Tuesday July 6 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Illinois pension fund uses derivatives in desperate attempt to recupe losses - (news.medill.northwestern.edu) Dale Rosenthal, a former strategist for Long Term Capital Management, the hedge fund known for its epic collapse in 1998, and a proprietary trader for Morgan Stanley, has seen his share of financial complexities. But when shown a seven-page list of derivatives positions held by the Illinois Teachers Retirement System as of March 31, obtained by Medill News Service through a Freedom of Information Act request, the University of Illinois-Chicago assistant professor of finance expressed disbelief. “If you were to have faxed me this balance sheet and asked me to guess who it belonged to, I would have guessed, Citadel, Magnetar or even a proprietary trading desk at a bank,” Rosenthal said. The fact that the sheet doesn’t belong to one of those high-flying hedge funds, but to the $33.72 billion pension fund that serves more than 355,000 full-time, part-time and substitute public school teachers and administrators working outside the city of Chicago, is perplexing to those interviewed for this story. How bad is it? After losing $4.4 billion on investments in fiscal year 2009, and 5 percent on investments in fiscal 2008, the teachers’ pension is now underfunded by $44.5 billion, or 60.9 percent, according to the Commission on Government Forecasting and Accountability’s March 2010 report. By comparison, only 20.3 percent of the Chicago Teachers’ Pension Fund is unfunded.

Spain plays high-stakes poker game with Germany as borrowing costs surge - (www.telegraph.co.uk) Spain has upped the ante in a high-stakes poker game with Germany, pushing for the release of EU stress test results for major banks in a move that risks precipitating a dramatic escalation of Europe's financial crisis. "We're not afraid of transparency," said the Spanish Banking Association (AEB), saying the full truth would put an end to rumours battering Spain's instutitions. El Pais reported that the government backs the initiative, putting it on a collision course with Germany which insists on secrecy. Josef Ackermann, head of Deutsche Bank, warned last week that it would be "very dangerous" to publish the results of each bank, fearing that it would trigger flight from weak lenders and set off a chain reaction. The Spanish authorities have little to lose by publishing the data given the near paralysis in the country's debt markets. Funding is frozen for much of the private sector. Spain was pummeled yet again on Tuesday as credit default swaps (CDS) measuring bond risk on Spanish debt jumped to 245 basis points, approaching an all-time high. Default insurance for Greece rocketed after Moody's downgraded it to junk on Monday, forcing bond indexes to sell up to €20bn of Greek debt. Ireland and Portugal also jumped sharply, with mounting credit stress in Belgium following the electoral triumph of Flemish separatists.

Soros Says 'We Have Just Entered Act II' of Crisis - (www.bloomberg.com) Billionaire investor George Soros said “we have just entered Act II” of the crisis as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits that may push the global economy back into recession. “The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.” Soros, 79, said the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak. Concern that Europe’s sovereign-debt crisis may spread sent the euro to a four-year low against the dollar on June 7 and has wiped out more than $4 trillion from global stock markets this year. Europe’s debt-ridden nations have to raise almost 2 trillion euros ($2.4 trillion) within the next three years to refinance, according to Bank of America Corp.

In jail for being in debt - (www.startribune.com) You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts. As a sheriff's deputy dumped the contents of Joy Uhlmeyer's purse into a sealed bag, she begged to know why she had just been arrested while driving home to Richfield after an Easter visit with her elderly mother. No one had an answer. Uhlmeyer spent a sleepless night in a frigid Anoka County holding cell, her hands tucked under her armpits for warmth. Then, handcuffed in a squad car, she was taken to downtown Minneapolis for booking. Finally, after 16 hours in limbo, jail officials fingerprinted Uhlmeyer and explained her offense -- missing a court hearing over an unpaid debt. "They have no right to do this to me," said the 57-year-old patient care advocate, her voice as soft as a whisper. "Not for a stupid credit card." It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

