Monday July 6 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Yes, we were foolish enough to bail out the banks through TARP funds, buy their toxic assets, provide them with FDIC-backed bonds, allow them to borrow money at Fed Funds rate of zero (or .25%) while they loan out the money at much higher rates, etc. Now they are returning the funds after dumping the bad debt on taxpayers, and increasing their salaries across the board:

· Citigroup Is Said to Be Raising Salaries for Workers - (www.cnbc.com) Citigroup, which to many, symbolizes the troubles of the financial industry, intends to raise workers’ base salaries by as much as 50% this year to offset smaller annual bonuses, the New York Times reports. fter all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up. The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan. The shift means that most Citigroup employees will make as much money as they did in 2008, although some might earn more and others less. The company also plans to award millions of new stock options to employees in an effort to retain workers and neutralize a precipitous drop in the value of their stock holdings. Like Citigroup, financial companies like Bank of America and Morgan Stanley are raising employees’ base salaries in an attempt to shift attention away from bonuses. So are banks like UBS and other European competitors. The Citigroup proposals, discussed internally this week, present a crucial test for the Obama administration, which has vowed to rein in runaway compensation at companies that have received large taxpayer-financed bailouts. Citigroup has gotten not one but two rescues from Washington. This month, the government assumed a 34 percent stake in the company, whose share price has plunged nearly 84 percent in the last year. Despite Washington’s new role at Citigroup, and public anger over big paydays on Wall Street, administration officials have little power to prevent the company and others in the industry from raising salaries for rank-and-file employees. Kenneth R. Feinberg, the administration’s new “pay czar,” has the authority to set compensation for only the top 100 employees at troubled companies. The rest — which at Citigroup, means fewer than 300,000 people — can be paid as executives see fit, provided any increase does not rank them among the 100 most highly paid workers. Outsize pay on Wall Street, particularly the industry’s bonus culture, is widely seen as having encouraged the risk-taking that led to the gravest financial crisis since the Depression. But industrywide, total compensation is expected to rise 20 to 30 percent this year, approximately to the levels of 2005, before the crisis broke out, according to Johnson Associates, a compensation consulting firm. Total industry pay would still be below the record levels of 2007, but only a bit.

· How To Rob The Treasury For Bonuses - (www.market-ticker.org) You have to love Goldman Sachs: Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms. A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm. Nothing like a little taxpayer money funneled through AIG to add to the pool, right? In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year's payouts are on track to be the highest for most of the bank's 28,000 staff, including about 5,400 in London. Let's remember that Goldman got roughly $10 billion in AIG-funneled money to "settle" CDS that their CEO said was a fully-hedged position and which would have had no material impact if AIG had gone down, mostly because they had collected nearly all of the hedge before AIG got in serious trouble. That is, they got paid twice - once with their hedge (good move guys) and again by government fiat, directed by Henry Paulson who coincidentally used to run Goldman. Also note the size of the first-quarter profit, multiply by four (assuming equally good results) and then compare against the "extra" payout through AIG to figure out whether there would be any bonus pool absent that payment. Looks to me like the US Taxpayer is funding all of Goldman's bonuses, never mind this ditty: Last week, the firm predicted that President Barack Obama's government could issue $3.25tn of debt before September, almost four times last year's sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds. Nice, eh? Do Treasury's bidding, get paid for it, get an extra $10 billion from the taxpayer as a gift to cover a bet you had already hedged against default, and pocket it all. Change we can believe in - yep, we'll steal even more than we did under The Bush Administration!

· Union Asks Morgan Stanley to Reverse Pay Hikes - (www.cnbc.com) major union this week called on Morgan Stanley to reverse recent salary hikes for senior executives and other top earners, the Wall Street Journal said citing a letter from the union. The raises "weakened the link between top executive pay and performance," wrote Gerald McEntee, international president of the American Federation of State, County, and Municipal Employees (AFSCME) in a letter to Morgan Stanley, provided to the paper. "We urge you to return base salaries to their previous levels and reward executives for long-term value creation, not just showing up for work." AFSCME members' pension funds have more than $1 trillion in assets and hold roughly 3 percent of Morgan Stanley's outstanding shares, according to the paper. Last month, Morgan Stanley raised the base salaries of certain senior officers to $800,000, but said it does not plan to raise total compensation. Morgan Stanley, which became a bank-holding company last year, raised the base salaries for five of its senior officers, including its chief financial officer but said Chief Executive John Mack's base salary will not change.

