Friday November 6 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Armageddon in Alabama Proves Parable for Local U.S. Governments - (www.bloomberg.com) In its 190-year history, Jefferson County, Alabama, has endured a cholera epidemic, a pounding in the Civil War, gunslingers, labor riots and terrorism by the Ku Klux Klan. Now this namesake of Thomas Jefferson, anchored by Birmingham, is staring at what one local politician calls financial “Armageddon.” The spectacle -- a tax struck down, about 1,000 county employees furloughed, a politician indicted over $3 billion in sewer debt that may lead to the largest municipal bankruptcy in history -- has elbowed its way up the ladder of county lore. “People want to kill somebody, but they don’t know who to shoot at,” says Russell Cunningham, past president of the Birmingham Regional Chamber of Commerce. One target of their anger is Larry P. Langford, who was the county commission’s president in 2003 and 2004 and is now mayor of Birmingham. The 61-year-old Democrat goes on trial today, charged in a November 2008 federal indictment with taking cash, Rolex watches and designer clothes in exchange for helping to steer $7.1 million in fees to an Alabama investment banker as the county refinanced its sewer debt. Jefferson County’s debacle is a parable for billions of dollars lost by state and local governments from Florida to California in transactions done behind closed doors. Selling debt without requiring competition made public officials vulnerable to bankers’ sales pitches, leaving taxpayers to foot the bill for borrowing gone awry. Swaps Blew Up: Under Langford’s stewardship, the county bet on interest- rate swaps, agreements that a representative of New York-based JPMorgan Chase & Co. told commissioners could reduce their interest costs. Instead, the swaps -- covering more than $5 billion in all -- blew up during the credit crisis after ratings for the county’s bond insurers fell. JPMorgan, through spokeswoman Christine Holevas, declined to comment for this story. Thousands of public borrowers across the U.S. chose a similar strategy, and many are now paying billions of dollars to escape the contracts, said Peter Shapiro, managing director at Swap Financial Group in South Orange, New Jersey. Even Harvard University, the world’s richest academic institution with an endowment of $26 billion, fell for Wall Street’s financing in the dark: It paid $497.6 million to investment banks during the fiscal year ended June 30 because it chose to cancel $1.1 billion of interest-rate swaps.

Adam Storch, 29-Year-Old Goldman Guy Who Is Now COO Of The SEC - (www.businessinsider.com) hat sure didn't take long. Only a few moments ago we noted that we hadn't yet been able to track down a photograph of the 29-year-old Goldman Sachs vice president who has just been named the chief operating officer of the Securities and Exchange commission. And now we've got this photo. Storch graduated from SUNY Buffalo. During college he did a stint as a summer intern at Neuberger Berman and worked at Deloitte & Touche for two years after graduating. He then went to NYU's Stern School of Business. This lead to a job at Goldman, where he worked for the last five years. As we noted earlier, this will surely lead to people complaining that A VAMPIRE SQUID IS RUNNING THE SEC. Interestingly, Storch seems to be a big fan of Bill Clinton. At Stern, he created a website asking people to vote for Bill Clinton in the 2008 election. "Don't stand for the 22nd Ammendment!" the website implores.

Medicare Premiums to Rise 15 Percent as Costs Jump - (www.nytimes.com) The basic Medicare premium will shoot up next year by 15 percent, to $110.50 a month, federal officials said Monday. The increase means that monthly premiums would top $100 for the first time, a stark indication of the rise in medical costs that is driving the debate in Congress about a broad overhaul of the health care system. About 12 million people, or 27 percent of Medicare beneficiaries, will have to pay higher premiums or have the additional amounts paid on their behalf. The other 73 percent will be shielded from the increase because, under federal law, their Medicare premiums cannot go up more than the increase in their Social Security benefits, and Social Security officials announced last week that there would be no increase in benefits in 2010 because inflation had been extremely low. Kathleen Sebelius, the secretary of health and human services, urged the Senate to approve a bill, already passed by the House, to block the scheduled increase in Medicare premiums. “We are in tremendously difficult economic times, and seniors are being hit particularly hard,” Ms. Sebelius said. “The last thing seniors need right now is a substantial increase in their Medicare premiums, and many seniors will see such an increase if no action is taken.” Among those who face higher premiums next year are new Medicare beneficiaries, high-income people and those whose Medicare premiums are paid by Medicaid. Premiums can be as high as $353.60 a month, or more than $4,200 a year, for Medicare beneficiaries who file tax returns with adjusted gross income greater than $214,000 for an individual or $428,000 for a couple. The higher premiums will impose “an additional and significant burden” on states, which help pay Medicaid costs, along with the federal government. The House bill was passed, 406 to 18, on Sept. 24. Among those who voted against it was the Democratic leader, Representative Steny H. Hoyer of Maryland, who said he saw no need to help multimillionaires at a time when the nation was struggling to rein in entitlement programs.

Foreclosures Force Ex-Homeowners to Turn to Shelters - (www.nytimes.com) The first night after she surrendered her house to foreclosure, Sheri West endured the darkness in her Hyundai sedan. She parked in her old driveway, with her flower-print dresses and hats piled in boxes on the back seat, and three cherished houseplants on the floor. She used her backyard as a restroom. The second night, she stayed with a friend, and so it continued for more than a year: Ms. West — mother of three grown children, grandmother to six and great-grandmother to one — passed months on the couches of friends and relatives, and in the front seat of her car. But this fall, she exhausted all options. She had once owned and overseen a group home for homeless people. Now, she succumbed to that status herself, checking in to a shelter. “No one could have told me that in a million years: I’d wake up in a homeless shelter,” she said. “I had a house for homeless people. Now, I’m homeless.” Growing numbers of Americans who have lost houses to foreclosure are landing in homeless shelters, according to social service groups and a recent report by a coalition of housing advocates. Only three years ago, foreclosure was rarely a factor in how people became homeless. But among the homeless people that social service agencies have helped over the last year, an average of 10 percent lost homes to foreclosure, according to “Foreclosure to Homelessness 2009,” a survey produced by the National Coalition for the Homeless and six other advocacy groups. In the Midwest, foreclosure played a role for 15 percent of newly homeless people, according to the survey, reflecting soaring rates of unemployment — Ohio’s reached 10.8 percent in August — and aggressive lending to people with damaged credit. At a shelter for women and children run by the West Side Catholic Center in Cleveland, where Ms. West now lives, foreclosure accounted for zero arrivals in 2007, the center’s executive director, Gerald Skoch, said. Last year, two cases emerged. This year, the number has already reached four.

