Tuesday May 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Pelosi To Push for Pecora-style Investigation of Wall Street - (www.bloomberg.com) Pelosi should cut the crap and let Ron Paul provide the report and save everyone a lot of time and money. He was one of a few that has been writing about the crisis 5 years before it happened while Pelosi, Frank and the other showboaters were clueless. Why let people who caused the crisis or did not see the crisis coming investigate the crisis. Wall Street may be heading for the deepest investigation of its practices since a congressional panel’s probe of abuses following the 1929 stock market crash. House Speaker Nancy Pelosi plans to push for a comprehensive inquiry, saying that three-quarters of Americans want to know what led to the bankruptcy of Lehman Brothers Holdings Inc. and the collapse of Bear Stearns Cos. and Merrill Lynch & Co. She favors one patterned after Senate Banking Committee hearings led by Ferdinand Pecora starting in 1933, according to her spokesman, Nadeam Elshami. The Pecora review “was probably the single most important congressional investigation in the history of our country, except perhaps the Watergate hearings,” Donald Ritchie, associate historian for the U.S. Senate, said in an interview. Congress is reacting to an economic collapse that has generated $1.3 trillion in financial industry losses, $700 billion in U.S. taxpayer cash infusions and loans, and $37 trillion in destroyed world stock market value since 2007. The Pecora Commission generated public support for creating the Securities and Exchange Commission and laws that governed financial services for seven decades. Pelosi, a California Democrat, will speak about hearings this week to lawmakers, including Representative Barney Frank, chairman of the panel that writes banking law, Elshami said. “I think it’s useful to have it, but that should not be a reason to hold off on legislating,” Frank, a Massachusetts Democrat, said of Pelosi’s proposal after a speech in Washington yesterday. Rewriting Rules: President Barack Obama, Frank and other congressional leaders have made rewriting the rules governing Wall Street a top priority. Several lawmakers have proposed a commission or select committee to investigate the causes of the meltdown. Pelosi’s backing, expressed during an appearance in San Francisco last week, was the first show of support from the congressional leadership.

California Foreclosures Are Back—with a Vengeance - (www.cnbc.com) We knew it was coming, and now it's here...the return of California's foreclosure crisis. Okay, it wasn't exactly gone, but maybe just on hiatus thanks to a new state law that went into effect last fall. That law requires lenders to take additional steps to keep troubled borrowers in their homes. Then of course there were various bank and Fannie / Freddie moratoria on foreclosures. Today DataQuick reports "lenders filed a record number of mortgage default notices against California during the first three months of this year, the result of the recession and of lenders playing catch-up after a temporary lull in foreclosure activity." Default notices surged 80 percnet from 75,230 for the prior quarter to 135,431 notices in Q1 2009. That's also up 19 percent from the first quarter of 2008. This is a new all-time high for any quarter in DataQuick's statistics, which go back to 1992. Now you may say, well, these are default notices, not foreclosures, and we've got that great Making Homes Affordable adminstration plan all ready to help all these folks. I'm wondering just how they're going to handle these folks, let alone help them. According to DataQuick, the bulk of the loans were originated in late 2006, at the very height and most desperate frenzy of the housing boom, when lenders were trying to get everyone and their brother into a new loan. I wonder how many of those loans are now so far underwater, given the huge home price declines in California, that no modification is going to help.

Freddie Mac Executive Commits Suicide - (Mish at globaleconomicanalysis.blogspot.com) The New York Times is reporting Executive at Freddie Mac Is Found Dead. David B. Kellermann, the acting chief financial officer of the troubled mortgage giant Freddie Mac, was found dead Wednesday morning at his home in Northern Virginia, the police said. The executive apparently committed suicide by hanging himself, according to people with knowledge of the investigation. Mr. Kellermann, 41, had been Freddie Mac’s chief financial officer since September. He was named to the position when the federal government seized the company and ousted its top executives last fall. In recent weeks, according to neighbors and company officials, Mr. Kellermann had received a bonus of about $800,000. Such bonuses — which totaled $210 million for executives at Freddie Mac and its sibling company Fannie Mae — caused some controversy earlier this month, and some lawmakers called for them to be rescinded. According to neighbors, Mr. Kellermann hired a private security firm after reporters came to his house to ask about his bonus. The Associated Press reported that Mr. Kellermann and his wife had a daughter. Some neighbors told The A.P. that Mr. Kellermann had lost a noticeable amount of weight under the strain of the job, and some said they suggested to him he should quit to avoid the stress. Mr. Kellermann was also involved in recent tense conversations with the company’s federal regulator over its public disclosures. Freddie Mac executives wanted to emphasize to investors that the company was being run for the benefit of the government, rather than shareholders. The company’s regulator, the Federal Housing Finance Authority, had reportedly pushed to play down that language. Freddie Mac was (and still is) being run the same way nearly all public corporations are run: For the benefit of the top executives not the benefit of shareholders. There is no other explanation for executive pay, bonuses, stock options and other perks that all cause massive shareholder dilution over time. Countrywide CEO Angelo Mozilo took out $1 billion in stock options and pay while running the company into the ground. Now taxpayers have to clean up the mess. Greed is everywhere you look. I cannot begin to list it all.
Treasury Raises Offer to Chrysler Lenders - (www.cnbc.com) The U.S. Treasury has raised its offer to Chrysler lenders, sources said on Wednesday, as the embattled automaker races to cut its debt and labor costs and reach an alliance with Italy's Fiat SpA by the end of the month. Treasury has offered the lenders $1.5 billion of first-lien debt and a 5 percent equity stake in a restructured Chrysler in exchange for about $7 billion of debt they now hold, said the sources, who had direct knowledge of the talks. They spoke on condition of anonymity because of the confidential nature of the ongoing negotiations. The offer showed a quickening pace in the discussions with Chrysler facing an April 30 deadline to cement agreements with debtholders, unions and Fiat or face a bankruptcy that could result in its liquidation. Representatives from Treasury and Chrysler could not be reached immediately for comment.The Chrysler lending group on Monday had sought $4.5 billion of first-lien debt and a 40 percent stake in the restructured automaker, sources have said. That proposal was far above an initial offer from Treasury and quickly rejected by the Obama administration, which had proposed in early April that lenders write off all but $1 billion of the debt and receive no equity.

