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Goldman executives sold $700m of stock - (www.ft.com) Executives at Goldman Sachs sold almost $700m worth of stock following the collapse of Lehman Brothers last September, according to filings with the Securities and Exchange Commission. Most of the sales occurred during the period in which the investment bank enjoyed the support of $10bn from the troubled asset relief programme. The surge in selling among Goldman partners, at a time when the US government had thrown a lifeline to Wall Street, is likely to draw criticism from lawmakers on Capitol Hill. Having survived the crisis, the bank is expected to report strong second-quarter earnings on Tuesday on rebounding trading profits. For the eight-month period for which figures are available, Goldman partners sold more than $691m in company stock, even as the firm expanded its public float from 395m to 503m shares in several capital raises. For the comparable period between September 2007 and April 2008, when the average share price was substantially higher, Goldman partners sold about $438m in stock. A spokesman declined to comment on the sales, other than to note that Goldman partners receive a big share of annual bonuses in stock, and that for many, stock sales are an effort to diversify their holdings. Some of the sales could have been motivated by margin calls, which are said to have afflicted a number of Goldman executives who used company stock as collateral for loans. Stock sales by partners have been a sensitive topic at Goldman Sachs, but never more so than since last September after the collapse of Lehman’s. According to a disclosure in Goldman’s most recent proxy statement in March, the bank took the unusual step of buying back investments in illiquid employee funds made by Jon Winkelried, former co-chief operating officer, and Gregory Palm, general counsel, for $19.7m and $38.3m respectively. Goldman agreed to the unusual buy-backs last September to obviate the need for the two officers to sell stock on the open market, the company said in March. “Stock sales would easily have covered their requirements but, given the turbulent market conditions, we and they were concerned that such sales would be misconstrued by the market as indicating a lack of confidence in Goldman Sachs.” Employee ownership has been an important component of Goldman’s “partnership” culture, a vestige of the investment bank’s history as a privately held firm. It went public in 1999. But Goldman’s culture was severely tested last year. For the period during which executive sales were allowed, from September 17 to October 24, Goldman partners sold some $250m worth of stock. A bigger wave of selling occurred during the window between December 2008, after Goldman reported its first quarterly loss as a public company, and mid-February. In that two-month period, when Goldman’s share price sunk to near-historic lows, partners sold more than $280m worth of company stock.
Realtors Might Not Have Your Best Interests At Heart - (www.millionairemommynextdoor.com) made contingency-free, cash offers on three different houses this week. I used recent sold comps (comparables) and price-to-rent ratios to calculate a reasonable price. All three listing Realtors refused to present my offer to their sellers “because my bid wasn’t close enough to their asking price”. Even though Realtors are legally required to present all offers, sometimes they don’t. If I was in the mood for it, I’d get stinky and insist upon it. But obviously, I know these Realtors won’t present my offer in a positive way to their clients. I’d be wasting my time. My contingency-free cash offer might be good for their seller, but the lower price would mean a lower commission to the Realtor… The Realtors in our local market appear to be in denial about the state of our current economy and still have their heads in the sky about house valuation. Houses are getting contracts, then failing to close because they fall short when it comes time for loan appraisal. During my housing search, I’d ask the listing Realtor how they arrived at their price. What comps (comparable sales) did they use? Most of the Realtors told me they used “active comps” (houses currently for sale) rather than “sold comps” to set their price! …so what that those overpriced active comps have been languishing on the market month after month… Their rational went something like this: “It isn’t fair that appraisers include foreclosures and short-sales in the sold comps. They haven’t walked through those houses to compare interior finishes and condition with the house we are selling.” Helloooo? Appraisers have NEVER walked through sold house comps to compare finishes and condition. Why should it be different now? Furthermore, appraisers can’t use active comps in their appraisal report. Here are some of the other ridiculous things we were told: “It’s not a house, it’s your home. Your daughter needs a home.” Wherever you share love and laughter is home. Calling a house a “home” is a manipulation of your emotions for their profit. As I’ve said before, whether you pay rent to your landlord or pay interest to your mortgage company, you are buying shelter. “You can’t paint your walls when you rent.” Why not? We rent, we paint. Here are pictures of our living room and dining area:
Beazer Homes was a veritable crime wave - (www.nytimes.com) For years, Beazer Homes USA was much more than a builder of houses. It was a veritable crime wave. The company defrauded buyers, particularly poor people being sold homes they could not afford. It defrauded the federal government by getting government-guaranteed mortgages for those buyers. It created subdivisions now dominated by dozens of foreclosed homes. And while it was at it, Beazer lied to shareholders about how much money it was making. First, it lied by claiming it was making less than it was. Then it lied by hiding losses when the housing bubble began to burst. To keep the lies going, the government says, the company prepared fraudulent documents to mislead its auditors. Last week, Beazer settled the legal problems stemming from its crimes. It entered into a remarkably generousdeferred prosecution agreement with the Justice Department, in which the company will pay $15 million, and perhaps more if it manages to earn profits enough and does not decide to file for bankruptcy. Some of that money will go to defrauded homeowners, assuming they file claims and submit evidence. No money is to go to lawyers who help those homeowners, however. If the company knows a particular customer was defrauded, and by how much, it is under no obligation to point that out to the customer. Harry Truman used to say, “The buck stops here,” meaning that the president took responsibility. Beazer could have a similar slogan, but with a very different meaning. The bucks have continued to flow to the top, but the company thinks the responsibility for the crimes lies elsewhere. Heads rolled among lower-level officials, but the chief executive and chief operating officer have kept their jobs. The board — all of whose members were there when the crime wave was under way — has not changed at all. After the directors learned of the crimes, they did take some action. In 2008, a disastrous year for the company, the board gave the chief executive, Ian McCarthy, a bonus for his efforts in “communicating the importance of compliance by employees.” Not everyone thinks that bonus was deserved. “The C.E.O. should go,” said Charles Elson, the director of Weinberg Center for Corporate Governance at the University of Delaware, after reviewing the public documents at my request. “For something like that to happen in an organization, whether it is the cookie jar reserves or the sales practices, there is a question of tone at the top. That is ultimately his responsibility, whether he was aware of the specific problems or not.” Mr. McCarthy did not agree to an interview. Nor did the company make any directors available to discuss their decisions. Beazer’s crime wave might have gone on longer than it did but for a North Carolina newspaper, The Charlotte Observer, which in 2007 reported what had happened in some sad subdivisions outside Charlotte. Fraud was committed in numerous ways, and now some of those subdivisions are filled with empty, foreclosed homes. The buyers of those homes will be eligible for a few thousand dollars, if they can put together documents showing that they suffered from specific abuses. The Federal Housing Administration, which guaranteed the mortgages, gets $5 million. The tale of what Beazer did is laid out in the information filed by federal prosecutors and in a civil suit filed by the Securities and Exchange Commission against the company’s former chief accounting officer, who was fired. The company has agreed not to contest the facts of what happened. Mr. McCarthy, the chief executive, is paying a penalty. He agreed to contribute the after-tax balance of the $600,000 bonus the company paid him for fiscal 2008, when Beazer posted a net loss of $952 million, or $24.69 a share. The shares trade for less than $2 each, and have slipped since the deferred prosecution agreement was announced.
Lenders' latest foreclosure strategy: waiting - (www.heraldtribune.com) Across Florida, tens of thousands of foreclosed homes are being left in limbo, between homeowners who have abandoned them and banks that have not yet taken possession of them. Over the past year, banks and other lenders have canceled up to 50 percent of foreclosure sales in some parts of the state, adding to a growing stockpile of unclaimed homes. Experts fear the trend could slow the recovery of the housing market and pile more problems upon condo and homeowners associations that depend upon fees to keep up common areas and other facilities. "It's another facet continuing the downward pricing pressures on the housing market," said Jack McCabe, a Deerfield Beach-based real estate consultant who was one of the first to predict the housing downturn. The vast majority of foreclosed homes, until they are resold, sit in a state of neglect and depress prices for all nearby properties, McCabe said. Pushing foreclosures through quickly used to be in the bank's best interest, so the home could be resold and the bank could recoup the equity in it. Now, depressed housing prices mean few investors snapping up the properties at auction. And banks put off the foreclosure sales in many cases because once they take the property, they become liable for taxes, fees and maintenance, say some analysts and industry watchers. Banks know that the homes could sit on the market for more than a year before a resale, while those costs add up, said Kermit Lind, clinical professor of law at Cleveland State University and an expert on foreclosure law. "They may get stuck holding them for six, 18, 24 months," Lind said. "During that time, they are liable, like any other owner." But as long as the foreclosure is pending -- and the foreclosure sale has not taken place -- the banks' ledgers show the mortgage as an asset. And the bank keeps the money it would otherwise spend on maintenance and taxes. Representatives of the banking industry contacted by the Herald-Tribune said they are not deliberately slowing down the foreclosure process. They say the state forced some delays by a moratorium on foreclosures enacted late last year. They also point out that new federal rescue programs require them to negotiate with homeowners before taking back a home. Judges and defense attorneys agree the moratorium and federal rescue program have played a part in slowing foreclosures. But they say those do not account for the thousands of cases that are stalled in the courts.
