Friday March 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Are US Taxpayers Bailing Out Greece? - (Ron Paul at www.safehaven.com) Last week we were reminded that ours is not the only country suffering from severe economic turmoil. The Greek government is the latest to come close to default on their massive public debt. Greece has insufficient funds in their treasury to make even the minimum payments that are now coming due. Their debt level is about 120 percent of their gross domestic product and their public sector absorbs what amounts to 40 percent of GDP. Any talk of cutting costs and spending is met with violent protests from the many Greeks heavily dependent on government payments. Mounting fears of default have sent shockwaves through their creditors and all of the eurozone countries. But there have been statements made by the European Central Bank to calm fears and give assurances that Greece will get the aid it needs. Details of agreements are not forthcoming…. Greece is only the latest in a series of countries that have faced this type of crisis in recent memory. Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland. Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well. Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels. Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent. Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.

Illinois Pension Fund $61 Billion Underwater; State Borrows Money For 2010 Contribution; California $20 Billion in the Hole Again - (Mish at http://globaleconomicanalysis.blogspot.com) In November 2009, the state's Pension Modernization Task Force sent its recommendations to Gov. Quinn. The Task Force concluded that Illinois' unfunded pension liability exceeds $61 billion! And that number is growing exponentially. [Note: Projections have it at $89 billion by the end of the fiscal year - See below Mish] The report lays out the problem clearly: "Not wanting to implement dramatic cuts in spending on essential services, the legislature and various governors elected to instead divert revenue from making the required employer pension contribution to maintaining services like education, health care, public safety and caring for disadvantaged populations. Effectively, the state used the pension systems as a credit card to fund ongoing service operations." Illinois now has public debt of more than $130 BILLION. Unlike the federal government, our state cannot simply create new money to pay its bills. At some point -- and that point is very near -- investors will no longer be willing to lend money that cannot be repaid. Perversely, the problem is so huge that our politicians won't acknowledge this true "elephant in the room." So let me say it loud and clear: The Emperor Has No Clothes. Illinois is Broke. And there's no way public pensions will be paid -- unless huge changes are made. And that's The Savage Truth.

Greek Swaps Information Demanded This Week in EU Investigation - (www.bloomberg.com) Greece was ordered by the European Union to hand over information on its swaps transactions by the end of this week in an investigation that may extend to other EU countries. EU Economic and Monetary Affairs Commissioner Olli Rehn told Greece to submit the swaps data by Feb. 19. The probe comes as questions arise about how long European officials have known that Greece may have used derivatives to conceal the extent of its budget deficit, and whether other EU countries used similar techniques. “In case there is a reason to expect that this kind of technique has been used by other member states, not only Greece, then we shall request information” from those nations, Rehn said today after a meeting of EU finance ministers in Brussels. “We need further enquiries on this,” Luxembourg Treasury Minister Jean-Claude Juncker said. Greece turned to Goldman Sachs Group Inc. in 2002 to get $1 billion in funding through a swap, Christoforos Sardelis, head of Greece’s Public Debt Management Agency at the time, said in an interview last week. EU officials today fielded questions about how long they knew about the swaps and whether other countries used such instruments to mask the size of their debt.

Builders Nailed by Lumber Prices - (online.wsj.com) The long-ailing U.S. housing market is facing a new headwind: a jump in the cost of lumber. Lumber prices have climbed 32% on the futures market this year, a sudden and unexpected surge that could raise construction costs or force builders to swallow an added expense. "That's the last thing we need right now," Stephen Melman, director of economic services at the National Association of Home Builders, said of the recent price hike. Lumber's price rise contrasts with a decline in most other commodities, such as fossil fuels and industrial metals. Those are dragging due to fears of weaker demand amid a fragile recovery from the financial crisis. But lumber prices shot up because of a shortage of supply. When the housing market cratered, mills in the U.S. and Canada cut production; output plummeted about 45% between 2005 and 2009, according to Random Lengths, an industry data provider. Wholesalers shrank their own inventories and had little incentive to build them back up last year. Housing is the largest single source of demand for lumber, and new-home sales fell 7.6% in December from the prior month, to 342,000 units.