Muni Market Faces $11.3 Billion in New Issues, Most Since June - (www.bloomberg.com) The municipal market tackles its biggest week for new bond issues since June, as Minnesota and Denver-based Catholic Health Initiatives lead about $11.3 billion in fixed-rate offerings. Minnesota, home of Cargill Inc. and 3M Co., intends to bring $906 million of general obligation bonds to market. CHI, the second-largest Catholic health-care system in the U.S. after Ascension Health, seeks buyers for more than $1 billion of tax- exempt debt in three states. Both issues will refinance debt and finance new capital projects. States, local governments and nonprofit hospitals are pressing forward with borrowing plans after a buyer’s strike the past two weeks boosted benchmark tax-exempt yields from 42-year lows. The weekly Bond Buyer 20 yield index rose since Oct. 1 by 38 basis points, or 0.38 percentage point, to 4.32 percent. The gauge of 20-year general obligation bonds remains lower than it was from February 2008 through mid-September 2009. “Keep a sharp eye out for sizeable new-issue offerings that may be ‘priced to move’ in a difficult market,” John Dillon, a fixed-income credit strategist at Morgan Stanley Smith Barney in Purchase, New York, said in a report late last week. Weekly sales of fixed-rate municipal bonds reached $11 billion twice in the past four months, and totaled $11.9 billion for the period ended June 12, according to data compiled by Bloomberg. Following are descriptions of some pending sales of municipal bonds; the timing and amounts may change. CATHOLIC HEALTH INITIATIVES plans to sell about $1.1 billion of fixed-rate bonds as soon as this week in tax-exempt deals arranged by state agencies in Colorado and Kentucky, and by Ohio’s Montgomery County. The money raised will be used to pay off variable- and auction-rate debt as well as reimburse the system for previous capital spending and fund new projects. Morgan Stanley will lead banks marketing the bonds, which are rated AA by Fitch Ratings and Standard & Poor’s, and Aa2 by Moody’s Investors Service. The Denver-based health-care system operates 78 hospitals in 20 states and has annual revenue of $8.2 billion, according to its Web site. (Added Oct. 19) MINNESOTA will negotiate the sale of $906 million of general obligation bonds through a group of underwriters led by Barclays Plc this week. The proceeds will refinance debt and fund projects for parks, education, pollution control, transportation, natural resources and agriculture. The state’s full faith, credit and taxing power pledge carries S&P and Fitch’s top rating of AAA and Moody’s second-highest grade, Aa1. (Added Oct. 19) PENNSYLVANIA TURNPIKE COMMISSION, operator of the state’s toll roads, plans to issue $524 million of revenue bonds through Goldman Sachs Group Inc. this week. The commission is financing a payment, set by a 2007 law called Act 44, to the Pennsylvania Department of Transportation for capital projects. The debt, secured by a subordinate lien on turnpike revenue, is rated A2 by Moody’s and A- by S&P. (Added Oct. 19) CALIFORNIA PUBLIC WORKS BOARD plans to offer $820 million of bonds backed by lease payments appropriated this week. Underwriters led by Morgan Stanley and Royal Bank of Canada’s RBC Capital Markets unit will take orders from individual investors tomorrow and set final prices and yields on the debt Oct. 21, when institutions can buy. A portion of the deal will be taxable Build America Bonds, with the rest tax-exempt. The proceeds will fund various capital projects, including a prison in Monterey County near Soledad. Fitch grades the bonds BBB-, one level above high-risk, high-yield junk status. Moody’s rates them one level higher at Baa2. S&P assigns its A- rating, the fourth-lowest investment grade. (Updated Oct. 19)

OTHER STORIES:

Senate Bill Would Curtail Bank Overdraft Charges - (www.nytimes.com) The legislation would establish a limit of one overdraft fee in a month, with a maximum of six in a year.

Icahn Offers $6 Billion To Help CIT - (www.nytimes.com) The billionaire financier says a loan could help the CIT Group, a business lender, avoid bankruptcy.

DealBook: As Icahn Pitches CIT Investors, Egan-Jones Urges Rejection - (www.nytimes.com)

British Regulator Proposes Tighter Rules for Mortgages - (www.nytimes.com)

U.S. Said to Target Wave of Insider-Trading Cases After Galleon - (www.bloomberg.com)

Central banks fuel risky assets - (www.ft.com)

Gold at $2,000 Becomes Inflation-Adjusted Bullseye for ‘80 High - (www.bloomberg.com)

Won Crushes Yen as Dollar Substitute in Asian Rally - (www.bloomberg.com)

Japan Economy Improves in All Nine Regions, BOJ Says - (www.bloomberg.com)

Crisis Created ‘Moral Hazard,’ Former RBA Chief Says - (www.bloomberg.com)

U.S. Plans to Charge 10 More After Rajaratnam Arrest - (www.bloomberg.com)

Greenlight's Einhorn holds gold, says U.S. policies poor - (www.reuters.com)

Armageddon in Alabama Proves Parable for Local U.S. Governments - (www.bloomberg.com)

Muni Market Faces $11.3 Billion in New Issues, Most Since June - (www.bloomberg.com)

Brazil to Impose Tax on Foreign Inflows, Mantega Says - (www.bloomberg.com)

Fed Chief Cites Role of Trade Imbalances in Crisis - (www.nytimes.com)

Foreclosures Force Ex-Homeowners to Turn to Shelters - (www.nytimes.com)

Homebuilder Confidence in U.S. Unexpectedly Decreases - (www.bloomberg.com)

Bubble in Bubbles Means It’s Time to Close Bar: William Pesek - (www.bloomberg.com)

Thursday November 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Foreclosures: 'Worst three months of all time' - (money.cnn.com) Despite signs of broader economic recovery, number of foreclosure filings hit a record high in the third quarter - a sign the plague is still spreading. Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday. "They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes. During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country. The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

JPMorgan Pitches Interest-Only Mortgages to Boost Obama Plan - (www.bloomberg.com) Banks will push the Obama administration to expand its mortgage-modification program to allow interest-only periods on reworked loans, seeking to bring more homeowners into the initiative while recognizing concern that it may only postpone defaults, according to JPMorgan Chase & Co. “We’re working with our peers to develop a proposal to present,” Douglas Potolsky, a senior vice president at JPMorgan’s Chase home-loan unit, said yesterday at a Mortgage Bankers Association conference in San Diego. The suggestion reflects a new round of ideas and plans to refine the $75 billion “Home Affordable” program, announced in February as a bid to rework as many as 4 million loans to ease a housing slump now showing signs of ebbing. The program’s latest phase also is marked by a need to permanently convert more than 500,000 trial modifications by collecting paperwork so consumers’ mortgage payments don’t revert within months. “Our primary goal for the next few weeks is to make sure we convert all of those borrowers, or as many as possible,” Laurie Anne Maggiano, director of the Treasury’s policy office for homeownership preservation, said at the conference. “It’s a huge push for the Treasury and all of its partners.” Only “a couple thousand” conversions have been completed, Maggiano said. To aid the process, the government last week streamlined documentation requirements, and granted borrowers and loan servicers on initial trials an extra two months to complete the work, which typically must be finished after three months of timely payments, she said. ‘Short Sales’: By next week, the Treasury will announce details of a program to encourage so-called short sales of properties -- for less than mortgage amounts -- by homeowners who don’t qualify for modifications, Maggiano said. It will include “capped” payments to retire second mortgages that may form an “industry standard” and help curb the “back and forth” with owners of that debt which creates one of the biggest hurdles, she said.