State revenue falls 4% - (money.cnn.com) Revenue of U.S. states fell 4% in the 2008 fourth quarter as sales tax collections had their biggest drop in 50 years, and 41 states were on track for revenue declines of more than triple that rate for the first quarter of 2009, according to a report released on Tuesday. States, which have been struggling with lower revenue as the recession hits everything from sales taxes to property taxes, are likely to suffer more this month with an expected sharp fall in collected income taxes, according to the report by the Rockefeller Institute of Government. Total tax revenue declined in 35 states, while six saw double-digit declines, according to the institute, which is the public policy research arm of the State University of New York. Initial data for the first quarter of 2009 showed 41 states reporting that overall tax collections were down 12.8% in January and February versus the same two months in 2008, the report said. "Preliminary data for the January-March quarter suggests that fiscal conditions deteriorated even further, and the second major tax source for states - the income tax - is likely to weaken dramatically in April," said Donald J. Boyd, senior fellow at the Rockefeller Institute and co-author of the study, in a statement. Sales tax collections, a major revenue generator for states, fell by 6.1% in the fourth quarter of 2008 from the year-earlier period. The decline was wide-spread, hitting 34 out of the 45 states with broad-based sales taxes, according to the report.

Lewis testified that U.S. urged silence on Merrill deal: report - (news.yahoo.com/s/nm) Bank of America Corp Chief Executive Kenneth Lewis testified under oath that U.S. Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressured the bank to not discuss its plan to buy Merrill Lynch & Co, the Wall Street Journal said. In a testimony before New York's attorney general Andrew Cuomo in February, Lewis told prosecutors that he believed Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, which BofA acquired in January. Lewis testified that the government wanted him to remain silent while the two sides negotiated government funding to help BofA absorb Merrill and its losses, the paper said, citing transcripts of the testimony. A representative of Cuomo questioned Lewis about his failure to disclose Merrill's fourth-quarter losses, which eventually totaled $15.84 billion, according to the paper. Lewis said he was told by Bernanke and Paulson that the BofA-Merrill deal needed to be completed, otherwise it would "impose a big risk to the financial system" of the United States as a whole, according to the paper. A person in government familiar with Bernanke's conversations with Lewis told the paper that the Fed chairman did not offer the BofA chief advice on the question of disclosure, and suggested that Lewis consult his own counsel. Paulson repeatedly told Lewis that "the U.S. government was committed to ensuring that no systemically important financial institution would fail," the Journal cited the former Treasury Secretary's spokeswoman as saying.




OTHER STORIES:

GM employees may get shutdown details this week - (news.yahoo.com/s/ap)
US Moves Closer to Becoming A Major Shareholder In GM - (www.cnbc.com)
GM to Shut Most US Plants Up to 9 Weeks - (www.cnbc.com)
Toll Bros CEO: 80% of U.S. ‘On the Way Back’ - (www.cnbc.com)
'Time To Get Off This Ride,' Says Popular Strategist - (www.cnbc.com)
Credit-Card Reforms Being Pushed by Obama, Congress - (www.cnbc.com)
Banks Hinder Efforts to Offer Mortgage, Credit-Card Relief - (www.cnbc.com)
Wells Fargo CFO: Economy Has Encouraging Signs - (www.cnbc.com)

Detroit Councilman Walks Away From His Mortgage - (www.sacbee.com) A Crash This Way Cometh... - (www.321gold.com)Banks Realize: Lending is BAD business right now. - (www.marketwatch.com)TARP is Wide Open to Fraud - (www.nytimes.com)20 Criminal Tarp Probes - (money.cnn.com)Oil Falls to $45 - (finance.yahoo.com)Deflation Fears in Europe - (www.nytimes.com)US Leading Indicators Show Extended Recession - (www.bloomberg.com) Toyota's Japan Output Falls to 1978 Levels. 1978! - (www.marketwatch.com)

U.S. Existing Home Sales Dropped More Than Forecast - (www.bloomberg.com)
New jobless claims rise more than expected to 640K - (finance.yahoo.com)
U.S. Initial Jobless Claims Rose to 640,000 Last Week - (www.bloomberg.com)
Countries trying to cope with severe global slump - (news.yahoo.com/s/ap)
Global Economy Called Worst Since 1945 - (www.nytimes.com)
Rising Home Vacancies Give Bernanke Extra Time to Withdraw Cash - (www.bloomberg.com)
As Housing Market Dips, More in U.S. Are Staying Put - (www.nytimes.com)
UPS 1Q profit plunges more than 55 pct. - (finance.yahoo.com)
Regulators to Meet With Banks on Friday on ‘Stress’ Tests - (www.nytimes.com)
U.S. Weighs Revealing Each Bank’s Capital Needs After Tests - (www.bloomberg.com)
Treasury Is Said to Increase Its Offer to Chrysler Lenders - (www.nytimes.com)
Mortgage Bondholders Form Battle Lines Over Obama Housing Plan - (www.bloomberg.com)