Buffetts Most-Watched Index Takes a Tumble - (www.bloomberg.com) For Warren Buffett, freight-train traffic has the kind of importance that Alan Greenspan attached to scrap-steel prices as Federal Reserve chairman -- and it isn’t going his way. The CHART OF THE DAY compares the number of freight carloads at six of the largest U.S. railroads this year with the same period of 2008. Shipments tumbled 19.2 percent through last week from a year earlier, the Association of American Railroads reported yesterday. Buffett follows this gauge more closely than any other index, Bianna Golodryga, a reporter for ABC’s “Good Morning America” program, said yesterday after she interviewed the billionaire investor. Its drop worries him, she reported. Buffett’s Berkshire Hathaway Inc. owns a 23 percent stake in Burlington Northern Santa Fe Inc., the biggest U.S. railroad by revenue. The holding’s value was $5.25 billion at yesterday’s close. Among Berkshire’s common-share investments, only Coca- Cola Co. and Wells Fargo & Co. were bigger. Berkshire also has stakes in Norfolk Southern Corp. and Union Pacific Corp., two other U.S. railroads. The value of those shares totaled about $545 million yesterday. Greenspan followed the scrap-steel market to gain insight into the U.S. economy’s prospects. The rate at which cars and trucks are scrapped “has a pronounced cyclical pattern,” he wrote in a study that the Fed released in 1996.
Kohn warns Congress on meddling in Fed's affairs - (www.reuters.com) The U.S. Federal Reserve on Thursday launched a robust defense of its independence and warned that efforts in Congress to put monetary policy under political sway would hurt the economy. Fed Vice Chairman Donald Kohn said opening up some of the U.S. central bank's most sensitive decisions to political scrutiny could result in higher long-term interest rates and hurt the United States' credit rating. Kohn was speaking before a Congressional panel where he was seeking to beat back a proposal that would open policy decisions by the U.S. central bank to audits by a federal watchdog agency. "Any substantial erosion of the Federal Reserve's monetary independence likely would lead to higher long-term interest rates as investors begin to fear future inflation," he said in testimony prepared for delivery to a House of Representatives Financial Services subcommittee. Kohn's testimony comes as Congress debates President Barack Obama's plan for regulatory reform, which envisions the Fed taking on an expanded role monitoring risks across the entire financial system to help ward off future financial crises. The proposal has increased calls for greater accountability at the central bank, which was already facing heavy scrutiny from lawmakers angered by its role in bailing out Wall Street. Public anger over last year's financial crisis and Fed-backed bailouts of investment bank Bear Stearns and insurer American International Group has created a popular backlash that could gain momentum in Congress. A bill put forward by Representative Ron Paul, a Texas Republican, would expose the Fed's decisions on monetary policy and emergency lending to audits by the Government Accountability Office. It has won support from a majority in the House of Representatives. The GAO is currently prohibited from auditing these areas. Kohn said removing this exclusion would be highly detrimental and could lead investors to worry politics -- not economics -- would guide the Fed's decisions. "The Federal Reserve strongly believes that removing the statutory limits on GAO audits of monetary policy matters would be contrary to the public interest by tending to undermine the independence and efficacy of monetary policy," he said. He also said it could "cast a chill" on monetary policy deliberations by making officials nervous ideas they throw around behind closed doors could become public.
OTHER STORIES:
Goldman Sachs statement - (www.ft.com)
Can Goldman keep up its record earnings? - (www.ft.com)
Goldman rebounds from crisis of confidence - (www.ft.com)
Record fundraising buoys banks’ earnings - (www.ft.com)
More trouble ahead for overpriced housing - (www.blogs.moneycentral.msncom)
We may enjoy a Double Dip Case-Shiller Decline - (www.blogs.wsj.com)
Good News In Housing: Price Reductions Are Proliferating - (www.time.com)
Million-dollar houses are having trouble selling at last year's prices - (www.twincities.com)
Housebuyers remain fearful, with good reason - (www.denverpost.com)
You see a for rent sign almost on every corner - (www.huntingtonhomes.freedomblogging.com)
Health coverage or rent? O.C. residents have to choose - (www.ocregister.com)
Critics target recipients of CA six-figure public pensions - (www.latimes.com)
Houseowners Associations: California - Myth and reality - (www.ahrc.se)
26% of house mortgage defaults 'strategic' - (www.sfgate.com)
Prices fall in LA County for first time in 13 years - (www.latimesblogs.latimes.com)
Maui wipeout: Residents swept in debt - (www.mauinews.com)
Idling ships clog up Singapore shores - (www.news.bbc.co.uk)
How Average US Consumer Spends Paycheck - (www.visualeconomics.com)
Would you pledge your soul as loan collateral? - (www.news.yahoo.com)