Faber Report: Welcome to the Bankruptcy Inn - (www.cnbc.com) It looks like we’ll have another bankruptcy of a former LBO in the hospitality space. The WSJ is reporting that Red Roof Inns has defaulted on $332 million of mortgage debt. It was only last week that Extended Stay filed for bankruptcy after the crushing debt from its $8 billion LBO in the spring of 2007. Of course, it’s not just that business is bad for these companies. It is largely because they were saddled with debt loads that were many multiples of the cash flow the businesses produced that they are now going or about to go bankrupt. Back in the spring of 2007, even with the mortgage market about to implode, banks were still willing to dole out loans like the ones Red Roof’s buyers received. The buyers, the Global Special Situations Group of Citigroup (need I say more) and Westbridge Hospitality Fund, spent $1.3 billion to buy Red Roof from Accor. The purchase, financed almost entirely with debt, represented more than 11 years worth of Red Roof’s adjusted cash flow. Don’t you miss the good old days? Extended Stay and Red Roof (it’s currently in “restructuring” discussions with its lenders) will not be alone in seeking protection in bankruptcy court. Despite the generous capital markets, bankers tell me there are still plenty of former LBO’s with declining businesses and too much debt to try and support from declining cash flows. Interestingly, Red Roof’s debt, which came in the form of commercial real estate loans, was partially securitized, shining a light on yet another worrisome area for the market. While plenty of REITs have raised capital to cope with expected losses, the loans underlying many of the properties they manage are still in deep trouble as leases come up and are either not renewed or renewed at far lower rates.

Sacramento area misses move-up homebuyers -- they're staying put - (www.sacbee.com) Almost four years into the real estate crash, a once-thriving sector of the Sacramento-area housing market – the move-up buyer – has become a virtual dead zone that must revive itself for a true recovery to take hold, analysts say. Even as real estate rocks with enthusiastic first-time buyers and investors – accounting for up to two-thirds of area sales – one expert warns against being fooled by "the common belief that real estate is flying off the shelves." Momentum needed for a true recovery rests on the shoulders of those who traditionally dominate real estate markets: people who sell one house and buy another. And they aren't doing it. They can't. "Half to two-thirds of sales in the Sacramento region have not triggered a move-up," said Andrew LePage, an analyst for property researcher MDA DataQuick. "It was just some lender got its money back and then it ends. When that's been two-thirds of your market for months and months, ouch." Until the move-up sector of the market recovers, housing can't recover, analysts say. (Everything above $400,000 is almost at a standstill. DataQuick says sales in move-up neighborhoods such as Land Park, east Sacramento and Arden Park are half their 10-year average since early 2008.) And until housing recovers, many believe the economy will lag, and the state with it. The downturn prolongs the pain of layoffs, fuels the plunge in property taxes and deepens the local and state budget morass.

Golden State losing folks as old Dust Bowl beckons - (www.sacbee.com) Fleeing the Great Depression and a drought unprecedented in American history, a vast wave of Oklahomans and Texans dubbed "Okies" loaded everything they could onto crowded vehicles during the 1930s and headed west for California. Today, in huge numbers, their grandchildren are moving back. It doesn't take Loren O'Laughlin much time to come up with a reason why, in between bites of a burger at an Oklahoma City diner. "There aren't really people lined up on the streets here competing for a few scraps," said O'Laughlin, 23, who grew up in Sacramento but recently graduated from Oklahoma Christian University and opted to stay put. "Small businesses thrive here because networking is so easy." As California housing prices went wild in the middle of this decade, hundreds of thousands of residents scratched their heads and moved to places where homes were still affordable, state and federal statistics show. When prices started falling and unemployment started rising, many continued to leave California for healthier job markets. The result was five consecutive years when California saw more residents going to other states than coming. Although many stayed closer to home – Nevada, Oregon, Arizona – the mid-South saw a large influx. From 2004 through 2007, about 275,000 Californians left the Golden State for the old Dust Bowl states of Oklahoma and Texas, twice the number that left those two states for California, recent Internal Revenue Service figures show. In fact, the mid-South gained more residents from California during those four years than either Oregon, Nevada or Arizona. The trend continued into 2008.

Agent Refuses To Work By Hour - (www.patrick.net) Very funny email exchange between a buyer and an agent offering to have them work by the hour (like a lawyer or other profession).