Monday May 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Freddie Mac's Acting CFO Found Dead - (www.cnbc.com) David Kellermann, acting chief financial officer of mortgage giant Freddie Mac, was found dead Wednesday in his suburban Virginia home, a Fairfax County police spokeswoman said. Police were called at 4:48 am New York time to Reston, Virginia, spokeswoman Lucy Caldwell told Reuters. Local media reported that Kellermann's wife called in an apparent suicide, but Caldwell did not elaborate on the cause of death. The incident is "under investigation," she said. According to Freddie Mac's website, Kellermann, 41, was with Freddie Mac for more than 16 years and named acting CFO in September. Freddie Mac and rival mortgage finance company Fannie Mae were taken over by the U.S. government last year as mounting losses on housing investments weakened their balance sheets and played a role in the U.S. housing and global credit crisis

Morgan Stanley's Loss Much Wider than Expected - (www.cnbc.com) Morgan Stanley sharply missed market expectations on Wednesday, posting a net loss of 57 cents per share in the first quarter. But its Tier 1 capital ratio was more than double the required limit, at 16.4 percent. Analysts surveyed by ThomsonReuters had expected the bank to post a loss of just 8 cents a share in the first quarter. Morgan Stanley reported a net income of $1.26 per share in the first quarter last year. Net revenue at Morgan Stanley was $3 billion in the first quarter, 62 percent below last year's similar period and lower than analyst estimates of about $5 billion. The results were negatively impacted by a $1.5 billion decrease in net revenue related to the tightening of its credit spreads on certain of its long-term debt, the bank said in a statement. It also said it had net losses of $1 billion on investments in real estate. Shares in Morgan Stanely, which also cut its dividend to 5 cents a share to boost its capital, fell by nearly 9 percent in pre-market trading.

Geithner Hints at High Bar In Letting Banks Repay Aid - (www.washingtonpost.com) Treasury Secretary Timothy F. Geithner said yesterday that the "ultimate test" for determining which banks can repay government bailout money is whether the entire financial system is capable of offering enough credit to revive the economy. Geithner's remarks indicate that regulators will require banks to meet high standards to get out from under the government's thumb. Industry and federal officials are bracing for a showdown over this issue beginning Friday when the chief financial officers of 19 of the nation's major banks will be summoned to the Federal Reserve and told the results of the government's "stress tests." This federal initiative is examining whether the firms have enough capital to continue lending if the economy significantly worsens. Senior administration officials say the tests may show that some banks need to raise more money or take additional government aid. But the banks say federal bailout money, which requires firms to restrict executive pay and submit to other limits, now carries a stigma. Several of the firms, such as J.P. Morgan Chase and Goldman Sachs, have been lobbying the government to be released from the bailout and have taken steps to repay the money.

Still-fuzzy rules dog Geithner's toxic-asset purchase plan - (www.latimes.com) The Treasury can't seem to unequivocally guarantee major investment firms that they won't be subject to executive-pay limitations if they partner with the government to buy banks’ toxic assets. That could be a deal-killer, because it’s inconceivable that giants such as Pimco and TCW Group in Southern California, and BlackRock Inc. in New York, would agree to pay cuts to participate in the program. The public-private investment plan, unveiled in March, calls for big money managers to invest alongside the government to buy banks’ troubled assets, such as mortgage-backed securities. Treasury Secretary Timothy F. Geithner envisions these partnerships buying up to $1 trillion of toxic debt to unburden banks. But unlike the government’s injections of capital into major banks, which were mandatory for the banks and came with strings attached (such as pay restrictions), money managers’ participation in the public-private investment plan would be voluntary. So how could the government tell the firms that they'd have to limit employees' pay, and still expect them to join in? It wouldn’t work, Geithner acknowledged last month, when he told reporters that federal compensation rules "will not apply to the asset managers and investors in the program."

How the U.S. Will Save GM and Chrysler - (www.washingtonpost.com) Negotiations over the government's bailout of Chrysler and General Motors have shifted into high gear in recent days, and from this point until the end of June, things are likely to get more tense and more complicated. My guess is that when it's all over, both companies will have been run through a quickie bankruptcy process and will emerge smaller, with less debt, a lower cost structure and Uncle Sam as the majority owner. The process is now being driven largely by Steven Rattner and Ron Bloom, the Obama administration's auto czars. Over the past month, they have laid down the parameters for talks among the companies; the United Auto Workers; the banks and bondholders; and, in the case of Chrysler, Italy's Fiat, which seeks to integrate Chrysler with its newly revived European operations. The Obama team understands that it will get only one good shot at a rescue and that if its plan doesn't work, the companies will be shut down and sold off in pieces. Its priorities are to minimize damage to an already weak economy, protect workers and pensioners, and get the government out of the deal as quickly as possible with all of its money back. The government has the upper hand here for the simple reason that all the parties know they would be better off with almost any restructuring that involves $40 billion of federal financing than with the normal bankruptcy process, which would almost certainly result in the liquidation of the companies. But the government's leverage has its limits. As a legal matter, if the plan tilts too much in favor of unionized workers, the bankers and bondholders can demand that the judge reject it, based on a bankruptcy law requirement that all unsecured creditors be treated equally. And as a political matter, a Democratic administration may be reluctant to ask a bankruptcy court to impose an overly onerous labor contract on an unwilling union.

Bank Profits Appear Out of Thin Air - (www.nytimes.com) This is starting to feel like amateur hour for aspiring magicians. Another day, another attempt by a Wall Street bank to pull a bunny out of the hat, showing off an earnings report that it hopes will elicit oohs and aahs from the market. Goldman Sachs, JPMorgan Chase, Citigroup and, on Monday, Bank of America all tried to wow their audiences with what appeared to be — presto! — better-than-expected numbers. But in each case, investors spotted the attempts at sleight of hand, and didn’t buy it for a second. With Goldman Sachs, the disappearing month of December didn’t quite disappear (it changed its reporting calendar, effectively erasing the impact of a $1.5 billion loss that month); JPMorgan Chase reported a dazzling profit partly because the price of its bonds dropped (theoretically, they could retire them and buy them back at a cheaper price; that’s sort of like saying you’re richer because the value of your home has dropped); Citigroup pulled the same trick. Bank of America sold its shares in China Construction Bank to book a big one-time profit, but Ken Lewis heralded the results as “a testament to the value and breadth of the franchise.” Sydney Finkelstein, the Steven Roth professor of management at the Tuck School of Business at Dartmouth College, also pointed out that Bank of America booked a $2.2 billion gain by increasing the value of Merrill Lynch’s assets it acquired last quarter to prices that were higher than Merrill kept them. “Although perfectly legal, this move is also perfectly delusional, because some day soon these assets will be written down to their fair value, and it won’t be pretty,” he said.