Canadian Mine Workers Stubborn to Point of Self-Destruction - (Mish at globaleconomicanalysis.blogspot.com) At issue are proposals by Vale Inco to reduce a bonus tied to the price of nickel and to exempt new employees from its defined-benefit pension plan, moving them instead to a defined-contribution plan. Workers complain that they shouldn't have to give concessions to a company whose parent, Brazil-based Vale S.A., earned US$5.35 billion in 2009. This frustration was exacerbated when the other major mining company with operations in the Sudbury area, Xstrata Nickel, reached a labour agreement with its workers recently without having to resort to a strike. But [Vale spokesman Steve Ball] said Vale's Sudbury operations - formerly owned by Inco before it was bought by Vale for $19 billion in 2006 - need to be profitable without the help of its parent company, otherwise they could be shut down. The cost of keeping up with increasingly stringent environmental regulations and maintaining aging infrastructure means the company needs all the help it can get to stay profitable, he added. More than 3,000 employees at Vale's mill, smelter, refinery and six nickel mines in the Sudbury area have been on strike for seven months, along with their counterparts at Vale's Port Colborne, Ont., refinery. Workers at the company's nickel-cobalt-copper mine in Voisey's Bay, N.L. are also on strike, although the issues in that dispute are slightly different. For example, workers in Voisey's Bay are already on a defined contribution pension plan. Workers in Voisey's Bay briefly resumed bargaining last month, but those talks broke down almost immediately. No talks have been scheduled in Sudbury or Port Colborne since the strike began.

OTHER STORIES:

The Housing Double Dip Began In December - (www.businessinsider.com)

Report says Silicon Valley economy sputtering - (www.news.yahoo.com)

Rport Warns Silicon Valley Could Lose Its Edge - (www.nytimes.com)

Silicon Valley's Wage Crash by the Numbers - (www.eweek.com)

Commercial loan losses could threaten system - (www.marketwatch.com)

International Demand for U.S. Financial Assets Slowed - (www.bloomberg.com)

Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis - (www.nytimes.com)

Treasuries suffer as sentiment shifts - (www.ft.com)

U.S. looks to reluctant foreign investors to help fund the housing market - (www.washingtonpost.com)

U.S. credit card delinquency rates level off - (www.reuters.com)

U.K. Inflation Rate Accelerates to 14-Month High - (www.bloomberg.com)

Flaherty to Tighten Canadian Mortgage Rules as Market Heats Up - (www.bloomberg.com)

Hoenig Says Fed’s Objectives Threatened by U.S. Debt - (www.bloomberg.com)

Manufacturing in New York Area Expands at Faster Pace - (www.bloomberg.com)

Energy Company Mergers Are Expected to Rise - (www.nytimes.com)

JPMorgan, Bank of America Decline in Customer-Service Survey - (www.bloomberg.com)

Thursday March 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

F.D.I.C. Pushes Back at Charges in YouTube Video‎ - (www.nytimes.com) All week long, officials at the Federal Deposit Insurance Corporation watched with growing dismay as a YouTube video ricocheted around the Internet. In 4 minutes 26 seconds, the clip asserted that the agency’s sale last year of the assets of the failed bank IndyMac to a group of private investors was a sweetheart deal. Finally, F.D.I.C. officials decided they had had enough, The New York Times’s Sewell Chan reported on Monday. “It is unfortunate but necessary to respond to blatantly false claims in a Web video that is being circulated” about the creation of OneWest Bank out of the assets of IndyMac, the agency’s chief spokesman, Andrew Gray, said in a written statement late Friday. In the statement, he went on to say that the video “has no credibility” and was replete with “falsehoods.” Mr. Gray expressed particular alarm about the video’s claim that “the F.D.I.C. just announced it needs to start borrowing money from the Treasury.” Nonsense, Mr. Gray retorted: “We continue to be funded by the banking industry through assessments, not by taxpayers as claimed in the video.” The F.D.I.C. has not borrowed from the Treasury since 1992, but officials have said it might have to do so, as a last resort, because bank failures have caused losses to its insurance fund, The Times reports.