Were Smugglers Trying To Dump Japan's US Bonds? - (www.turnerradionetwork.com) Two Japanese men arrested by Italian Police while trying to smuggle $134 Billion in U.S. Treasury Bonds concealed in suitcases, out of Italy into Switzerland, are employees of the Finance Ministry of Japan. Turner Radio Network has now confirmed the two men arrested by Italy were trying to secretly dump Bonds that were previously held by the nation of Japan. The men arrested have told Italian police they were ordered to move the Bonds by the government of Japan because the Japanese government has lost faith in the ability of the U.S. government to repay its debts. Despite assurances from Japanese Finance Minister Kaoru Yosano about Japan's "absolutely unshakable” confidence in the credibility of the U.S. dollar, it is now confirmed based upon the serial numbers of the Bonds, that the $134 Billion is part of the $686 billion of U.S. debt officially held by Japan. According to Italian Law Enforcement, authorities originally thought the men were part of the "Yakuza", a Japanese organized crime syndicate similar to the Italian Mafia, which lead officials to believe the Bonds were forgeries But after the men who were arrested were forced to remain in jail for more than a few days, they discarded their cover story and admitted to being employees of the Finance Ministry of Japan. Strangely, very few major media outlets have covered this story. Of the few media outlets that have covered it, one - Bloomberg Business News - reported the bonds were "fakes." But according to Italian authorities, that is a cover story developed by the U.S. government to avoid panic selling of U.S. Treasuries by other nations. Law enforcement sources in Rome claim the Italian government is ecstatic over the seizure because under Italian law, they get to keep forty percent (40%) of the smuggled bonds. The governments of both the US and Japan are trying to negotiate with Italy for return of the Bonds but because of the astonishing amount of money involved, Italy is refusing any negotiation at all. TRN has been told to expect to receive serial numbers from the bonds as proof they are real. In addition, our source claims he can obtain scanned images of some of those bonds as well. If we are given such information or images, we will report them publicly. COMMENTARY: The implications of this situation are monstrous: An ally of the United States has been caught trying to secretly unload U.S. government debt. This is unmistakable proof that the United States government is headed into economic collapse because nations around the world have now officially lost faith in its ability to repay. The fact that $134 Billion in Bonds was intercepted by Italian Police was confirmed two days ago by Bloomberg Business news (here). Today's revelation by TRN that the men arrested were employees of the Japan Finance Ministry is a huge development which will cause sudden and dramatic reaction worldwide.

OTHER STORIES:

Learning To Love Falling House Prices - (www.blogs.reuters.com)

US House Prices Drop 6.8% in April as Foreclosures Rise - (www.bloomberg.com)

Calif unemployment climbs to record 11.5 percent - (www.sfgate.com)

Jobless pain continues in most states in May - (www.reuters.com)

House Prices Could Fall for 5 Years - (www.money.aol.com)

US "recovery" distressingly slow - (www.reuters.com)

Appetite for risk may have returned, but crisis not over - (www.economist.com)

Does the Obama Plan for Reforming Wall Street Measure Up? - (www.robertreich.blogspot.com)

Big Brother in Basel: Trading Stability for National Sovereignty? - (www.globalresearch.ca)

Top Chinese banker suggests that US issue bonds in yuan - (www.telegraph.co.uk)

Yesterday's nectar, today's killer - (www.thehindubusinessline.com)

Fortune Magazine warns about bond bubble - (www.seekingalpha.com)

World economy tracking or doing worse than during Great Depression - (www.voxeu.org)

Simply Mandating Health Insurance Will Not Work - (www.slate.com)

Japan Exports Show Little Sign of Quick Recovery - (www.cnbc.com)

China Defends Export Policies Against WTO Complaint - (www.cnbc.com)

Fed Chief's Future in Balance as Central Bank Meets - (www.cnbc.com)

Could Wednesday's Fed Statement Rock Stocks? - (www.cnbc.com)

New Rules on Home Appraisals Thwarting Many Sales - (www.cnbc.com)

Thursday January 1 Housing and Economic stories

TOP STORIES:

Goldman Sachs' Tax Rate Drops to 1% - (www.bloomberg.com) Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007. The company’s effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits. Goldman Sachs, which today reported its first quarterly loss since going public in 1999, lowered its rate with more tax credits as a percentage of earnings and because of “changes in geographic earnings mix,” the company said. The rate decline looks “a little extreme,” said Robert Willens, president and chief executive officer of tax and accounting advisory firm Robert Willens LLC. “I was definitely taken aback,” Willens said. “Clearly they have taken steps to ensure that a lot of their income is earned in lower-tax jurisdictions.” U.S. Representative Lloyd Doggett, a Texas Democrat who serves on the tax-writing House Ways and Means Committee, said steps by Goldman Sachs and other banks shifting income to countries with lower taxes is cause for concern.

Correct prediction that CalPERS was lying back in July - (wcvarones.blogspot.com) Interesting story from July that CalPERS was lying on their yearly statement through June 30 2008. CalPERS reports 2008 performance numbers: While the value of Calpers' stock portfolio fell nearly 11 percent, its private equity holdings gained 19.6 percent for the 12 months through March 31 and its inflation-linked assets returned 22.9 percent over nine months. Global fixed-income assets returned 7.7 percent for the year and real estate gained 8.1 percent for the 12 months through March 31. What a coincidence. While things that have easily observable market prices (i.e. stocks) went down, everything that is valued subjectively went up! Private equity? It does great during a credit crunch when stocks are crashing! Just ask noted private equity players Blackstone Group or Babcock & Brown. And real estate? Well, whose real estate portfolio is not up at least 8% this year? Nice numbers, CalPERS! Especially considering your investment in toxic waste CDOs at the beginning of the mortgage crisis, and your $1 billion dollar investment in the now-bankrupt LandSource at the peak of the real estate bubble.