Four states dominate city foreclosure rankings - (www.msnbc.msn.com) The top 26 areas are in California, Florida, Arizona and Nevada. The 26 U.S. cities with the worst foreclosure problems are concentrated in four states — California, Florida, Arizona and Nevada, a report released Wednesday shows. The report on foreclosures for the first quarter by RealtyTrac Inc. found the highest foreclosure rates were found in Las Vegas, Merced, Calif. and the Cape Coral-Fort Myers area in Florida. Next on the list were the California metro areas of Stockton, Riverside, Modesto, Bakersfield and Vallejo-Fairfield. Rounding out the top 10 were Phoenix and Port St. Lucie, Fla. Outside of the four high-foreclosure states, the worst foreclosure rate was in Boise City, Idaho (No. 27) and Greeley, Colo. (No. 29).






OTHER STORIES:

Geithner Acknowledges US Fault in Crisis - (www.cnbc.com)
Refinancing Demand Boosts Mortgage Applications - (www.cnbc.com)
Boeing Profit Narrows as Economy Hits Orders - (www.cnbc.com)
AT&T Profit Beats Forecasts, Boosted by Wireless - (www.cnbc.com)
A Whiff of Revival in Northeast US Home Market - (www.cnbc.com)
The Latest Threat to Housing: Worsening Job Losses - (www.cnbc.com)
Billions More in Mortgage Aid? - (www.cnbc.com)

U.S. Stock Futures Retreat; Morgan Stanley, Capital One Fall - (www.bloomberg.com)
European Stocks Fluctuate; Asian Shares, U.S. Futures Decline - (www.bloomberg.com)
Oil hovers under $49 ahead of US inventory report - (finance.yahoo.com)
Base metals retreat while oil steadies - (www.ft.com)
Soaring U.S. Budget Deficit Will Mean Billions in Bond Sales - (www.bloomberg.com)
Geithner Says Most U.S. Banks Have Enough Capital - (www.bloomberg.com)
Credit Swaps Market Cut to $38 Trillion, ISDA Says - (www.bloomberg.com)

Hedge Fund Redemptions Slowed on Outperformance - (www.bloomberg.com)
Banks in Europe Lag in Recovery - (www.washingtonpost.com)
U.K. Unemployment Rises to Highest Level in 12 Years - (www.bloomberg.com)
Darling Plans Record U.K. Deficit, Limiting Stimulus - (www.bloomberg.com)
Japan hit by first trade deficit in 30 years - (www.ft.com)
Hope and Caution on Chinese Economy - (www.nytimes.com)
For Housing Crisis, the End Probably Isn’t Near - (www.nytimes.com)
Mortgage applications up 5.3% last week: MBA - (www.marketwatch.com)

Public universities predict hefty tuition hikes - (www.usatoday.com)
California, Florida Metropolitan Areas Lead in Foreclosures - (www.bloomberg.com)
Morgan Stanley Loss Exceeds Analysts’ Estimates - (www.bloomberg.com)
Banks May Get Mix of U.S. Stock Conversions, Private Funding - (www.bloomberg.com)
By This Measure, a Battered Bottom Line - (www.washingtonpost.com)

Sunday May 3 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Broke Cities Use Renta-Cops Instead of Police - (www.infowars.com) Facing pressure to crack down on crime amid a record budget deficit, Oakland is joining other U.S. cities that are turning over more law-enforcement duties to private armed guards. The City Council recently voted to hire International Services Inc., a private security agency, to patrol crime-plagued districts. While a few Oakland retail districts previously have pooled cash to pay for unarmed security services, using public funds to pay for private armed guards would mark a first for the city. Hiring private guards is less expensive than hiring new officers. Oakland — facing a record $80 million budget shortfall — spends about 65% of its budget for police and fire services, including about $250,000 annually, including benefits and salary, on each police officer. In contrast, for about $200,000 a year the city can contract to hire four private guards to patrol the troubled East Oakland district where four on-duty police officers were killed in March. And the company, not the city, is responsible for insurance for the guards.