Germany growls as Greece balks at immolation - (www.telegraph.co.uk) The EU has issued a political pledge to rescue Greece – and by precedent, all Club Med – without first securing a mandate from the parliaments of creditor nations. Holland's Tweede Kamer has passed a motion backed by all parties prohibiting the use of Dutch taxpayer money to bail out Greece, either through bilateral aid or EU bodies. "Not one cent for Greece," was the headline in Trouw. The right-wing PVV proposed "chucking Greece out of EU altogether". Germany's Bundestag has drafted an opinion deeming aid to Greece illegal. State bodies may not purchase the debt of another state, in whatever guise. The EU is entering turbulent waters by defying these irascible and sovereign bodies. It had no choice, of course. Europe's banking system was – and is – at imminent risk as Greek contagion spreads across Club Med. The danger of a "sovereign Lehman" setting off a chain reaction is very real, with Britain too in the firing line. I find myself in the odd position of backing drastic EU action, for fear of worse. We all go down together if this escalates.

US senators oppose ‘systemic risk’ curbs - (www.ft.com) Senate Republicans are resisting a fundamental tenet of the Obama administration’s financial regulatory reforms in another obstacle for the stalled legislative process. Several aides from both parties involved in reform negotiations told the Financial Times that Republicans had opposed in private a plan to impose tougher capital and liquidity requirements on companies that posed a risk to the financial system. Meanwhile, people familiar with the continuing bipartisan talks say a council of regulators will be proposed to tackle “systemic risk”, rather than the alternatives of setting up a regulator or giving the power to the Federal Reserve. Democrats maintain that the authority to curb the sorts of broad systemic risk that built up in the financial products unit of AIG, the insurer, is essential to preventing a repeat of last year’s crisis. But Republicans say they are unconvinced that any regulator can even define systemic risk. They are happy to set up monitoring of possible bubbles but say the whole concept is too vague for an immediate introduction of sweeping powers.

Neb. workers cut as caseloads up - (www.sacbee.com) What happens when more and more Nebraskans seek public help while state officials are trying to cut caseworker numbers? You wind up with people going to community agencies for emergency food supplies because they can't get an application in for food stamps.

Greece’s Goldman Sachs Swaps Spawn EU Dispute on Disclosure - (www.bloomberg.com) A dispute is unfolding about how long European Union officials have known that Greece used derivatives to conceal its growing budget deficit. Greece turned to Goldman Sachs Group Inc. in 2002, just after adopting the euro, to get $1 billion in funding through a swap on $10 billion of debt, Christoforos Sardelis, head of Greece’s Public Debt Management Agency at the time, said in an interview last week. Eurostat, the EU’s statistics office, was aware of the plan, he said. Risk Magazine also reported on the swap in July 2003. “Eurostat was not until recently aware of this alleged currency swap transaction made by Greece,” spokesman Johan Wullt said by e-mail yesterday. The disagreement about who knew what and when comes amid the worst crisis in the euro’s 11-year history. The existence of the swaps, which allowed Greece to delay payments and shrink its reported budget deficit, is fueling questions about whether Greece used the contracts to mask the fact it was struggling to comply with the currency’s membership criteria from the early days of its entry into the eurozone. “Greece falsified deficit statistics, and that can’t be legal,” said Wolfgang Gerke, president of the Bavarian Center of Finance in Munich and honorary professor at the European School of Business. “Greece needs to be kicked out of the EU because otherwise there will be new copycats, and that could lead to the next catastrophe on financial markets.”

Fed carries losses from Bear portfolio - (www.ft.com) The US Federal Reserve is sitting on significant paper losses on the real estate assets it acquired in the Bear Stearns rescue, with much of the red ink coming from debt used to back some of the most high-profile buy-out deals of the bubble years. Among the debts weighing on the central bank’s portfolio are those used in financing the acquisitions of Hilton Hotels, which is being restructured, and hotel operator Extended Stay, which is in bankruptcy, people familiar with the matter say. The Fed holds these and other real estate assets in a vehicle known as Maiden Lane I, which was set up to pave the way for JPMorgan Chase’s purchase of Bear. At the time the deal was struck in March 2008, JPMorgan feared that if it bought all of Bear’s assets it would be left with too much exposure to the real estate market. Bear, for example, originally had $5.4bn of Hilton debt, a huge concentration. The assets in Maiden Lane I – all of which came from Bear’s mortgage desk – were originally valued at $30bn when a final agreement on the portfolio was reached in June 2008 by the New York Fed, its advisers at asset managers BlackRock and JPMorgan. At the end of 2009 the Fed said the assets were worth $27.1bn (€20bn, £17.4bn). People familiar with the portfolio said Maiden Lane I’s losses were concentrated in commercial real estate assets, which had a face value of $8.4bn and an estimated worth of $7.7bn when they were acquired by the Fed. As of September they had been marked down to $4bn, filings show.