Deutsche Bank decides not to repay €1bn bond - (www.ft.com) Deutsche Bank jolted bond and equity investors on Wednesday when it became the first big bank to say it would not repay €1bn ($1.4bn) of a particular kind of bond as expected in January. The move raised fears about Deutsche’s capital strength and signalled a much higher likelihood that other banks would follow the example in not repaying so-called hybrid-capital bonds. This could, in turn, erode the market for hybrid capital deals, which are supposed to occupy a kind of grey area between debt and equity. These instruments have been hugely important in squeezing extra funding into bank balance sheets – and in propping them up since the financial crisis exploded. The bonds are typically repaid at the first opportunity after an initial period when redemptions are not allowed. If an issuer does not redeem then, they must pay a higher penalty coupon rate. Deutsche Bank decided it was more cost-effective to pay this penalty rate rather than replace the funding in current difficult market conditions, which have made finance more expensive.

Palm Beach pawn shop becomes a bit of a sensation amid Madoff scandal - (www.chicagotribune.com) Pawnbroker Levi Touger tells reporters wanting to see the Lamborghini a Bernie Madoff victim hawked for quick cash that they needn't bother stopping by. He doesn't have it. And, by the way, it was a Ferrari. Touger's Royal Pawn & Jewelry has made loans to some of the well-heeled Palm Beach investors caught in Madoff's alleged $50 billion scam, turning his business into a bit of a media sensation as television crews inquire about filming the big-ticket booty. He says reports have overstated the items people were pawning, but not the income bracket of some of his more recent clients. "People call me and say, 'Levi, if I need you, what could I get?'," he said.

Citadel Shuts Down Its Special Situations Group - (www.nytimes.com) Another day brings more news of the downsizing taking place at the Citadel Investment Group, Kenneth C. Griffin’s giant hedge fund firm. Citadel, based in Chicago, shut down its special situations group last week after its strategy racked up big losses for the firm. People close to the group said that at one point several years ago its strategy covered as much as 15 percent of Citadel’s total assets under management, but it had recently been pared down to about 3 percent of the firm’s overall portfolio as several investments turned sour. Through November, the special situations portfolio had sustained losses of about 61 percent, according to a person briefed on the matter. News of the shutdown was first reported by David Faber of CNBC. A spokeswoman for Citadel declined to comment.

'Orderly' Bankruptcy Is One Option for US Auto Bailout - (www.cnbc.com) The Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the ailing US auto industry.

GMAC Still Short of Capital to Become a Bank - (www.cnbc.com) Financing company GMAC said in a regulatory filing Thursday that about $16.9 billion, or 58 percent, worth of its notes have been tendered as part of a plan to swap $38 billion of debt and amass enough regulatory capital to become a bank holding company. The total includes notes tendered through the end of Wednesday. That's about $300 million more than the $16.6 billion worth of notes tendered at end of day Tuesday, according to a filing with the Securities and Exchange Commission. In addition, GMAC's Residential Capital mortgage business has tendered $3.5 billion, or 38 percent, of its notes, the company said. In order to become a bank holding company, and eligible for a slice of the federal government's $700 billion bank rescue plan, GMAC must show that it has at least $30 billion in regulatory capital. The company has said it needs about 75 percent participation on the offers in order to meet that requirement. GMAC warned last week that failure to convert to a bank holding company would have a "material adverse effect" on its business. And some analysts have speculated that without the federal financial help, the company could be forced to file for bankruptcy protection or shut down the ResCap division, which has accounted for the bulk of its recent losses.

FDIC rules will ban new banks - (www.blacklistednews.com) The Federal Deposit Insurance Corp. may be implementing what is effectively a ban on new banks in metro Atlanta and other distressed areas nationwide, as the financial industry’s and broader economy’s deterioration accelerates. The FDIC, the nation’s bank deposit guarantor, has increased scrutiny of new banks applying for deposit insurance in select areas of the Southeast and other regions, including Western states, industry insiders said. The new reviews, insiders said, make approval difficult in practice, if not impossible. “It is a de facto ban,” said Stephen Johnson, CEO of Alpharetta-based consultant T. Stephen Johnson & Associates Inc. “I’ve never seen a time this difficult to get a charter.” Johnson is a longtime bank organizer and consultant in Atlanta, raising $500 million for various bank investments during his two-decade career.