The Rage of the Privileged Class As It Loses Its Privileges - (www.nymag.com) As the privileged class loses its privileges, a collective moan rises from the canyons of Wall Street. Shortly after 1:30 on the afternoon of March 18, two dozen traders in AIG’s financial-products division stepped away from their Bloomberg terminals and huddled around televisions to watch their boss, CEO Edward Liddy, testify before Congress. There was much at stake. These were the people who received the greater part of $165 million in “retention bonuses” that had suddenly become, to borrow a phrase, toxic. As the hue and cry to return the money grew, the traders had thought that Liddy would stand up for them. The ruddy-faced, 63-year-old former Allstate CEO, who had been installed by Treasury Secretary Hank Paulson in September, was, if not exactly one of them, at least someone who understood the rules of the game as it had been played—and who understood what they were entitled to under those rules, even if those rules were unspoken. In AIG’s glory years, executives like Joseph Cassano, the former head of financial products, took home more than $300 million. That was the kind of money you couldn’t talk about. But as Andrew Cuomo stoked public outrage by threatening to release the names of the bonus recipients, it became clear that the game was changing. When AIG employees had arrived at their desks that morning, they found a memo from Liddy asking them to return 50 percent of the money. The number infuriated many of the traders. Why 50 percent? It seemed to be picked out of a hat. The money had been promised, was the feeling. A sacred principle was at stake, along with, not incidentally, their millions. Everyone on Wall Street is prepared to lose money. Bankers have expressions for disastrous losses: clusterfuck, Chernobyl, blowing up … But no one was prepared to lose money this way. This felt like getting mugged. Jake DeSantis, a 40-year-old commodities trader at AIG, was an unlikely face of Wall Street greed. Stocky and clean cut, with an abiding moral streak, he’d worked summers for a bricklayer in the shadow of shuttered steel mills outside Pittsburgh; he was valedictorian of his high-school class and attended college at MIT. Compared with the way many of his Wall Street brethren lived, with their Gulfstreams, Hamptons mansions, and fleets of luxury cars, his life wasn’t one to invite scorn. He had canvassed for Obama in Scranton on Election Day and drove a Prius. His division at AIG was profitable. And since joining the company in 1998, he had never traded a single credit-default swap. Now his boss was selling him out. DeSantis left work that day feeling that his world was falling apart. The next day, the House passed—by a wide margin—a bill that would levy a 90 percent tax on bonuses at firms that were bailed out. The Connecticut Working Families Party planned to bus protesters to the homes of AIG executives in Fairfield County. There were death threats. “It’s been terrifying,” says his wife’s mother, Lynnette Baughman. “It’s like a witch hunt.” It was in this environment that DeSantis sent his remarkable resignation letter to the New York Times. In the letter, which ran as an op-ed on March 25, he compared himself to a plumber (“None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house”) and announced that he would quit AIG and donate his bonus to charity. The letter, passionate and wounded and oddly out of touch with ordinary Americans, put a human face on Wall Street’s anger. When DeSantis arrived at the office the morning his letter appeared in the paper, the AIG traders gave him a standing ovation. In some quarters of the press, he was vilified. (As Frank Rich put it in the Times, “He didn’t seem to understand that his … $742,006.40 (net) would have amounted to $0 had American taxpayers not ponied up more than $170 billion to keep AIG from dying.”) But the fracas was useful: DeSantis had succeeded in opening up an honest conversation—as typically emotional and awkward and neurotically charged as is any conversation on the subject—about money, the first this town has had in years. I n a witch hunt, the witches have feelings, too. As populist rage has erupted around the country, stoked by canny politicians, an opposite rage has built on Wall Street and other arenas where the wealthy hold sway. Its expression is more furtive and it’s often mixed with a kind of sublimated shame, but it can be every bit as vitriolic. “AIG pissed some people off, and now you’re gonna screw everyone on Wall Street?” rails a laid-off JPMorgan vice-president. (Despite the honesty of the conversation, many did not wish to be quoted by name.)

AP Exclusive: Fed tests harder on regional banks - (news.yahoo.com/s/ap)
The government is giving Wall Street banks a helping hand. But this time it's not a handout. The federal bank "stress tests" rate the individual loans held by big regional banks as riskier than the complex troubled assets held by the industry titans, according to a Federal Reserve document obtained by The Associated Press. That approach could threaten some major regional banks while making the national banks appear in better shape when the government releases the results of the tests next month. Regulators are administering the tests to 19 large financial firms to determine which banks are healthy, which need more help and which might fail if the recession worsens. Under one scenario, the tests assume banks will see "no further losses" on the complex securities, according to the document obtained by AP. By contrast, it estimates that individual loans will lose up to 20 percent of their value. Regional banks are holding more individual loans and fewer of the securities Wall Street giants specialize in — complex derivatives backed by huge pools of mortgage-backed loans and other debt. Analysts say regulators are probably favoring the largest banks because if even one failed, it would pose a grave financial risk. Banks that deal in securities are more connected to other corners of the global financial system.

Detroit councilman walks away from his mortgage - (www.sacbee.com) It was their dream home, a two-story, four-bedroom colonial in one of Detroit's nicest and most stable neighborhoods. But then, one day in December, City Councilman Kwame Kenyatta and his wife packed up their belongings, locked the doors, mailed in the keys and walked away - adding another vacant house to the thousands in a city hard hit by the nation's mortgage crisis. "We're already underwater when it comes to what we're paying on the house versus what the house is worth," Kenyatta said. Around the country, the practice, sometimes referred to as "mortgage walking" or "jingle mail," appears to be growing. But for Kenyatta, the decision could do more than hurt his credit rating. It could damage his bid for mayor of Detroit this summer, particularly since he has been one of the city's most vocal supporters of measures to improve neighborhoods and clean up blight. "If I'm going to follow you, you need to be a leader," said Patricia Dixon, a former neighbor of Kenyatta's. "You don't show leadership by walking away from your home in the city of Detroit. You have vandalism where they find out the houses are vacant. You have people stealing fireplaces." Kenyatta, a Democrat, is not the only elected official facing mortgage trouble. The Wayne County prosecutor's Detroit home has gone into foreclosure. And California Rep. Laura Richardson nearly lost her home before she paid up delinquent home loans. KEN NOTE: THE KEY QUESTION IS WHERE DID LAURA GET THE MONEY TO CATCH UP ON HER DELINQUENT LOANS?