OTHER STORIES:

Contrarian Investor Predicts Crash in China - (blogs.nytimes.com)

Wall Street Helped Cover Up Greek Debts, Fueling Crisis - (www.cnbc.com)

There's Greece - and Also Some U.S. States - (online.barrons.com)

Slumburbia - (blogs.nytimes.com)

Why can't conservative Utahns afford their mortgages? - (www.csmonitor.com)

Hawaii foreclosure up 286% over January 2009 - (www.news.ino.com)

Foreclosures surge on the way? - (www.news.yahoo.com)

Millions approaching retirement 'in denial' over pension income - (www.thisismoney.co.uk)

Future Bailouts of America - (www.nytimes.com)

Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis - (www.nytimes.com)

The Greek Tragedy That Changed Europe - (online.wsj.com)

The Poor Are Better Off Renting - (online.wsj.com)

Repossession can be 'best option' says housing minister - (news.bbc.co.uk)

Mortgage applications fall despite low interest rates - (news.medill.northwestern.edu)

Fed in Talks to Help Drain $1 Trillion and Raise Rates - (www.bloomberg.com)

Global Household Leverage, House Prices, and Consumption - (www.frbsf.org)

The Housing Double Dip Began In December - (www.businessinsider.com)

Report says Silicon Valley economy sputtering - (www.news.yahoo.com)

Rport Warns Silicon Valley Could Lose Its Edge - (www.nytimes.com)

Silicon Valley's Wage Crash by the Numbers - (www.eweek.com)

Commercial loan losses could threaten system - (www.marketwatch.com)

Housing Bubble? That's Crazy Talk - (www.Full of shit in 2002) - (www.thestreet.com)

Fed's Greenspan Doubts 'Housing Bubble' Thesis - (www.Full of shit in 2004) - (www.thestreet.com)

Market facts puncture myth of 'housing bubble' - (www.Full of shit in 2005) - (www.bizjournals.com)

Wednesday March 3 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

U.S. Housing Aid Winds Down, and Cities Worry - (www.nytimes.com) Equally important is an expanded mortgage insurance program run by the Federal Housing Administration, which encourages private lenders to accept borrowers with small down payments. The government takes the risk of default. A few years ago, only one in 10 buyers in Elkhart used the housing agency program. Now about half do. Across the country, the agency has greatly expanded its reach so that it now insures six million mortgages.“There has been all kinds of help for housing. I’m not unappreciative,” said Barb Swartley, president of the Elkhart County Board of Realtors. “But you can’t turn real estate into a government-sponsored operation forever.” Many in Washington agree. With worries about the deficit intensifying, the government is eager to start withdrawing some of its support programs. The first step could happen as early as next month, when the Federal Reserve has said it will end its trillion-dollar program to buy up mortgage securities. That program has driven mortgage interest rates to lows not seen since the 1950s…. The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications…. The programs favor first-time buyers, who have the fewest resources to bring to a deal. Heather Stevens, a 23-year-old nurse here, is closing on a three-bedroom house this week. Since her loan was insured by the Federal Housing Administration, she had to put down only 3.5 percent of the $74,900 purchase price. “It was a breeze to get approved,” she said. The sellers are covering her closing costs, which agents say is often the case here. That meant Ms. Stevens had to come up with only the $2,600 down payment, which still took all her savings.

Greece Paid Goldman $300 Million To Help It Hide Its Ballooning Debts - (www.businessinsider.com) The news that Goldman and other banks got paid hundreds of millions of dollars to help Greece hide its huge debts from the EU overseers has now gone mainstream. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means... Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere. In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come. [Greece paid Goldman] about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.

Goldman Said to Have Helped Greece Hide Debt - (blogs.nytimes.com) As Europe tries to resolve the problem of Greek deficits and debt before the struggling southern economy puts the euro in the tank, more shenanigans have come to light, and this time, they are said to involve Goldman Sachs. In 2002, Spiegel reports, the debt-laden state struck a deal with Goldman for cross-currency swaps, whereby “government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.” In themselves, cross-currency swaps can be a normal and honest way for governments to raise funds, but in the case of Greece and Goldman, the exchange rate was fiddled with, so that the swaps hid credit of about $1 billion, according to the publication. “Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future,” one person familiar with the matter told the magazine.