Ukraine Hryvnia Drops 15% in 2 Days; Half of Loans May Default - (www.bloomberg.com) Ukraine’s hryvnia pared a record two-day plunge after the central bank said a rate above 9 per dollar was “unacceptable.” The currency fell 1.7 percent to 9.1000 per dollar by 6:28 p.m. in Kiev. It pared an earlier 18 percent two-day drop to a record 9.78 after the central bank sold reserves to support the currency. Petro Poroshenko, head of the central bank council, said at a press conference a weak hryvnia is a threat to the economy. “The central bank did say they would intervene at 8.95 today so it looks like they went ahead with it,” said Dmitry Gourov, an economist focusing on Ukraine at UniCredit SpA in Vienna. “The question is how big is their war chest, and given the limited amount of reserves they have to spend, there’s not much room left.” President Viktor Yushchenko earlier tried to stem the drop, saying Ukraine will buy hryvnia and calling for licenses to be revoked for lenders found speculating against the currency. The central bank said it will raise its benchmark refinancing rate from 12 percent to an unspecified level. Ukraine is attempting to arrest a deepening crisis since the International Monetary Fund provided a $16.4 billion bailout last month as the falling currency increases the cost of more than half of loans from domestic lenders that are in dollars, according to central bank data. The ex-Soviet nation, with $105 billion of corporate and state debt, has the third-highest credit risk worldwide after Ecuador, which defaulted last week, and Argentina, based on the cost of credit-default swaps.




OTHER STORIES:

Calpers To Report Losses of 103% on its Residential Investments - (Mish)
Forecast: A Long, Cold Winter - (online.barrons.com)
HUD Chief Calls Aid on Mortgages A Failure - (www.washingtonpost.com)
55% of SoCal house sales were foreclosures - (lansner.freedomblogging.com)
Record decline in SoCal house prices - (themessthatgreenspanmade.blogspot.com)
Foreclosures push So Cal house prices down 35 percent - (www.pasadenastarnews.com)
Half of OC's house boom gain now gone - (lansner.freedomblogging.com)
Fed now lending money for 0% interest - (www.newsday.com)
Banks Show No Signs of Easing Credit in Step With Feds Rates - (www.bloomberg.com)

Bonds Stagnate on Mind-Numbing Housing Data - (blogs.wsj.com)
SEC plans to investigate ties to Madoff's niece - (www.marketwatch.com)
The Great Unraveling - (www.nytimes.com)
A New DIS-Belief System Is Born - (extremely negative) - (ashizashiz.blogspot.com)
Repost -- context for following: - (www.tampabay.com)
The Sunny Kim Power Training Series - (www.youtube.com)

TARP Now Likely to Be Used for Housing, Stimulus - (www.cnbc.com) The second half of the $700 billion Wall Street bailout fund is likely to go toward foreclosure relief—and possibly economic stimulus.
Oil Plunges to Settle Below $37 as Demand Slows - (www.cnbc.com)
Obama Stimulus Plan Could Reach $850 Billion - (www.cnbc.com)
Schapiro Picked for SEC Post - (www.cnbc.com)
Jobless Claims Ease - (www.cnbc.com)
Homeowners Are Rushing To Refinance as Rates Fall - (www.cnbc.com)
30-Year Mortgage Hits Low - (www.cnbc.com)
How Low Can Rates Go? - (www.cnbc.com)
Madoff Scandal Shaking Real Estate Industry - (www.cnbc.com)
Wedbush Morgan CEO: Madoff Performance Was 'Odd' - (www.cnbc.com)
Oracle Earnings: 'Good' News Might Be Too Good - (www.cnbc.com)

Tuesday December 23 Housing and Economic stories

TOP STORIES:

Mortgage Debt Not Big Burden, Said Greenspan in 2004 - (query.nytimes.com) Published: October 20, 2004. Alan Greenspan on Tuesday defended one of the most tangible results of his tenure as chairman of the Federal Reserve Board: the big increase in homeowner debt. In his most detailed discussion yet on the subject, Mr. Greenspan disputed analysts who worry that home buyers have become swept up in a speculative housing bubble that the Fed is partly responsible for creating. While he acknowledged that consumer debt has risen ''especially steeply'' in the last five years, he said family finances were still in ''reasonably good shape.'' Mortgage debt and housing prices have both soared since 2001, in part because the Federal Reserve pushed borrowing costs to their lowest levels since the 1950's. With interest rates now rising, a growing number of economists worry that many home buyers will face higher monthly debt payments in an economic environment that could cause house prices to fall. In a speech here to a convention of community bankers, Mr. Greenspan said fears of a speculative bubble in housing prices were exaggerated, because people cannot buy and sell their own homes as easily as stock market speculators can buy and sell stock. The biggest risk of a housing bubble, he said, would be among people who buy second homes and vacation homes. But those kinds of purchases accounted for only 11 percent of new mortgages in 2003.