Don't say prices are falling - (www.nytimes.com) IN the past few years, New York City’s frenzied love affair with real estate fueled a veritable geyser of cocktail party/water cooler/diaper circuit chatter. In these circles, who bought what and for how much was far more fascinating than the mating preferences of celebrities or the dark machinations of Dick Cheney. Flash forward to the winter and now spring of our proliferating discontent: the median sales prices of co-ops have plunged more than 20 percent in six months with no bungee cord in sight, buyers are abandoning six-figure deposits on new condos, and sellers stranded with underwater properties are feeling like victims of a Ponzi scheme. The toupee is off, and in the flat gray light of the morning after, real estate looks a lot like tech stocks in the aftermath of the Internet boom. So for those who have invested in it, has real estate become the dirtiest pair of words in town? “From what I see, it’s not that it’s a dirty word, but that it’s not a word anymore,” said David S. Markus, 44, a former hedge fund manager who owns a co-op on the Upper West Side. “Nobody wants to talk about it. In my building a year ago, people would talk about how much someone listed their apartment for. Today nobody wants to talk about the fact that we have three apartments in the B line that are for sale and none have sold. We’re all in this together and everybody’s apartment has come down in value and nobody wants to talk about it.” It may be that real estate is more persona non grata than public enemy No. 1. Susan Bernfield, 44, the artistic director of a nonprofit theater company, bought a TriBeCa loft with her husband in 1996. Most of her friends — artists, architects and people in publishing, a smattering of bankers and lawyers — settled there around the same time, before the colonization of their area by new development. She says that the subject, tenor and frequency of real estate conversations has shifted drastically over the past few months.

The international monetary systems breakdown is underway - (www.leap2020.eu) In this issue of the GEAB, our researchers anticipate the different forms a US default will take at the end of summer 2009, a US default which can no longer be concealed concealable from this April (most taxes are collected in April in the US) onward (10). The perspective of a US default this summer is becoming clearer as public debt is now completely out of control with skyrocketing expenses (+41%) and collapsing tax revenues (-28%), as LEAP/E2020 anticipated more than a year ago. In March 2009 alone, the federal deficit has nearly reached USD 200-billion (way above the most pessimistic forecasts), i.e. a little less than half of the deficit recorded for the entire year 2008 (a record high year) (11). The same trend can be observed at every level of the country’s public organisation: federal state, federated states (12), counties, towns (13), everywhere tax revenues are vanishing, suffocating the whole country with spiraling debts that no one can control anymore (not even Washington). In this issue of the GEAB (N°34), our researchers focus on how to explain the « mystery of gold price ». Indeed, our seekers (of information, not gold) identified a number of interesting leads to understand why (14) the price of gold has been fluctuating around the same level for months when the number of gold buyers is constantly increasing and demand for coins and bars far exceeds available supply in many countries. Finally, our team gives recommendations on how to prepare for the crisis in the coming months, with particular regard to savings and life-insurance.

'The Goldman Conspiracy' - (www.marketwatch.com) 10 reasons why Wall Street has absolute power over America's democracy. Two mind-numbing fast-paced dramas. Two parallel worlds. One real, one fiction, both deadly. Jack Bauer, mythic hero of "24." Dying from a deadly bio-pathogen leaked from weapons developed by Starkwood, a rogue mercenary army attacking the presidency, hell-bent on taking over America. The other drama in play: "Hank the Hammer" Paulson, iconic Wall Street hero, a Trojan Horse placed inside Washington by Goldman Sachs as Treasury Secretary in control of America's $15 trillion economy. Goldman, a modern dynasty with vast financial powers much like those once used by the de' Medici, Rothschilds and Morgans to control nations. Both dramas play high-stakes games with financial WMDs that have lethal consequences. Jack compresses thrills, kills and chills into 24 hours. Hank, Goldman and their army of Wall Street mercenaries move with equally blinding speed, heart-pounding action. Drama? You bet. Six short months ago Hank led an assault on Congress. The scene parallels one in "24:" Sangala War Lord Juma's brazen attack inside the White House. But no AK-47s necessary. The Hammer assaulted Congress with just a two-and-a-half page memo in hand. Like a crack special-ops warrior, he took down the enemy, demanding $750 billion, absolute control, total secrecy, no accountability and emergency powers to act immediately ... warning that inaction was not an option, that collapse of America's banking system was imminent, would bring down the global monetary system, pushing world's economies into a "Great Depression II." Congress surrendered. Here's the whole plot: Scene 1. American government is now run by the 'Goldman Conspiracy': Oh, you really think just I'm plotting a television series? Or just paranoid, exaggerating this power grab? You better read "The Usual Suspects," Matthew Malone's brilliant article in Portfolio magazine: He "exposed" the "Goldman Sachs 'conspiracy' to take over the U.S. financial system." Read it in this context: America's financial sector has exploded from 19% of corporate profits in 1986 to 41% today, becoming a magnet for every wannabe billionaire. They know why Wall Street must control Washington. Malone focuses on the incestuous "conspiracy" of Goldman alumni in Treasury, Bank of America, Merrill Lynch, AIG, Citigroup, Washington lobbyists and politicians. Scene 2. Huge conflicts motivating Wall Street's 'Trojan Horse': And just in case you think any emphasis on The Hammer's conflict of interest was invented purely to increase drama, please remember that he worked at Goldman for three decades after serving under Nixon. He got $38 million his last year as CEO in 2006 before becoming Treasury Secretary. Then during the market meltdown six months ago the $700 million personal fortune he built at Goldman was threatened by Goldman's huge $20 billion derivatives exposure at AIG: Suddenly his responsibilities at Treasury merged with a strong self-interest in protecting his personal fortune. AIG was "saved."