Banks step up lobbying against stiffer regulation - (www.latimes.com) Even as the financial industry has sought to keep a low public profile, some of the country's largest banks have ramped up their spending on lobbying to fight off some of the stiffest regulatory proposals pending in Congress. Lobbying expenditures jumped 12% from 2008 to $29.8 million last year among the eight banks and private equity firms that spent the most to influence legislation, according to data compiled from disclosure forms filed with Congress. The biggest spender was JPMorgan Chase & Co., whose lobbying budget rose 12% to $6.2 million, enough for the firm to have more than 30 lobbyists working for it. Among other banks, spending on lobbying rose 27% at Wells Fargo & Co. and 16% at Morgan Stanley.

Hercules buys condo from councilman's daughter - (www.contracostatimes.com) The Hercules Redevelopment Agency recently bought a condo from a daughter of City Councilman Ed Balico in what looks like a much better deal than several other recent investments under the agency's Homeownership Retention and Loss Mitigation Program. According to records furnished by the city, the redevelopment agency spent $123,971 to acquire the condo of Adelyn Jill A. Balico, on Devonwood in the Village Park section, in a short sale; a grant deed was recorded with the Contra Costa County Recorder in late September. A sale price of $120,000 reported in real estate industry records appears to be net of closing costs. Industry records also show Jill Balico bought the condo in January 2006 for $412,500, with a $362,500 first mortgage from a bank and a $50,000 loan from the redevelopment agency, although neither her name nor the address of her condo appear on First-Time Homebuyer and other loan lists that the city provided to the newspaper in October. Barring any other expenditures, the acquisition, added to the earlier $50,000 loan, brings the city's investment in Jill Balico's property to $173,971.

Hercules homebuying program tough to join - (www.contracostatimes.com) The Hercules Redevelopment Agency occasionally buys homes and resells them or puts them up for rent. But what you have to do to get one is a bit of a mystery. The Homeownership Retention and Loss Mitigation Program was established in May 2007 with the primary aim of helping homeowners who previously borrowed money from the agency avoid foreclosure by their primary lender. The agency has bought 11 homes under the program, city records show. In some instances, the agency paid off the existing bank mortgage and stepped in as first lender; in others, the agency bought the home. Five of the 11 purchases occurred in the last half of 2009, all but one as short sales. The agency since has resold one of the homes, and rented two others back to the owners it acquired them from. The other two -- a condo at 1209 Devonwood and a condo at 16 Amber Court -- are vacant. In the same period, the agency also sold back to the previous owner a home on Crows Nest Circle it had bought earlier in the year. The homes were not advertised for sale or rent on the city Web site and did not appear on the real estate Multiple Listing Service since the city acquired them. Brent Hawkins, general counsel for the California Redevelopment Association, said that generally speaking, redevelopment agencies must hold a public hearing before selling or otherwise transferring property, but there are exceptions. "If you have some sort of a bidding process or competitive process, you don't have to have a public hearing," Hawkins said. "But you still have to make the public aware of this opportunity." Jon Sakamoto, an employee of NEO Consulting Inc./Affordable Housing Solutions Group, which runs the Hercules Affordable Housing Department under contract, referred a request for a list of agency-owned residential properties for sale or rent to City Attorney Mick Cabral.

OTHER STORIES:

Companies Pull Most Bond Sales Since ‘07 Crisis: Credit Markets - (www.bloomberg.com)

US senators oppose ‘systemic risk’ curbs - (www.ft.com)

Greek drama plays out on Wall Street - (www.reuters.com)

Shipping Adds 32% as Boats Await Coal From Newcastle - (www.bloomberg.com)

Europe Junk Bonds Shrug Off Greece to Beat U.S.: Credit Markets - (www.bloomberg.com)

Financial News: Hedge Funds Hire As Confidence Returns - (online.wsj.com)

Greece’s Goldman Sachs Swaps Spawn EU Dispute on Disclosure - (www.bloomberg.com)

Europe Finance Ministers Face Pressure for Greek Deal - (www.bloomberg.com)

Eurozone gives Greece 30 days to show good on deficit - (www.reuters.com)