Letting Goldman roll the dice - (blogs.reuters.com) On this morning’s conference call, David Viniar, Goldman Sachs’ chief financial officer, emphasized the bank’s valuable social role. His bank made markets and provided credit when other financial players were suffering. But is Goldman really such an indispensible financial intermediary? One look at the firm’s revenue breakdown shows that it’s more casino than anything else, and some of the markets it makes still put the economy in danger. With markets recovering and competitors falling away, Goldman’s trading and principal investment revenue through the first nine months of the year was nearly $24 billion, on pace to break the $30 billion record set in 2007. Goldman, in other words, generates most of its revenue trading its own money and earning vigorish on customer transactions. It’s a hybrid hedge fund and bookie, with an investment bank and asset management business thrown in for good measure. With that in mind, one is left to wonder whether Goldman was really worth saving last year. What have taxpayers received for $50 billion worth of cash and guarantees, for giving Goldman access to the Federal Reserve as its lender of last resort? Saving Goldman was largely about saving the derivatives market, which is so big and unstable that the death of one counterparty could mean the death of all. With big commercial banks like JPMorgan Chase in deep, saving the derivatives business was as much about protecting depositors and maintaining the integrity of the payment system as it was derivatives themselves. Many of us didn’t like it — we thought banks like Goldman should have been recapitalized the right way, by wiping out shareholders and forcing subordinated creditors to eat their share of losses. But that ship has sailed. We socialized the risk while privatizing the profit because we were told we had no other choice: The government had to guarantee the biggest banks’ liabilities because they were too unstable to survive bankruptcy or FDIC receivership. If that’s true, why haven’t we seen any substantial reforms to reduce systemic risk? Congress is kicking around new resolution authority to help resolve failed systemically-important banks. But the goal should be reducing systemic risk to begin with. Yet serious reform of the derivatives market — something that would reduce its size significantly — is nowhere on the radar. Indeed, Goldman’s trading results suggest that market is coming back with a vengeance. It’s playing in very risky markets with a capital structure that remains vulnerable yet is guaranteed by taxpayers.

S. Fla. foreclosures surge - (www.miamiherald.com) Foreclosures in Miami-Dade County surged 94 percent in September compared to a year ago, with 5,721 homeowners receiving word their lenders had initiated foreclosure proceedings. In Broward, the rate rose two percent, with 3,493 homes entering foreclosure. The monthly figures released Thursday by RealtyTrac -- which tallies new filings, scheduled auction sales and homes that were returned to lenders -- suggest rising unemployment may be worsening the region's foreclosure problem. In Miami-Dade, some 1,312 homes were slated for auction in September and 687 were reclaimed by banks. In Broward, 1,769 were scheduled for public sale and 1,280 were taken back by banks. Broward and Miami-Dade ranked sixth and seventh, respectively, among the worst performing counties in Florida. St. Lucie County ranked first. Statewide foreclosures rose 15 percent compared to a year ago, with a total of 55,036 homes in some stage of foreclosure. In September, Florida ranked third nationally. For the third quarter, the rate in Miami-Dade was up 52 percent, compared with the same three months a year ago. In Broward, foreclosures rose 27 percent in the period ending Aug. 31.

Riverside and San Bernardino Shadow inventory - (housing-kaboom.blogspot.com) Here's a long and boring read about shadow inventory. This is a report put together by the Amherst Securities Group for their investors. There report starts off with... With the apparent stabilization of home prices and the increase in new and existing home sales, many investors believe the housing market has bottomed, and is beginning to recover. We believe this optimism is premature. We acknowledge that there are a lot of positives in the market—prices have fallen significantly and housing is more affordable than at any point over the past 2 decades. The tax credit for first time home buyers has helped spur purchase activity. However, investors are overlooking one critical factor—the size of the “housing overhang”; i.e., the # of loans in delinquent status or in foreclosure. We estimate the housing overhang at 7 million units – these loans are destined to liquidate, and are creating a huge shadow inventory. Interestingly, they used the city of Riverside as an one example.
The break out is as follows:
- For Sale = 1,372 Units
- Banked Owned (but not yet listed) = 1,362 Units
- Auction Date Announced = 1,916 Units
- Notice of Default Issued = 2,360 Units
- Total Probable Inventory = 7,010 (1,372 + 1,362 +1,916 + 2,360)
As of 2007, City-Data.com reports that the city of Riverside, CA had 34,854 mortgaged residential units. It is one of the cities in the San Bernadino/Riverside County areas that experienced rapid home price appreciation during the bubble, with median home prices escalating from $136,000 in 2000 to a 2007 median price of $423,400 (for a 17+%/year price appreciation). Using Loan Performance data, we estimate that almost 50% of the mortgaged properties in the city were financed with Alt-A, Pay Option, or subprime loan product. Recent median sales data indicate that home prices have fallen nearly 60% from the peak. Thus, the Trulia numbers imply a staggering 7,010 potential properties for sale in Riverside, out of only 34,800 units (thus 20% of all properties!). Stated differently, total inventory (actual listings + REO + Auction Date Announced + Notice of Default issued) are actually more than 5X the number of units listed “for sale.” And this doesn’t take account of homes backed by loans where a Notice of Default has not yet been filed.

OTHER STORIES:

U.S. Foreclosure Filings Jump 23% to Record in Third Quarter - (www.bloomberg.com)

Foreclosures Hit All-Time High - (www.businessinsider.com)

SF Bay Area houses still taking a hit - (www.contracostatimes.com)

Foreclosures rise 5% from summer to fall in LA - (www.latimes.com)

Foreclosures leap in Sarasota County, FL - (www.heraldtribune.com)

Hawaii foreclosure filings up 63% compared with September '08 - (www.honoluluadvertiser.com)

Maui leads in foreclosures - (www.starbulletin.com)

US housing: Sustainable bottom or dead cat bounce? - (www.morningstar.co.uk)

Housing could take double dip down in 2010 - (www.marketwatch.com)

Renting Beats House-Buying Remorse After Meltdown - (www.bloomberg.com)

What's Wrong With Being A Renter? - (www.cato-at-liberty.org)

Dow Breaks 10,000: Don't Get Caught Up - (www.finance.yahoo.com)

No, You're Reading That Right: 79.9% rate targets credit-challenged - (www.nbcsandiego.com)

Ask 'But Why?': Sir James Goldsmith interview 11-15-1994 - (www.askbutwhy.com)

Wednesday November 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Japan Airlines Near Bankruptcy - (www.reuters.com) Japan Airlines Corp shares slid 12 percent to a record low on Friday as investors suggested bankruptcy may be an option for Asia's biggest airline by revenue, even as the government again pledged to support the troubled carrier. "There's increasing concern about the future of the company and whether it's heading for a GM-style bankruptcy or not," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. The airline, plagued with high costs in a severe industry downturn, has asked creditors for 600 billion yen ($6.6 billion) in financial aid, including 300 billion yen in debt waivers and debt-for-equity swaps, as part of a restructuring plan, according to two sources familiar with the matter. JAL shares fell to 100 yen, their lowest since they were re-listed in 2002. By the close, the stock was quoted at 101 yen, down more than 11 percent. The shares have lost a quarter of their value this week. Last month, JAL proposed a plan under which it pledged to cut 6,800 jobs, eliminate 50 routes and lower its operating costs by 30 percent, but it was forced back to the drawing board after the government said the steps were not enough. The airline is now working with a government-appointed task force on a new plan to put to the transport ministry within two weeks. Transport Minister Seiji Maehara on Friday pledged his support for the airline while that process is underway. "From I can see in the pre-draft plan I received the other day from JAL and its task force, I am confident that work on the plan is progressing smoothly," said Maehara, adding there was no change in the government's stance to support the airline. But the lack of a clear growth plan for JAL is fuelling market concern that a rescue package may be throwing good money after bad, some investors said, leaving creditors such as Mitsubishi UFJ Financial Group (MUFG) and Mizuho Financial Group out in the cold.