OTHER STORIES:

Biggest Budget Deficit In UK History Coming Up - (Mish at globaleconomicanalysis.blogspot.com)
Commercial Real Time Bomb Goes Off But No One Notices - (Mish at globaleconomicanalysis.blogspot.com)
Economist Mankiw Defends Policy of Theft - (Mish at globaleconomicanalysis.blogspot.com)
Pacific Grove California Explores Bankruptcy Over Pension Issues - (Mish at globaleconomicanalysis.blogspot.com)

Banks say they're lending, but they're not -- and that's good - (www.marketwatch.com)
Morgan Stanley mulling buy of U.S. regional banks: report - (www.marketwatch.com)
Yahoo's profit tumbles; company will cut 5% of workforce - (www.marketwatch.com)
FDIC discussed possible Pandit replacements at Citi: report - (www.marketwatch.com)
Many firms with DB pension plans are significantly underfunded - (www.marketwatch.com)

Killing the Myths of Houseownership - (www.reallyfuckedhomeowner.com)
Ameriquest: A window into the mortgage meltdown - (www.contracostatimes.com)
The Casualties of a Building Boom That Got Ahead of Itself - (www.nymag.com)
Why Housing Is Not Coming Back - (www.Charles Hugh Smith)
Backdoor Way To Clear Housing Inventory: Tax Liens - (www.optionarmageddon.ml-implode.com)

Treasuries shaky as investors' sanctuary - (www.washingtontimes.com)
US May Convert Banks' Bailouts to Equity Share - (www.nytimes.com)
Foreclosure Watch 2009 as Option ARM's Reset - (www.subprimemortgagedebacle.com)
Time For Professor Mankiw To Resign - (Mish)
Zero Interest Rate paper from 2003 - (www.dallasfed.org)

Saturday May 2 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Macklowe Lender to Seize 1330 Tower as Empire Shrinks - (www.bloomberg.com) A 40-story office tower next to New York’s Museum of Modern Art is set to be taken over tomorrow by a unit of Canada’s largest pension fund in the second foreclosure auction of a U.S. skyscraper in less than a month. The pending seizure of 1330 Avenue of the Americas is another step in the dismantling of New York developer Harry Macklowe’s property empire. The building, between 53rd and 54th Street, is topped by a peach “FT” logo signifying the Financial Times newspaper published by tenant Pearson Inc. The auction follows the March 31 sale of Boston’s John Hancock Tower to Normandy Real Estate Partners and Five Mile Capital Partners. The foreclosures are being triggered by defaults on mezzanine loans, a type of property financing that proliferated during the takeover boom that ended in 2007. More auctions may follow as mezzanine lenders foreclose on borrowers that relied on short-term debt to pay for acquisitions, said Daniel Rubock, a senior vice president at Moody’s Investors Service. “Mezzanine loans are the front guard of the capital stack and they’re the ones that are going to be vulnerable first,” Rubock said. “We’re going to see more of these mezzanine loans have problems.”

Lenders Battle Lawmakers Over Letting Courts Modify Mortgages - (www.washingtonpost.com) As lenders begin to implement the Obama administration's foreclosure rescue program, Senate Democrats are wrangling with the financial services industry over a key part of the plan that would permit bankruptcy judges to cut the principal owed by mortgage borrowers. Congressional and industry officials said progress is being made, but no deal has been struck. Major lenders, including Bank of America, Wells Fargo and J.P. Morgan Chase, negotiated with Sen. Richard J. Durbin (D-Ill.), who is leading the effort in the Senate, through the recent two-week recess, officials said. The banks declined to comment. "We're certainly making progress but have yet to reach an agreement," said Max Gleischman, Durbin's spokesman. Under the proposal, a bankruptcy judge could change the terms of a distressed homeowner's mortgage to make it more affordable, including lowering the principal balance or interest rate, a process known as a cramdown. The measure passed the House by a wide margin last month, but then stalled. Senate leaders hope to reach an agreement and vote by Memorial Day. The Obama administration has said the measure is an important part of its efforts to reduce foreclosures. The negotiations, which have also included the Credit Union National Association, have touched on provisions pushed by the financial services industry to blunt the impact of the change. For example, lenders want the cramdown authority to expire by 2014. There is also debate about how to make bankruptcy modification the last resort for borrowers.

BNY Mellon Net Falls 51% as Fees Decline With Equity Markets - (www.bloomberg.com) Bank of New York Mellon Corp., the world’s biggest custody bank, cut its dividend as first-quarter earnings fell short of analysts’ estimates because of a drop in recordkeeping and money-management fees. BNY Mellon fell as much as 15 percent in New York trading after reducing its quarterly dividend to 9 cents a share from 24 cents. Net income dropped 51 percent to $370 million as fees tumbled 28 percent, the New York-based company said today in a statement. Falling equity markets drove a 16 percent year-over-year drop in custody assets to $19.5 trillion, while money managed for clients fell 20 percent to $881 billion. The average value of the MSCI World Index, which reflects the returns of stocks in developed and emerging markets, declined 44 percent in the first quarter from a year earlier. The company “has a number of challenges as fees are under pressure,” Mark Fitzgibbon, an analyst with Sandler O’Neill & Partners LP in New York, said in an interview before the results were announced. Excluding some costs, BNY Mellon earned 53 cents a share, missing the 63-cent average estimate of 15 analysts surveyed by Bloomberg. Per-share earnings were 28 cents after preferred dividends BNY Mellon paid to the U.S. government bank-rescue fund.

IMF Says Global Losses From Credit Crisis May Hit $4.1 Trillion - (www.bloomberg.com) Worldwide losses tied to distressed loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and credit crisis exact a higher toll on financial institutions, the International Monetary Fund said. Banks will shoulder about 61 percent of the writedowns, with insurers, pension funds and other nonbanks assuming the rest, the Washington-based lender said in a report released today on the state of the global financial system. The fund forecast $2.7 trillion in losses from U.S.-originated loans and assets, compared to its estimates of $2.2 trillion in January and $1.4 trillion in October. Without fiscal stimulus and other government action, banks will probably curtail lending in coming months, worsening the most severe global slump in six decades, the IMF said. Even with forceful state policies, “the deleveraging process will be slow and painful”, the fund said. “Stabilizing the financial system remains a key priority and, although progress is being made, further policy efforts will be required,” the fund said in its report. “Without a thorough cleansing of banks’ balance sheets of impaired assets, accompanied by restructuring and, where needed, recapitalization, risks remain that banks’ problems will continue to exert downward pressure on economic activity.” The $4.1 trillion estimate is the first by the IMF to include loans and securities originating in Europe and Japan. Pension funds and insurance companies are also exposed to such losses.