Orphanides Signals ECB May Keep Rates Low to Support Economy - (www.bloomberg.com)

Athens to resist push for greater austerity - (www.ft.com)

Greek Probe Uncovers ‘Long-Term Damage’ From Swaps Agreements - (www.bloomberg.com)

India Worries as China Builds Ports in South Asia - (www.nytimes.com)

India Inflation Accelerates to 15-Month High of 8.56% - (www.bloomberg.com)

EU Finance Ministers to Resist Obama Plans for Banking Overhaul - (www.bloomberg.com)

China’s Growth May Top 11% Even as Officials Rein in Lending - (www.bloomberg.com)

Japan’s Economy Grows Faster-Than-Anticipated 4.6% on Exports - (www.bloomberg.com)

Germany’s Weber Leads Race to Succeed Trichet as ECB President - (www.bloomberg.com)

Fed carries losses from Bear portfolio - (www.ft.com)

Tuesday March 2 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Boulder CO City Contractors Forcing Residents to Change Light Bulbs - (online.wsj.com) This spring, city contractors will fan out across this well-to-do college town to unscrew light bulbs in thousands of homes and replace them with more energy-efficient models, at taxpayer expense. City officials never dreamed they'd have to play nanny when they set out in 2006 to make Boulder a role model in the fight against global warming. The cause seemed like a natural fit in a place where residents tend to be politically liberal and passionate about the great outdoors. Instead, as Congress considers how to encourage Americans to conserve more energy, Boulder stands as a cautionary tale about the limits of good intentions. "What we've found is that for the vast majority of people, it's exceedingly difficult to get them to do much of anything," says Kevin Doran, a senior research fellow at the University of Colorado at Boulder. President Barack Obama has set ambitious goals for cutting greenhouse-gas emissions, in part by improving energy efficiency. Last year's stimulus bill set aside billions to weatherize buildings. The president has also called for a "cash for caulkers" rebate for Americans who weatherize their homes.

There's Greece - and Also Some U.S. States - (online.barrons.com) BRACE YOURSELF FOR THE SECOND WAVE -- the wave of sovereign defaults that typically occurs a few years after a financial meltdown. The first sign of what's headed our way may have arrived last week, when pressure on the Greek debt markets was intense enough for the European Union to publicly promise to support the profligate spender. Concern about Dubai's ability to pay its debts re-emerged as well, despite earlier financial support from Abu Dhabi that calmed the market for a short time. Worries about the ability of Spain, Portugal, Ireland and Italy to fund their deficits are also dogging investors. And before Americans start to feel smug, our own domestic tests are coming from states like California, Illinois and New York, which are facing large deficits. California's 10-year debt yields 4.5%, which translates into a 6.92% after-tax yield. Illinois' 10-year debt sports a 3.77% yield, for an after-tax bonanza of 5.8%. Those are extraordinary levels; municipal debt typically yields less than 10-year Treasuries, currently at 3.69%. There are credit-default swaps on 50 countries, and all but three have seen widening spreads, notes James Bianco, CEO of Bianco Research. "The whole planet's ability to pay its debt is being questioned," he says. The risk is that these smaller "subprime" countries and states drag down their larger "prime" counterparts.

Goldman Sachs’s Spilker, Overseer of $871 Billion, Exits Firm - (www.bloomberg.com) Goldman Sachs Group Inc. investment management co-head Marc Spilker is leaving the firm after two decades and will be replaced by a predecessor. Spilker, 45, will turn over responsibilities at the end of February to Edward Forst, who rejoined the most profitable securities firm in Wall Street history in September from Harvard University, according to internal memorandums yesterday from Chief Executive Officer Lloyd Blankfein and President Gary Cohn. The departing executive was on the firm’s management committee, whose members got year-end bonuses for 2009 in stock they can’t sell for five years instead of cash. Spilker’s exit is the latest of a series of changes atop investment management, which accounts for less than 10 percent of the firm’s revenue. Spilker and Tim O’Neill were elevated to help run it in June 2008, when Forst, 49, left to oversee finances at Harvard, his alma mater, after less than a year at the division. “There’s a history there of no one really running asset management for a long period of time,” said Henry Higdon, managing partner at recruitment firm Higdon Partners LLC in New York. “Have any of the leaders of the firm ever come from asset management? I don’t think so. They’re all from trading or investment banking.”