States' Revenue Falls Most Since 1963 in Income, Sales Tax Drops - (www.bloomberg.com) U.S. state tax collections tumbled the most in almost half a century in the second quarter as the economic recession curbed levies on incomes and sales. The 16.6 percent plunge was the biggest since at least 1963, the Nelson A. Rockefeller Institute of Government said today. For the 12 months to June 30, the fiscal year for most states, revenue declined 8.2 percent, or $63 billion, about twice what states got from the $787 billion U.S. economic stimulus package, the institute said. State revenue has dwindled for two straight quarters and continued to decline in July and August, the Albany-based research organization said. Budgets for the year that began July 1 already face $26 billion of deficits, the Washington, D.C.- based Center on Budget and Policy Priorities said Aug. 12, forcing state lawmakers to confront additional spending cuts. “We’re looking at a multiyear problem hitting essentially every state,” Robert Ward, the institute’s deputy director, told reporters. “It has happened during recessions before, but the depth of this decline is unprecedented in modern times.” Collections dropped in 49 states in the second quarter as sales and personal-income taxes slid for the third consecutive period, the institute said. Income tax was down 27.5 percent and sales tax fell down 9.5 percent, its study said. Both categories fell by the most in 45 years. “Many economists believe that the national recession has ended and that a tepid recovery is now underway,” Rockefeller analysts Lucy Dadayan and Donald J. Boyd wrote. “Unfortunately for states, an emerging economic recovery does not spell instant budget relief.” ‘Considerably More’: Figures for July and August for 36 early-reporting states showed tax collections down 8 percent, the Rockefeller Institute said. At least 17 states have announced budget shortfalls since July, with “considerably more” expected, Boyd said. New York’s tax revenue from April 1 to Sept. 15 was $634.5 million below projections and $3.6 billion less than a year ago, Comptroller Thomas DiNapoli said yesterday. California reported last week that revenue trailed a forecast made less than three months earlier by $1.1 billion, or 5.3 percent. States are anticipating more cuts to current-year budgets, already pared once to bring them into balance. Mississippi Governor Haley Barbour told managers on Oct. 13 to cut spending 5 percent because tax collections in the first three months of fiscal 2010 were 7.7 percent below estimates. Florida Governor Charlie Crist told department heads on Oct. 12 not to request more money for next year, when the state faces a $2.6 billion deficit.

NO WATER IN CALIFORNIA – (www.google.com/hostednews/ap) Farmers in the most prolific agricultural region in the country should be planting winter romaine lettuce and calculating spring cantaloupe acreage at this time of year. Instead the romaine packing company left this year for the searing Sonoran Desert of Arizona, where there is more reliable water. And cantaloupe? Who knows whether there will be water to irrigate it. "How bad does it have to get for people to take action?" farmer Jeremy Freitas asked a panel of state agricultural officials Wednesday, choking back tears. They had come to California's agricultural heartland for an update on the state's water crisis. They left hearing that — even after a year of discussing possible quick fixes to the delivery problems that have fallowed tens of thousands of acres, forced bankruptcies and contributed to record unemployment — farmers are no more certain about their water supplies. As California prepares for its fourth year of drought, farmers are nervous in California's San Joaquin Valley. The valley's eight counties, if they were their own state, would be the top producing one in the nation. Nearly all the U.S. cantaloupes, garlic, almonds and processing tomatoes come from here. And so do nearly 400 other commodities — more than anywhere else. The lack of water in the state's reservoirs, coupled with the environmental collapse of the Sacramento-San Joaquin Delta where water from the state's wet north is pumped south to irrigate fields, has restricted the amount of water some of the state's most prolific farmers receive to as little as 10 percent of normal. "It's October going to March quickly and we can't seem to get an agency to move," said farmer Dan Errotabere, who lost his romaine contract when the local packinghouse moved to Yuma. "We need action. We need agreements now. We need certainty in the Central Valley now." Gov. Arnold Schwarzenegger wants a special legislative session this fall to look at issues surrounding California's aging water infrastructure, built 50 years ago for a population one-third the size. The most ambitious, a peripheral canal to move water from the north around the Delta, is at least 15 years away. Meanwhile, farmers have been begging for several quick fixes so they count on water in 2010, including temporary suspension of the Endangered Species Act so water can be pumped to them even if it kills threatened smelt. Congress once granted a temporary reprieve to New Mexico but so far has declined to do for California.

Jobless flock to sign up for the military - (money.cnn.com) The nation's armed services wrapped up a record year for recruiting as a withering job market and bigger bonuses trumped two unpopular wars. The Department of Defense said it met or exceeded recruitment goals for all branches of the armed services for fiscal year 2009, which ended Sept. 30, for the first time since 1973, when the draft ended and U.S. forces withdrew from Vietnam. "We're pleased to report that for the first time since the advent of the all-volunteer force, all of the military components, active and reserve, meet their number as well as their quality goals," said Bill Carr, deputy undersecretary of Defense for Military Personnel Policy, at a Pentagon press conference on Tuesday. The active-duty Air Force, Marine Corps and Navy all met their goals, as measured by the number of fresh recruits, while the Army achieved 108% of its recruitment goals, the DOD said. The Reserves for each branch exceeded their goals for recruitment numbers, and the National Guard matched its goal. The Pentagon also exceeded its quality goals, as 96% of the active-duty recruits were high-school graduates, surpassing a 90% benchmark. Carr acknowledged that the high level of unemployment in the civilian job market was helping the military draw recruits, and the earning power of recruits puts them in the top 10% of workers of commensurate age, education and experience. Recruits typically earn $1,399.50 a month as they undergo basic training during their first few months in the military, according to the DOD. Most enlisted personnel can expect to earn $1,568.70 a month by the end of their first year, which translates into an annual salary of $18,824.40.

Time for Baltimore to "Pull a Vallejo" and Declare Bankruptcy - (Mish at globaleconomicanalysis.blogspot.com) A crisis over police and fire benefits in Baltimore, has reached boiling temperature. Please consider Baltimore police, fire pension costs could double next year. An unusual pension benefit for police and firefighters could cost Baltimore $164.9 million next year, nearly double what the city is now paying and a figure that the city's finance director says taxpayers cannot afford. After years of calls for pension reform, board members who oversee the nearly $2 billion system said their Tuesday vote that passes the whopping bill on to City Hall is a message that the fund is close to a breaking point and needs attention. Edward J. Gallagher, the city's finance director, said the city "certainly cannot afford" to pay the full commitment due in July. "It seems that our concern has really come home to roost." The new retiree funding request is twice as large as the $81.9 million the city paid to the fire and police pension fund last year. If the pension system is not altered before the bill comes due, needed cash could come from raising the city property tax rate 11 percent, or "significant reductions across all agencies, including public safety," Gallagher said. Mayor Sheila Dixon, who has long sought reductions in the city's tax rate of $2.27 per $100 in assessed value, has said both options are unacceptable. The extra cash is needed largely to shore up a part of the pension program called a variable annuity. The benefit is similar to a cost-of-living increase, but is tied to positive stock market returns. When the market goes up, some of the extra money is given to retirees in the form of a permanent pay increase, an uncommon benefit that has made Baltimore's costs grow. In most pension plans, extra money is plowed back into the asset funds to make up for the bad investment years. The Dixon administration in March recommended replacing that part of the retirement benefit with a straight cost-of-living increase - a change that would have likely headed off Tuesday's vote. However, the unions objected, saying the proposed COLA was too low. The administration withdrew that plan and offered a new proposal to suspend the variable benefit, with the idea that some type of COLA would be reinstated later as part of a larger pension reform effort. Unions object to that plan too, and there has been no action on it. The market value of the fund's assets has fallen to 50.2 percent of what is needed to pay out all benefits. Last year, it was 89.4 percent funded. Baltimore's Pension Plan Bankrupt: It's time for Baltimore to face the facts. The pension plan is essentially bankrupt. It is grossly unfair to taxpayers to raise taxes one cent to pay for this monstrosity. My recommendation for Baltimore is to