Bernanke was also full of it in 2005. Eliminate the Fed! - (www.washingtonpost.com) Thursday, October 27, 2005; Page D01. Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve. U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new household

Russia Devalues 2nd Time in Week, Lets Ruble Fall Total 8.6% - (www.bloomberg.com) Russia’s central bank devalued the ruble for the second time in a week after policy makers spent $161 billion of reserves trying to defend the currency and oil revenue slumped. The ruble fell as much as 1.3 percent to a four-year low of 37.5015 per euro after Bank Rossii widened the trading band against a basket of dollars and euros, the mechanism by which it manages the exchange rate. Russia has drained 27 percent of its reserves, the world’s third-largest, trying to stem a 16 percent decline in the currency since August as the price of oil fell 69 percent, constricting economic growth. Standard & Poor’s cut its credit rating on Russia for the first time in nine years last week. “It is possible we will see two to three more devaluations this week,” said Martin Blum, head of emerging-market currencies and fixed income strategy at UniCredit SpA in Vienna. “Russian policy makers are serious about continuing the one percent devaluations.”

Fed Refuses to Disclose Recipients of $2 Trillion - (www.bloomberg.com) The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral. Bloomberg filed suit Nov. 7 under the U.S.Freedom of Information Act requesting details about the terms of 11 Fed lending programs, most created during the deepest financial crisis since the Great Depression. The Fed responded Dec. 8, saying it’s allowed to withhold internal memos as well as information about trade secrets and commercial information. The institution confirmed that a records search found 231 pages of documents pertaining to some of the requests. “If they told us what they held, we would know the potential losses that the government may take and that’s what they don’t want us to know,” said Carlos Mendez, a senior managing director at New York-based ICP Capital LLC, which oversees $22 billion in assets.

Just a sign of troubled times, or has the Fed lost it? - (www.idahostatesman.com) Something funny is going on with the Fed funds rate, but everyone is so engrossed with the auto industry and other dramas that few have noticed. This long-obscure interest rate historically has been an important financial-market barometer, but its readings over the past two months are erratic, to say the least. Either the Fed has abandoned what it says is its principal policy tool, or that tool has become impotent. Let's start with some background. Commercial banks are financial intermediaries, accepting deposits and making loans. To protect depositors against loss, banks are not allowed to lend out all the money they get as deposits. Legally, a fraction must be held in reserve. And banks may choose to hold more money in reserve than the legal minimums. These reserves may be held in the form of "vault cash" in the bank itself. But most are held in the bank's account at its Federal Reserve District Bank. (These reserve accounts at the Fed also are used in check clearing, but that is another column.) Historically, the Fed did not pay any interest on banks' reserve accounts. Money not loaned out earns no interest. So banks normally keep their reserve accounts at or just above required minimums. But their deposits vary and so do their Fed reserve accounts, often depending on how many checks are presented for payment. On any given day, a bank may be short of "Fed funds" or have extra.

Jim Rogers calls most big U.S. banks bankrupt - (www.reuters.com) Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded. Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital. Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research,Stock Buzz). Some of the funds are being used for acquisitions. "Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor. "What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

Goldman Sachs Sued Over MBS Deals - (www.housingwire.com) The mortgage litigation machine is now turning its attention towards RMBS issuers as investors allege fraud and misrepresentation by firms that sold off loans into securitization trusts, with a new putative class-action suit filed Thursday in New York against Goldman Sachs Group Inc. (GS: 67.74 0.00%) and some of the firm’s individual directors. The case, filed in Southern District Court in New York on Dec. 11 by the San Diego-based law firm of Coughlin Stoia Geller Rudman & Robbins LLP, a well-known securities litigation firm, argues that Goldman made false statements or omitted key information regarding the nature of the mortgages it sold into 17 different trusts during 2007. The lead plaintiff in the case is a pension fund administered by NECA-IBEW, an electrician’s labor union that purchased securities in the deals in question, and has since seen