Spain’s Falling Prices Fuel Deflation Fears in Europe - (www.nytimes.com) Faced with plunging orders, merchants across this recession-wracked country are starting to do something that many of them have never done: cut retail prices. Prices dipped everywhere, from restaurants and fashion retailers to pharmacies and supermarkets in March. Hoping to increase sales, Fernando Maestre reduced prices by a third on the video intercoms his company makes for homes and apartment buildings. But that has not helped, so, along with many other Spanish employers, he is continuing to fire workers. The nation’s jobless rate, already a painful 15.5 percent, could soon reach 20 percent, a troubling number for a major industrialized country. With the combination of rising unemployment and falling prices, economists fear Spain may be in the early grip of deflation, a hallmark of both the Great Depression and Japan’s lost decade of the 1990s, and a major concern since the financial crisis went global last year. Deflation can result in a downward spiral that can be difficult to reverse. As unemployment rises sharply and consumers cut spending, companies cut prices. But if sales do not pick up, then revenue can decline further, forcing more cuts in workers or wages. Mr. Maestre is already contemplating additional job and wage cuts for his 250 employees.

Stress Test Results: Most Banks Likely to Pass - (www.time.com) onsumers and investors have been waiting for weeks for the results of the Treasury Department's "stress tests" of the nation's 19 largest banks. And it won't be until May 4 that we get definitive results. But a senior Administration official says the Treasury Department has indicated that there is substantial value in the banks tested and that there are no big shocks coming. (See TIME's "25 People to Blame for the Financial Collapse.") That likely means no big bank will be deemed too stressed to survive. The official says the Treasury does believe some of the banks will need additional capital to make them stronger, and in all likelihood the government will identify those banks. (See TIME's photos of the G-20 protests.) The bank stress tests are considered one of the key components of Treasury Secretary Tim Geithner and President Barack Obama's plan to fix the financial system. They are designed to determine which banks would fail and which would survive if the economy worsens, as some economists expect. But when they were announced in mid-February it was not clear what the government would do with the information collected. Would it shut down a troubled bank? At first, the Treasury Department said it might not release the specific bank results. Observers assumed that Treasury officials were nervous that if a bank failed the test customers and investors would flee. But in the past few weeks the Obama Administration has started to believe that the market is doing a good job of differentiating between good banks and problem banks, according to the Administration official. That belief, the official says, gives the Treasury the confidence that it can release individual results of the stress tests without disrupting the market, or unduly forcing a bank out of business.

Let Insolvent Financial Firms Fail: Fed's Hoenig - (www.cnbc.com) Insolvent financial firms must be allowed to fail regardless of their size, and sheltering such "too big to fail" institutions risks making the financial crisis worse, a top Federal Reserve official said Tuesday. In blunt criticism of the government and his fellow central bankers, Federal Reserve Bank of Kansas City President Thomas Hoenig also said that the design of a $700 billion bank bailout last year had created uncertainty and slowed recovery. "The United States currently faces economic turmoil related directly to a loss of confidence in our largest financial institutions because policymakers accepted the idea that some firms are just 'too big to fail.' I do not," Hoenig told the Joint Economic Committee of the Congress in prepared remarks. "Yes, these institutions are systemically important, but we all know that in a market system, insolvent firms must be allowed to fail regardless of their size, market position or the complexity of operations," said Hoenig, who will be a voter on the Fed's policy-setting committee next year. The biggest 19 U.S. banks are being subjected to a battery of so-called stress tests to restore confidence in their soundness, with guidelines on the process due on Friday and the results on May 4.




OTHER STORIES:

Darling to Agree on Guarantee for U.K. Mortgage Bonds - (www.bloomberg.com)
Audit Cites $900 Million Loss on Citigroup Assets - (www.ml-implode.com)
Company Touts Real Estate Feedback System - (www.ml-implode.com)
Junk Bonds Posting Big Gains on Recovery Hopes - (www.cnbc.com)
Geithner: Bank Rescue Plan Has Right Balance - (www.cnbc.com)
TARP Inspector General Calls For Greater Transparency - (www.cnbc.com)

Roubini: 'Suckers Rally' to Fade Amid Economy Woes - (www.cnbc.com)
U.S. Stocks Fluctuate as BNY Mellon Retreats, Yahoo Rallies - (www.bloomberg.com)
Oil languishes near $46 as stock markets sink - (finance.yahoo.com)
Geithner Says Most U.S. Banks Have Enough Capital - (www.bloomberg.com)
Regulators Give Greater Weight to Loan Quality in U.S. Tests - (www.bloomberg.com)
Hedge Fund’s Book May Have Fallen 75%, FRM’s Tomlinson Says - (www.bloomberg.com)
Bank Aid Programs Are Seen as Open to Fraud - (www.nytimes.com)
Stanford Points Fingers in Fraud Case - (www.nytimes.com)
Sweden slashes interest rates, more cuts expected - (finance.yahoo.com)
India central bank cuts rates by 0.25 points to 4.75% - (www.marketwatch.com)
German Investor Sentiment Increases to Two-Year High - (www.bloomberg.com)
Choosing alternatives to layoffs - (www.latimes.com)
Caterpillar Posts 1st Loss in 16 Years, Cuts Forecast - (www.bloomberg.com)
DuPont Cuts 2009 Profit Forecast as Weak Demand Cuts Sales - (www.bloomberg.com)

IBM Sales Miss Estimates Amid Slump, Currency Changes - (www.bloomberg.com)
Citigroup’s Shareholders Wondering When Treasury Ousts Board - (www.bloomberg.com)