1) declare bankruptcy
2) privatize the fire department
The greed of the unions is simply unconscionable. It's time for Baltimore to "Pull a Vallejo". Please see Judge Rules Vallejo Can Void Union Contracts for a synopsis of the situation in Vallejo, California.

Colorado Minimum Wage Poised To Drop - (Mish at globaleconomicanalysis.blogspot.com) Colorado minimum wages are indexed to the Consumer Price Index. With the decline in the CPI, minimum wages are poised to go lower. Please consider Colorado minimum wage to drop as living costs fall. Colorado will become the first state to reduce its minimum wage because of a falling cost of living. The state Department of Labor and Employment ordered the wage down to $7.24 from $7.28. That's lower than the federal minimum wage of $7.25, so most minimum wage workers would lose only 3 cents an hour. Colorado is one of 10 states where the minimum wage is tied to inflation. The indexing is thought to protect low-wage workers from having flat wages as the cost of living goes up. But because Colorado's provision allows wage declines, the minimum wage will drop because of a falling consumer price index. It will be the first decrease in any state since the federal minimum wage law was passed in 1938. In Florida, deflation would reduce the minimum wage to $7.21, but the state's minimum wage already matches the federal wage, so Florida workers' paychecks won't change. Other states with minimum wages that rise with inflation are Arizona, Missouri, Montana, Nevada, Oregon, Vermont and Washington. Ben Hanna, Colorado organizer for the Association of Community Organizations for Reform Now, or ACORN, said the difference is small but significant for poor workers. "I can't imagine many employers would see this as an opportunity to lower wages," Hanna said in August. Minimum wage laws discourage hiring. Moreover, proposals to make health care mandatory do the same thing. Small businesses, the lifeblood of any recovery, have significant reasons not to go on hiring sprees in this deflationary environment.

OTHER STORIES:

* End of the USD as Reserve Currency * - (www.financialsense.com)

Weak Dollar? Not So Much in China - (www.nytimes.com)

For Housing, Question Now Is How Strong a Recovery - (www.cnbc.com)

CME in Informal Talks To Take Over CBOE: Report - (www.cnbc.com)

Obama Said Not To Be Demanding Public Health Option - (www.cnbc.com)

Wall Street Compensation is Outrageous: Sen. Dodd- (www.cnbc.com)

UBS Registered Mail Warns US Clients on Tax: Report - (www.cnbc.com)

GM CFO Search Complicated by US Pay Rules: Report - (www.cnbc.com)

Apple earnings: Will iPhone disappoint? - (money.cnn.com)

'Wild Things' are king at the box office - (money.cnn.com)

CIT amends restructuring plan with bondholders - (money.cnn.com)

50 Best Places to Launch a Business - (money.cnn.com)

All I want for Christmas: A job - (money.cnn.com)

Rehab for the rich and famous - (money.cnn.com)

The car that drives itself - (money.cnn.com)

How Goldman partners get paid - (money.cnn.com)

Stimulus jobs report 'rife with mistakes'- (money.cnn.com)

U.S. deficit biggest since 1945- (money.cnn.com)

Tuesday November 3 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Price War Over Books Worries Industry - (www.nytimes.com) A tit-for-tat price war between Wal-Mart and Amazon accelerated late on Friday afternoon when Wal-Mart shaved another cent off its already rock-bottom prices for hardcover editions of some of the coming holiday season’s biggest potential best sellers, offering them online for $8.99 apiece. Publishers, booksellers, agents and authors, meanwhile, fretted that the battle was taking prices for certain hardcover titles so low that it could fundamentally damage the industry and the ability of future authors to write or publish new works. The price cutting began on Thursday when Wal-Mart announced that it would take pre-orders for 10 yet-to-be-published hardcovers for $10 apiece on its Web site, Walmart.com. Later that day Amazon quietly began cutting the prices of those same titles to the very same $10, prompting Wal-Mart to lower its price to $9, a markdown of 59 to 74 percent off the list price of the books. Amazon had matched the $9 price by Friday morning, and Wal-Mart had lowered its price again, to $8.99, by late afternoon. The titles affected include Sarah Palin’s memoir, “Going Rogue”; John Grisham’s short-story collection, “Ford County”; Stephen King’s “Under the Dome”; Barbara Kingsolver’s new novel, “The Lacuna”; and the latest installment in the Alex Cross thriller series by James Patterson, “I, Alex Cross.” Although Wal-Mart, Amazon and other retailers like Costco, Target and even pure bookstore chains like Barnes & Noble typically discount best sellers, they usually don’t take more than 50 percent off the list price. Wal-Mart’s move, and Amazon’s reaction, signaled a new threshold in price cutting for books and left publishing insiders wondering how low it would go when the beleaguered industry is already worried about the effect of $9.99 e-books and a slowdown in book sales over all.

U.S. Savings Bind - (www.nytimes.com) In his Labor Day weekend address on the American worker, President Obama, with little fanfare, announced some initiatives to help Americans save more money. One such step will allow employees to receive their tax refunds in the form of U.S. Savings Bonds instead of in cash. Another will promote automatic enrollment in retirement funds for workers at medium and small firms so that employees will have to opt out of saving, rather than opt in. Studies show that this results in more saving. All these steps should add to the national savings rate. It is a goal Obama campaigned on — and one that policy wonks and pundits have been screaming about for years. The United States is staring at frightening retirement deficits, infrastructure needs and health care liabilities. How else to meet them but to start saving and stop borrowing money? Here’s the funny part. The American consumer kicked the borrowing habit more than a year ago. The country, you may have noticed, is in an economic crisis, and most economists say the only way out is for consumers to start spending money. Spending is the opposite of saving. Since consumer spending accounts for 71 percent of the gross domestic product, an enduring rise in personal saving would make for a weaker recovery, with fewer jobs. One main purpose of the $787 billion government stimulus was to provide a buffer until private spending revived. Usually, saving recedes when recessions end. Some economists think the current financial crisis was such a shock — on a par, psychologically, with the Great Depression — that people will feel the need to save even after it is over. If their predictions are right, the United States would need to enact a stimulus every year to get the economy back to where it was. That is why the federal government enacted the cash-for-clunkers program; it wants people who have been accumulating savings to buy automobiles. The government’s mixed message may sound grossly inconsistent, but it isn’t. Economists often give different answers for the short term and the long term. What is unusual is that the financial crisis has brought these divergent agendas into such sharp relief. The prescription that we should save more isn’t wrong. Household saving is the total of what people earn less what they spend. If you want to describe the history of the U.S. economy over the last 50 years, in shorthand, you could do worse than this: Americans saved. Then they didn’t. For the 35 years after World War II, Americans dutifully set aside about 9 percent of their income. Their savings were plowed into stocks and bonds and formed a pool of capital for investments and new technologies (and a couple of wars, not to mention the space program). They begat a golden era of productivity and growth and, eventually, the 1990s boom. But by then, habits were changing. Starting in the mid-1980s, the personal-savings rate declined. Credit became more available, and people became used to borrowing what they needed. (The commonplace phrase “saving up” — as in “I’m saving up for a washing machine” — all but disappeared.) Also, bubbles in stocks and real estate convinced people they didn’t need to save much for the future, since even a small nest egg would grow into a big one. By the late 2000s, the savings rate plunged to less than 1 percent.

