well as investors who cooperated with PSI. A failure to pay would signal Europe’s debt crisis is worsening.

Germans warns Greece: no cuts, no aid - (www.reuters.com) Leading German politicians warnedGreece on Tuesday that the country would not receive a cent more aid unless it fulfills all the conditions of its international bailout. An election on Sunday in Greece failed to deliver a parliamentary majority for the two big pro-bailout parties, plunging the country into political limbo and increasing the risk that another vote may be required to resolve the impasse. On Tuesday, the leader of the Left Coalition party, which benefited from rising anger over austerity to take second place in Sunday's poll, declared Greece's policy pledges under its EU/IMF rescue null and void.

Greece braces for repeat elections - (www.ft.com) Greece is bracing itself for a repeat general election after its centre-right leader failed to win leftwing support to form a “national salvation government” after Sunday’s inconclusive outcome at the polls. “We are now heading for a second vote next month in a deeply polarised atmosphere,” said a disappointed government official. The repeat election would probably take place on June 17, he said.

Italian Banks’ ECB Borrowings Increase to Record High in April - (www.bloomberg.com) Italian banks’ borrowings from the European Central Bank reached a record high in April, as the country’s lenders took up almost one-fourth of the funds offered to lenders amid revived concerns about Europe’s debt crisis. Total borrowing by Italian banks rose to 271 billion euros ($353 billion) from 270 billion euros in March, the Bank of Italy said on its website today. Most of the funding, about 268.4 billion euros, was from longer-term refinancing operations, while 2.6 billion euros came from the main refinancing operations, the data show. Lenders in the entire euro area borrowed about 1.13 trillion euros from the ECB, according to the central bank.

Wall Street Banks Depressed in Shift Defying Blankfein - (www.bloomberg.com) For banks such as Citigroup Inc., Goldman Sachs Group Inc. (GS) and Deutsche Bank AG (DBK), the downpour shows few signs of stopping. Almost four years after the financial crisis, their stocks are trading below liquidation values as investors like Boston-based MFS, which manages $285 billion, forecast no rebound in revenue or profitability soon. Last month’s shareholder rejection of executive pay at Citigroup is the most public symptom of the frustration with large lenders and their managements. “For whatever you’ve seen publicly that’s happened in the last six months on pay, multiply that times 10 and that’s what’s actually going on in private” between investors and bank executives, said Benjamin Hesse, who manages five financial- stock funds and leads a team of 15 analysts at Boston-based Fidelity Investments. 

OTHER STORIES:

Greece Likely to Exit Euro This Year, FX Concept’s Taylor Says - (www.bloomberg.com)

China’s Gold Imports Jump as Country May Become Biggest User - (www.bloomberg.com)

Euro Area Must Take Austerity Pain Now, Dombrovskis Says - (www.bloomberg.com)

Canada Housing Bubble Concern Shown in Insurer Query: Mortgages - (www.bloomberg.com)

Greek Government Mandate to Pass to Syriza as Samaras Fails - (www.bloomberg.com)

U.K. RICS House-Price Gauge Drops to Six-Month Low - (www.bloomberg.com)

The End Of Austerity? - (online.wsj.com)

Berlin prepares for pragmatic partnership - (www.ft.com)

Fed's Dudley urges more global policy coordination - (www.reuters.com)

Billion-Dollar Traders Quit Wall Street for Hedge Funds - (www.bloomberg.com)

Morgan Stanley Sees $9.6 Billion Collateral Call If Cut 3 Grades - (www.bloomberg.com)

Monetary policy is no panacea for Europe’s ills - (www.ft.com)