Lawyer Dreier Seen as Bold Enough to Cheat the Best - (www.nytimes.com) Since that opening tip, federal authorities have been tracking what they describe as a brazen swindle of some of New York’s savviest investors by one of New York’s more accomplished lawyers. Mr. Dreier has been charged with multiple frauds in the United States and a related crime in Canada, and is being held without bail in Manhattan. In court last week, prosecutors said their count so far put the money missing at $380 million, most of it lost by hedge funds and other investors who had bought promissory notes that were flat-out fictions. In recent days, Dreier L.L.P., the Park Avenue law firm that Mr. Dreier founded, has been plunged into chaos. At least $35 million in escrow that was to have been held by the firm seems to be missing, the authorities say, and nearly all of its 250 lawyers are now looking for work. The amounts pale next to the $50 billion fraud that another high-profile New York figure,Bernard L. Madoff, was accused last week of orchestrating, but they have unnerved lawyers and their clients in the broader legal community. As the Dreier firm’s lawyers rummage through the law firm’s books, which had been until recently Mr. Dreier’s exclusive preserve, they are finding that bills have not been paid in months. Their health insurance is in default and the firm will not be able to make its $2.6 million payroll on Monday, lawyers there say. “No one is in charge,” Vincent F. Pitta, a lawyer at the firm, complained last week in an affidavit in support of a government request to freeze assets. “The news of Mr. Dreier’s arrest has had a neutron-bomb-like effect on Dreier L.L.P.”




OTHER STORIES:

Treasury bonds have reached bubble stage - (www.dallasnews.com)
Deflation has become inevitable - (www.nakedcapitalism.com)
FDIC says not to worry about FDIC - (www.fdic.gov)

U.S. Stock Futures Decline on Economic Concern; Apple, IBM Drop - (www.bloomberg.com)
Dollar Falls to 8-Week Low on Outlook for Fed Interest-Rate Cut - (www.bloomberg.com)
Crude Oil Rises as OPEC’s El-Badri Says Sizeable Cut Is Needed - (www.bloomberg.com)
Madoff Said to Use Unregistered Side-Unit for Clients - (www.bloomberg.com)
Gold Climbs to Near Eight-Week High as Dollar Drop Spurs Demand - (www.bloomberg.com)
Fleeing Investors Put a Strain on Funds - (www.nytimes.com)
More banks reveal Madoff exposure - (www.reuters.com)
A Palm Beach Enclave, Stunned by an Inside Job - (www.nytimes.com)

Household Net Worth in U.S. Declines Most on Record - (www.bloomberg.com)
SF feels pain of real estate meltdown - much more to come - (www.sfgate.com)
Why house prices might not ever recover - (PDF - i.usatoday.net)
Houseowners less happy than renters - (PDF - real.wharton.upenn.edu)

Fed mulls interest rate cut, maybe to all-time low - (www.signonsandiego.com)
Job cuts adding to growing number of housing defaults - (www.usatoday.com)
Home values to lose well over $2 trillion during 2008: Zillow - (www.reuters.com)
Goldman Sachs Shares Morgan Stanley’s Pain as Prospects Darken - (www.bloomberg.com)
Annus Horribilis Peaks in Anxiety for Global Economy - (www.bloomberg.com)
Do You Know Where Your Money is? - (optionarmageddon.ml-implode.com)
Ponzi Nation - (www.businessweek.com)
Visual guide to the bailout - (blog.mint.com)

Tuesday April 15 Housing and Economic stories

Top Stories:

Terrified Fannie "warns" housedebtors who walk away - (www.sfgate.com) – On March 31, Fannie Mae sent out new guidelines to lenders intended for walkaways and other foreclosure situations. Fannie will now prohibit foreclosed borrowers from getting another mortgage through the giant investor for five years, unless there are "documented extenuating circumstances." In those cases, the mortgage prohibition is for three years.
You Thought You Had an Equity Line - (www.nytimes.com)
Continental, United Could Merge 'Pretty Quickly': Source - (www.cnbc.com)
Continental Airlines and United Airlines have laid most of the groundwork for a merger, sources said, and could have a deal ready if Delta Air Lines and Northwest Airlines announce a tie-up.
Sinking housing market maroons houseowners - (www.insidebayarea.com) – Homes are supposed to be more than 1-2 year investments so homeowners “should” be marooned in their homes.
What is Paulson Smoking? "IRS's $600 Stimulus Checks Will Add 500,000 - 600,000 Jobs to Economy." - (www.nytimes.com)
Restaurants Find Diners Choosing Cheaper Fare - (www.boston.com)
Jury Says Realtor Not to Blame for Purchase Price - (www.voiceofsandiego.org) – For once I agree, it is about time the home-purchasers take some blame here for their greed and stupidity instead of blaming everyone else.
New loan changes bring no relief - (www.sfgate.com)
Walking Away From Your Mortgage - (www.ml-implode.com) – The San Francisco Chronicle reported the threat by Fannie Mae and Freddie Mac 'to make anyone thinking about joining the growing "walkaway" trend,..., feel the pain'. Here are some good observations on the subject on minyanville.com
Biofuels Nothing Short of a Disaster - (www.canada.com)
No-down-payment mortgages are gone - (www.marketwatch.com)
‘Tranche warfare’ breaks out over CDOs - (www.ft.com)
Assets seized to halt payment to others - 18:45
Did appraisers juice Florida real-estate market? - (www.orlandosentinel.com) – Yes, but so did the banks, realtors, homeowners and everyone else. They all participated on the way up and are now blaming each other on the way down.
Stresses on Fannie, Freddie pose wider risks - (www.ml-implode.com) - 'A deep recession could force mortgage-finance titans Fannie Mae and Freddie Mac to require a federal bailout large enough to hurt the U.S. government's top-grade credit rating, Standard & Poor's warned Monday.'
Banks Must Write Down Loans to Prevent a Mass Homeowner Exodus - (www.ml-implode.com) - The word is out and the banks and servicers need to get a clue. People are walking from their underwater homes in droves. Wha...
John Rubino: America, Ex-Distortion - (www.dollarcollapse.com) – Key paragraphs below:
"Almost four decades have passed since the United States scrapped its last currency ties to precious metals. Our copper and nickel coinage still retains some metallic value, but not nearly enough for the purpose of currency tampering--the historic temptation of inflation-plagued or otherwise wayward governments, including, at times, our own. Instead, since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is."