Obama looking at all options for creating jobs - (finance.yahoo.com) President Barack Obama is considering all options to create jobs, including another stimulus package, while trying to pull the economy out of a deep recession and deal with a record deficit, White House advisers said Sunday. With more than half of the $787 billion recovery package yet to be spent, Obama aides said the administration is not ready to commit to additional measures. "Everything is on the table," senior adviser Valerie Jarrett said. "You've got this huge national deficit and we've got to do what we can to bring that down. At the same time, it's important to stimulate the economy," Jarrett said. "Let's wait and see. Let's let the recovery bill do its job." Unemployment stands at 9.8 percent, with more than 4 million jobs lost this year. The deficit has reached $1.4 trillion and the national debt $11.9 trillion. Adviser David Axelrod cited progress on reviving the economy, with expectations for growth in the third quarter this year. But he warned that the government should not make the mistake of ending its recovery initiatives too early at the risk of sending the economy back into recession. "That doesn't mean that we don't look to the mid- and long-term for deficit reduction," Axelrod said. "We have a stimulus program in place, an economic recovery program in place, that is not even 50 percent through. We have to see that through. And we'll see what other measures we need to take." In appearances on the Sunday news programs, the advisers criticized those Wall Street firms that are paying huge amounts in compensation and benefits after accepting taxpayer assistance. Goldman Sachs, for example, has said it has set aside $16.7 billion for compensation so far this year, more than $500,000 per employee. Citigroup is paying $5.3 billion in bonuses to its employees and Bank of America $3.3 billion. "I think the American people have a right to be frustrated and angry," said Rahm Emanuel, the White House chief of staff. Emanuel and the chairman of the Senate Banking, Housing and Urban Affairs Committee, Sen. Chris Dodd of Connecticut, said the compensation issue comes as banks and other financial institutions oppose efforts by the president and Congress to put in place regulations designed to prevent the kind of financial meltdown that began last year. "They have a responsibility to the whole system," Emanuel said. "And it starts with not fighting the financial regulatory system and the reforms that are necessary to protect consumers, homeowners and others." Dodd criticized banks for failing to make more credit available to small businesses and others.

California job losses keep climbing - (www.latimes.com) California lost more than five times as many jobs in September as it did the month before, signaling that the state's employment woes continue despite a budding economic recovery. Employers cut 39,300 workers from their payrolls last month, according to figures released Friday by the state Employment Development Department, led by cuts in construction and government. A separate survey of joblessness showed that California's unemployment rate was 12.2% in September, down from a revised 12.3% in August. But that decline wasn't a reflection of a stronger job market. The rate fell only because thousands of jobless Californians gave up searching for work last month and were no longer counted as unemployed. "It is discouraging," said Esmael Adibi, an economist at Chapman University. "We want to see job losses go down and the pace slow down, but we didn't see it." The state's unemployment rate has climbed dramatically over the last year, up from 7.8% in September 2008. It's also significantly higher than the national rate of 9.7%. Despite the disappointing job numbers, economists said California was in the early stages of a comeback, albeit an uneven one. Southern California, which has been hobbled by the collapse in housing and construction, is projected to lag behind the Bay Area, whose bellwether tech industry is gearing up to supply growing global demand for computers, software and mobile devices. Intel Corp. of Santa Clara and Google Inc. of Mountain View reported encouraging earnings this week. Northern California's exports of semiconductors and electronics climbed. In August, loaded containers sailing from the Port of Oakland were up 12.8% from the same period last year, while tonnage at San Francisco International Airport was up 5.2%, according to Jock O'Connell, international trade and economics advisor at the University of California Center Sacramento.

States suing federal government for unclaimed war bonds – (www.latimes.com) $16.7 billion in certificates has yet to be cashed in. Six states now say that Treasury officials haven't tried to find the bondholders or their descendants, and that states have a right to the money. Nearly 70 years ago, the federal government began issuing hundreds of billions of dollars in savings bonds to finance the greatest war effort in the nation's history, with President Franklin D. Roosevelt buying the very first one. But the bonds came with a catch: They wouldn't be paid off for 40 years. As the decades passed after World War II, $16.7 billion worth of bond certificates were either forgotten in dusty attics or thrown out in the trash. That treasure has remained unclaimed, but a lawsuit could change that. Six states have sued the federal government to get that money, contending that the Treasury Department has done nothing to find the original bondholders or their descendants -- not even send out a letter when it came time for the government to repay the bonds. Moreover, the states say, they have laws that empower them to take unclaimed property for themselves, which would be a welcome infusion of cash at a time of economic distress. Oral arguments are expected to begin in the coming weeks in U.S. District Court in New Jersey, where the lawsuit was originally filed. "It's daunting," said Randall Berger, a partner at Kirby McInerney who is representing the states -- Kentucky, Missouri, Montana, New Jersey, North Carolina and Oklahoma. "But the states are doing it because they need the money and because they have these statutes that clearly lay out what happens . . . to unclaimed property." Representatives for the Treasury Department and the U.S. attorney's office, which represents the department, declined to comment. The case will largely turn on the issue of where the boundaries are between federal and state power, lawyers for the states say. If the court rules in favor of the U.S. government, the Treasury Department could keep money it owes to ordinary Americans.

Southern California's vast desolation indoors – (www.latimes.com) Almost 51 million square feet of office space is vacant in Southland, and that number is expected to continue growing well into next year. Though Wall Street investors are showing some enthusiasm about the direction of the economy, shell-shocked business owners in Southern California are still more inclined to shrink than grow their companies. ¶ Problems at white-collar firms are bleeding the region's enormous office rental industry. Almost 51 million square feet of office space in Los Angeles County, Orange County and the Inland Empire is now empty -- more than 17% of the total. ¶ The exodus from office buildings that started in late 2007 accelerated during the third quarter as the anemic business climate took its toll on the real estate rental industry, according to the Cushman & Wakefield real estate brokerage. ¶ "These vacancies are a direct reflection on unemployment," said Joe Vargas, an executive vice president at Cushman & Wakefield. "Companies continue to reduce their workforce, or they are not hiring." Troubled business owners facing expiring leases often choose to downsize these days and take less office space, even though rents are falling, he said. Real estate rentals are a lagging indicator of the economy, so the shrinking-space trend is expected to persist well into next year even if the nation's financial outlook continues to improve. Industry observers were divided in their assessments about whether tenants at least showed signs of interest in renting new office space. "There was a dramatic drop-off in leasing velocity last quarter," said John McAniff, managing director of brokerage Jones Lang LaSalle. "Apparently the rebound on Wall Street did not translate to a rebound in tenant commitments. That tells me there is a lot of uncertainty out there."