Dubai Default Swaps Jump to Highest Since Debt Delay- (www.bloomberg.com) The cost to protect against a default by Dubai surged to the highest since state-controlled Dubai World delayed debt repayments in November, as Greece’s financial crisis reignited concern riskier emerging-market debt might not be repaid. Credit-default swaps linked to Dubai debt jumped the most in two months, rising 53 basis points to 638 basis points at 9:15 a.m. in New York, according to CMA Datavision. The contracts are at the highest since Nov. 27. Dubai’s Islamic bond due 2014 fell to 87.125 cents on the dollar from 89 cents, the lowest since the debt was sold in October, according to Royal Bank of Scotland Group Plc prices. Dubai World, developer of the world’s tallest tower, said Nov. 25 it was seeking a standstill agreement from creditors so that it could restructure $22 billion of debt, shaking investor confidence around the world. Dubai default swaps reached 647 basis points on speculation Dubai World unit Nakheel PJSC would default after losing access to funding after a 50 percent plunge in the emirate’s home prices.

Greece turns on EU critics - (www.ft.com) Greece on Friday unleashed a fierce attack on its European Union partners, accusing them of creating a “psychology of looming collapse” a day after they pledged support for the country’s crisis-hit government. George Papandreou, Greek prime minister, said that, in the eurozone’s first big test, Greece had become “a laboratory animal in the battle between Europe and the markets”. In a televised address to his cabinet, he criticised EU members for sending “mixed messages about our country . . . that have created a psychology of looming collapse which could be self-fulfilling”. Mr Papandreou blamed the European Commission for failing to crack down on the previous conservative government’s “criminal record” in falsifying statistics. “This has undermined the responsibility of the European institutions with international markets,” he said.

The $555,000 Student-Loan Burden - (online.wsj.com) When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000. It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency. "Maybe half of it was my fault because I didn't look at the fine print," Dr. Bisutti says. "But this is just outrageous now." To be sure, Dr. Bisutti's case is extreme, and lenders say student-loan terms are clear and that they try to work with borrowers who get in trouble. But as tuitions rise, many people are borrowing heavily to pay their bills. Some no doubt view it as "good debt," because an education can lead to a higher salary. But in practice, student loans are one of the most toxic debts, requiring extreme consumer caution and, as Dr. Bisutti learned, responsibility. Unlike other kinds of debt, student loans can be particularly hard to wriggle out of. Homeowners who can't make their mortgage payments can hand over the keys to their house to their lender. Credit-card and even gambling debts can be discharged in bankruptcy. But ditching a student loan is virtually impossible, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principals waived seldom happens. Yet many former students are trying. There is an estimated $730 billion in outstanding federal and private student-loan debt, says Mark Kantrowitz of FinAid.org, a Web site that tracks financial-aid issues—and only 40% of that debt is actively being repaid. The rest is in default, or in deferment, which means that payments and interest are halted, or in "forbearance," which means payments are halted while interest accrues.

OTHER STORIES:

Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’ - (www.bloomberg.com)

Treasuries Tumble on Supply, Europe’s Pledge to Support Greece - (www.bloomberg.com)

Senate’s Corker Considers Reducing Fed’s Bank-Oversight Role - (www.bloomberg.com)

Individual insurance rates soar 15% or more in at least 3 states - (www.usatoday.com)

China’s Central Bank Hits Brake on Hot Economy - (www.nytimes.com)

Euro zone needs stronger economic management: Draghi - (www.reuters.com)

China's tropical getaway becomes latest property boom - (www.marketwatch.com)

China, worried about a real estate bubble, moves to restrain bank lending - (www.latimes.com)

China Sees Growth Engine in a Web of Fast Trains - (www.nytimes.com)

Thrifty Chinese resist enticements to spend - (www.latimes.com)

Consumer Sentiment Index in U.S. Declined in February - (www.bloomberg.com)

Fed grapples with policy brakes - (www.ft.com)

As Retail Sales Climb, Consumers Stay Glum - (online.wsj.com)

US consumer indicators tell mixed story - (www.ft.com)

Recession’s Silver Lining: U.S. Trade Deficit Is Down the Most on Record - (www.nytimes.com)

‘PIGS’ in Rescue Lipstick Are Uglier Than Default: Mark Gilbert - (www.bloomberg.com)