Other Stories:

Nationalization or monetization? - (www.ml-implode.com) - 'Fortunately, given the rate at which home prices are now declining in many parts of the country, any government action in suppo...
Mortgage payments worry many - (www.ml-implode.com) - 'In an ominous snapshot of how the sagging real estate market and sour economy are intersecting, the Associated Press-AOL Money ...
Accounting failures enter the subprime equation - (www.ml-implode.com) - As homeowners, shareholders and federal investigators pick through the subprime wreckage, many have asked how effectively fro...
Bank denies cash-raising reports - (www.ml-implode.com)
Phoenix Median Home Price Down A “Stable” 17% In March - (www.ml-implode.com)
Many skeptical of Foreclosure Protection Act - (www.ml-implode.com)

Credit Crisis Could Affect Markets for Decade: Study - (www.cnbc.com)
Citi allows loan ‘cherry picking’ - (www.ft.com)
Move could complicate balance sheet clean-up - 23:22
Inflation takes bite out of paychecks: Fed's Fault - (www.idahostatesman.com)
Blunt former Fed chairman Volcker takes on Bernanke - (www.theglobeandmail.com)
A Tale of Two Coasts - (www.seekingalpha.com)
Price boom redistributes wealth destructively - (www.independent.co.uk)
California Mortgage Rates Still High - (www.mybudget360.com)
Stocks Brace for Flood of Earnings - (www.marketwatch.com)
Congress study: Housing aid wouldn't help economy - (news.yahoo.com)
'Subprime Relief Plan' May Make a Bad Situation Worse - (www.seekingalpha.com)
US Housing Woes Spread Around the Globe - (www.nytimes.com)
CitiGroup, Merrill Reveal Fresh $15B Losses - (business.timesonline.co.uk)
Oil, Gasoline Close at Records on Dollar Weakness Against Euro - (www.bloomberg.com)
Stocks Close Down Amid Earnings Concerns - (www.ap.com)
Against a housing bailout: let the prices fall! - (www.walletpop.com)
Shiller: Housing Will Continue to Fall - (www.seekingalpha.com)
Pending sales index points to declines ahead - (www.businessweek.com)

U.S. Retail Sales Rise on Gain in Gasoline Purchases - (www.bloomberg.com)
The consumer spending mirage - (www.businessweek.com)
Phoenix job growth slows - (www.azcentral.com)
As Greenspan’s reputation sinks, Volcker’s rises - (www.ap.com)
Atlanta gas prices hit new high of $3.36 per gallon - (www.ajc.com)
Schools Get A Lesson in Lunch Line Economics - (www.nytimes.com)
The Meltdown Lowdown - (www.prospect.org)
Gold as an investment - (en.wikipedia.org)
Is A House Really A Good Investment? - (cosmos.bcst.yahoo.com)

Goldman Strategists Say U.S. Earnings Are `Awful' - (www.bloomberg.com)
Is Street Turmoil Coloring Art Market? - (online.wsj.com)
Record grain prices provide food for thought - (www.ft.com)
Nothing Special With Treasuries as Fed Has Mortgages - (www.bloomberg.com)
IRS audits of largest corporations declining - (www.ajc.com)

Wachovia Posts Loss, Plans $7 Billion Capital Raising - (www.bloomberg.com)
Northwest, Delta near merger deal - (www.chicagotribune.com)
Newspaper Vendors Worry About Downturn - (www.chicagotribune.com)
Ex-Commerce Chief down on big banks - (www.nypost.com)
Housing Woes in U.S. Spread Around Globe - (www.nytimes.com)