OTHER STORIES:

Don’t Let Exceptions Kill the Rule - (www.nytimes.com)

Dollar Touches 14-Month Low on Outlook for Fed’s Target Rate - (www.bloomberg.com)

The Proof Will Be in the Profits - (www.nytimes.com)

Hedge Fund Chief Is Charged With Fraud - (www.nytimes.com)

VIX Posts Worst Losing Streak in Four Years as Dow Tops 10,000 - (www.bloomberg.com)

In Britain, a Soaring Deficit Lifts a Hawk - (www.nytimes.com)

U.S., China Yuan Dealings May Turn ‘Contentious,’ Roach Says - (www.bloomberg.com)

Trichet, Juncker to Go to China to Discuss Yuan Rate - (www.bloomberg.com)

Sagging consumer view tempers output optimism - (www.reuters.com)

US budget deficit hit a record $1,400bn - (www.ft.com)

U.S. must live within its means: Geithner - (www.reuters.com)

Calif. bank becomes 99th in US to be shut in 2009 - (finance.yahoo.com)

Forecast for Microsoft: Partly Cloudy - (www.nytimes.com)

Monday November 2 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Ron Paul: Saving Face in Afghanistan - (www.dailypaul.com) This past week there has been a lot of discussion and debate on the continuing war in Afghanistan. Lasting twice as long as World War II and with no end in sight, the war in Afghanistan has been one of the longest conflicts in which our country has ever been involved. The situation has only gotten worse with recent escalations. The current debate is focused entirely on the question of troop levels. How many more troops should be sent over in order to pursue the war? The administration has already approved an additional 21,000 American service men and women to be deployed by November, which will increase our troop levels to 68,000. Will another 40,000 do the job? Or should we eventually build up the levels to 100,000 in addition to that? Why not 500,000 – just to be “safe”? And how will public support be brought back around to supporting this war again when 58 percent are now against it?

I get quite annoyed at this very narrow line of questioning. I have other questions. We overthrew the Taliban government in 2001 with less than 10,000 American troops. Why does it now seem that the more troops we send, the worse things get? If the Soviets bankrupted themselves in Afghanistan with troop levels of 100,000 and were eventually forced to leave in humiliating defeat, why are we determined to follow their example? Most importantly, what is there to be gained from all this? We’ve invested billions of dollars and thousands of precious lives – for what? The truth is it is no coincidence that the more troops we send the worse things get. Things are getting worse precisely because we are sending more troops and escalating the violence. We are hoping that good leadership wins out in Afghanistan, but the pool of potential honest leaders from which to draw have been fleeing the violence, leaving a tremendous power vacuum behind. War does not quell bad leaders. It creates them. And the more war we visit on this country, the more bad leaders we will inadvertently create. Another thing that war does is create anger with its indiscriminate violence and injustice. How many innocent civilians have been harmed from clumsy bombings and mistakes that end up costing lives? People die from simply being in the wrong place at the wrong time in a war zone, but the killers never face consequences. Imagine the resentment and anger survivors must feel when a family member is killed and nothing is done about it. When there are no other jobs available because all the businesses have fled, what else is there to do, but join ranks with the resistance where there is a paycheck and also an opportunity for revenge? This is no justification for our enemies over there, but we have to accept that when we push people, they will push back. The real question is why are we there at all? What do our efforts now have to do with the original authorization of the use of force? We are no longer dealing with anything or anyone involved in the attacks of 9/11. At this point we are only strengthening the resolve and the ranks of our enemies. We have nothing left to win. We are only there to save face, and in the end we will not even be able to do that.

CIT, the loaner of last resort for millions of small businesses, is toppling into bankruptcy, and unlike Morgan Stanley or AIG, no one at the Treasury or Fed cares. Of course no one at the Treasury or Fed ever ran a small business and CIT's leaders never worked for Goldman Sachs. - (finance.yahoo.com) CIT Group Inc (NYSE:CIT - News) is seeing little interest from bondholders in a debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely, sources familiar with the matter said. The lender to small and medium-sized businesses said earlier this month it was looking for investors to approve a large debt exchange that would reduce its borrowings, or to approve a prepackaged bankruptcy. CIT is now more likely to try a prepackaged bankruptcy, two people familiar with the matter said. They declined to be identified because the exchange offer is ongoing and information about its progress is private. But separately, investors in CIT securities said it is possible the company will not find enough debtholder approval for a prepackaged bankruptcy, which requires sufficient support before the company files for protection from creditors. Instead, CIT might have to aim for a prenegotiated bankruptcy, which typically has less support before the actual filing. CIT spokesman Curt Ritter declined to comment. CIT has limited time to work out its debt difficulties. It has about $3 billion of debt to repay in the fourth quarter, including both secured and unsecured obligations, according to a CIT quarterly filing with regulators. CIT has lost access to unsecured debt markets, but has billions to refinance in coming years. In three of the next four years, it will have more debt to repay than cash to pay it back. CIT has roughly 1 million customers and more than $70 billion of assets, but many of its borrowers are struggling amid the worst recession since the Great Depression. The company's debt exchange aims to reduce CIT's borrowings by at least $5.7 billion, with specific targets for lowering the company's liabilities through 2012. The exchange offer expires on October 29. AT LEAST TWO WANT MORE: At least two groups of investors are pushing for better terms in a bankruptcy than those suggested by the company earlier this month, one of the sources and investors said. A subordinated debt holder said last week he was hoping to press for either more equity, or for a promise from the company to pay extra money to current subordinated debt holders if the company's assets perform well enough. Separately, investors holding debt that funded CIT business in Canada are pushing for greater consideration in any bankruptcy plan, too. These investors are entitled to recover money from Canadian assets and the parent company in the United States and could therefore get close to 100 cents on the dollar in any bankruptcy. One investor that would take a hit in a CIT bankruptcy is the U.S. government. The United States' Troubled Asset Relief Program invested $2.3 billion in CIT in December and much or all of that could be lost if the company files for bankruptcy, analysts said. But many debt investors are likely to end up with much more than zero if CIT files for bankruptcy. One group of bondholders lent $3 billion to the company in July. That loan is collateralized by an estimated $30 billion of assets, which would ensure that the July loan could likely be paid back in full.

Geithner Aides Made Millions on Wall Street - (www.ft.com) Obama administration officials now working on fixing and regulating the financial system were beneficiaries of several million dollars in pay from Wall Street and private equity companies, it has been revealed. Financial disclosure forms show that prior to joining the government, Gene Sperling, a senior Treasury adviser, was paid $887,727 by Goldman Sachs and $158,000 for speeches to companies that included Stanford Group, the company run by Sir Allen Stanford, who has since been charged with fraud. Mr Sperling’s compensation from Goldman was for work on a philanthropic project. His overall pay, including for his main job at the Council on Foreign Relations, totalled $2.2m in the 13 months to January. The forms, which were first obtained by Bloomberg, showed that Matthew Kabaker, another adviser in the Treasury, earned $5.8m at Blackstone, the private equity firm, in the two years before joining the administration to work on plans to support banks and spur lending. Much of the compensation was in stock. Lewis Alexander, another adviser, was chief economist to Citigroup before joining the administration; he was paid $2.4m in the last two years. Even though some of the officials whose previous salaries were disclosed are senior, many were appointed as “counselors”, meaning they escaped Senate confirmation hearings which could have highlighted their past remuneration and employment at a time of heightened animosity towards the financial industry. Earlier this month the release of the telephone call logs of Tim Geithner, Treasury secretary, showed he had numerous conversations with a number of Wall Street executives, sparking allegations that the administration was too close to the industry. Officials argued then and on Wednesday that it was important to have skilled people working for the government as it crafted complicated financial rescues and for Mr Geithner to communicate with financial sector executives. Mr Geithner, the former president of the Federal Reserve Bank of New York, has never worked on Wall Street. Mr Obama, however, has hit out at the culture that he said prevailed before last year’s financial crisis – at a time when many of the Treasury officials were working on Wall Street and related businesses. “We will not go back to the days of reckless behaviour and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses,” he said at a speech in New York last month. Previous releases of disclosure forms revealed the $5.2m paid to Lawrence Summers, chief economic adviser to the White House, by DE Shaw, the hedge fund, in the two years before he joined the administration. The disclosures come during a complicated time for the relationship between the Obama administration and business, with officials accused of being too close to companies on the one hand and encountering increased criticism from business lobby groups on the other. The US Chamber of Commerce on Wednesday launched its “campaign for free enterprise”, arguing the private sector was under threat from various over-reaching government plans, including for a Consumer Financial Protection Agency and a cap-and-trade scheme to reduce carbon emissions.

Arianna Huffington: Why Joe Biden Should Resign - (www.huffingtonpost.com) oe Biden met with CENTCOM chief Gen. David Petraeus this morning to talk about Afghanistan -- an issue that has pushed the vice president into the spotlight, landing him on the cover of the latest Newsweek. I have an idea for how he can capitalize on all the attention, and do what generations to come will always be grateful for: resign. The centerpiece of Newsweek's story is how Biden has become the chief White House skeptic on escalating the war in Afghanistan, specifically arguing against Gen. McChrystal's request for 40,000 more troops to pursue a counterinsurgency strategy there. The piece, by Holly Bailey and Evan Thomas, opens with details of a September 13th national security meeting at the White House. Biden speaks up: "Can I just clarify a factual point? How much will we spend this year on Afghanistan?" Someone provided the figure: $65 billion. "And how much will we spend on Pakistan?" Another figure was supplied: $2.25 billion. "Well, by my calculations that's a 30-to-1 ratio in favor of Afghanistan. So I have a question. Al Qaeda is almost all in Pakistan, and Pakistan has nuclear weapons. And yet for every dollar we're spending in Pakistan, we're spending $30 in Afghanistan. Does that make strategic sense?" The White House Situation Room fell silent. Being Greek, I'm partial to Biden's classic use of the Socratic method -- skillfully eliciting facts in a way that lets people connect the dots that show how misguided our involvement in Afghanistan has become. It's been known for a while that Biden has been on the other side of McChrystal's desire for a big escalation of our forces there -- the New York Times reported last month that he has "deep reservations" about it. So if the president does decide to escalate, Biden, for the good of the country, should escalate his willingness to act on those reservations…....Sen. Dianne Feinstein offered up a few rationales for why Obama should rubber stamp Gen. McChrystal's wishes. First, she said, "there has to be a process of finding out, which of these people can we work with and which can we not." Really? Seven years in and we still haven't checked that one off our to-do list? Feinstein then broke out the latest trendy, new-for-fall reason why we need to up the ante in Afghanistan -- it's all about the women. " I particularly worry about women in Afghanistan," Feinstein said, "acid in the face of children, girl children who go to school, women who can't work when they're widowed, huddled on the streets, begging, women beaten and shot in stadiums, you know, Sharia law with all of its violence." This is indeed very tragic, and I share her concern. But missing from the discussion was the fact that "Sharia law with all of its violence" has just been made the law of the land by President Karzai -- you know, our man in Kabul. The Sharia Personal Status Law, signed by Karzai, became operational in July. Among its provisions: custody rights are granted to fathers and grandfathers, women can work only with the permission of their husbands, and husbands can withhold food from wives who don't want to have sex with them. On the plus side, if a man rapes a mentally ill woman or child, he must pay a fine. Of course, even with America standing guard, only 4 percent of girls in Afghanistan make it to the 10th grade, and up to 80 percent of Afghani women are subjected to domestic violence. As one of the Afghan women interviewed in Rethink Afghanistan sums up the current situation: "The cases of violence against women are more now than in the Taliban time."

Lazy Journalists Love Detroit - (www.viceland.com) After suffering through the nation’s worst and most concentrated examples of racial violence, industrial collapse, serial arson, crack war, and municipal bankruptcy following years of municipal kleptocracy, Detroit is being descended on by a plague of reporters. If you live on a block near one of the city’s tens of thousands of abandoned buildings, you can’t toss a chunk of Fordite without hitting some schmuck with a camera worth more than your house. The interest in coverage is legitimate—if you search places like Digg or Reddit for Detroit stories, even totally boring news items like a hiring jump at the local wind-energy plant number in the thousands. And God help you if the piece has anything to do with urban decay. When Vice UK ran a little series of photos by James Griffioen of the demolished interior of an abandoned Detroit public school, it tripled our website’s traffic for nearly a week. The problem is it’s reached the point where the potential for popularity or “stickiness” or whatever you’re supposed to call it now is driving the coverage more than any sort of newsworthiness of the subject. There’s a total gold-rush mentality about the D right now, and all the excitement has led to some real lapses in basic journalistic ethics and judgment. Like the French filmmaker who came to Detroit to shoot a documentary about all the deer and pheasants and other wildlife that have been returning to the city. After several days without seeing a wild one he had to be talked out of renting a trained fox to run through the streets for the camera. Or the Dutch crew who decided to go explore the old project tower where Smokey Robinson grew up and promptly got jacked for their thousands of dollars’ worth of equipment. The flip side is a simultaneous influx of reporters who don’t want anything to do with the city but feel compelled by the times to get a Detroit story under their belts, like it’s the journalistic version of cutting a grunge record. “Time magazine sent a 24-year-old guy to Detroit,” James Griffioen told me. “They wouldn’t let him rent a car, so he was dropped off in a cab downtown. He’s there for six hours and he’s supposed to write a feature article on Detroit. For Time. He had a meeting with the mayor in the morning, the mayor stood him up, then he had a meeting with me, and that was it.” For a while James was getting four to five calls a week from outside journalists looking for someone to sherpa them to the city’s best shitholes, but they’ve finally begun leaving him alone since he started telling them to fuck off. “At first, you’re really flattered by it, like, ‘Whoa, these professional guys are interested in what I have to say and show them.’ But you get worn down trying to show them all the different sides of the city, then watching them go back and write the same story as everyone else. The photographers are the worst. Basically the only thing they’re interested in shooting is ruin porn.”

OTHER STORIES:

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