Chicago's Rogers Park neighborhood hit hard by condo foreclosures - (www.chicagotribune.com) It is hard to tell whether Traci Hargrove is moving on or staying put. On one day she tends the garden at her Rogers Park three-flat, preparing to plant impatiens. But the next day she removes the drapes in her den and takes down her ceiling fans, because she fears losing her home. Hargrove is caught in the middle. Below her is a foreclosed property and above her is a unit whose owner has stopped paying assessments. Like a lot of condo owners in Rogers Park, she has paid her mortgage and assessments on time, but has been forced to foot the heat, water and other maintenance bills for the building. "If it were my fault, I could handle it. But my livelihood and happiness is dependent on other owners in the building," she said. "I pay what I have, but it's not enough."

OTHER STORIES:

AXA fears 'fatal flaw' will destroy eurozone - (www.telegraph.co.uk)

Moody's cuts Greece ratings to junk - (www.theglobeandmail.com)

'Doomsday Capitalism:' Local virus? Global pandemic? - (www.marketwatch.com)

Builders in U.S. Lost Confidence After Credit Ended - (www.bloomberg.com)

Auditors have doubts about client's chances for survival - (www.cfo.com)

Accelerating Jumbo Mortgage Delinquencies Will Bash High-End Property Values - (www.housingstory.net)

Rosenberg warns the bear market isn't over yet - (money.cnn.com)

Here's Why Many US Housing Markets Are Continuing To Weaken - (www.businessinsider.com)

Applications Point to Slow Summer Housing Season - (www.usnews.com)

Why Tampa Bay's 'real' home ownership rate is so much lower than we think - (blogs.tampabay.com)

Waking Up From the American Dream - (www.nytimes.com)

Houseowners in mediation programs face court backlog of foreclosure cases - (www.washingtonpost.com)

Builders Rush to Complete Houses by U.S. Tax Credit Deadline - (www.bloomberg.com)

Tax Credit Extension Could Help Tax Cheaters - (www.blogs.wsj.com)

FBI to "arrest hundreds of people" next week for Mortgage Fraud - (www.calculatedriskblog.com)

'Jack Nasty' pleads guilty to mortgage racketeering - (www.signonsandiego.com)

Adverse possession: Latest housing fraud to strike South Florida - (www.sun-sentinel.com)

Is Canada's housing bubble about to burst? - (www.thecoast.ca)

The Anatomy of a Bubble - (www.greatdepression2006.blogspot.com)

Oil Spill May Cost $4.3 Billion in Property Values - (www.preview.bloomberg.com)

BP Spills Coffee - (www.youtube.com)

Public employee unions on the defensive - (www.sfgate.com)

SNL skewers unions in "Public Employee of the Year" - (www.taxdollars.freedomblogging.com)

Monday July 5 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

A lobbying tempest engulfs financial overhaul - (news.yahoo.com/s/ap) Congress' final tinkering with Wall Street overhaul this month offers lobbyists a last-ditch shot to reshape the package on behalf of clients with billions at stake.

Even as the legislation gets tougher on banks by the week, agents of influence are hardly strangers on Capitol Hill. Many once worked for the lawmakers they're lobbying. Rep. Barney Frank, chairman of a panel resolving differences in House and Senate bills, and Sen. Chris Dodd, who shepherded the Senate's measure, have their hands full fending off industry efforts to dilute the final legislation. They must do so while trying to hold together a fragile Senate coalition with only four Republicans. So sticking points in this legislative tempest, whether over big banks' exotic trades or the plastic in people's wallets, are awfully tricky. At least 56 industry lobbyists have served on the personal staffs of the 43 Senate and House members who will shape the legislation over the next two weeks, according to Public Citizen and the Center forResponsive Politics, two government watchdogs.

Greece Cut Four Steps to Junk by Moody’s on ‘Risks’ - (www.bloomberg.com) Greece’s credit rating was cut to non-investment grade, or junk, by Moody’s Investors Service, threatening to further undermine demand for the debt-strapped nation’s assets as it struggles to rein in its budget deficit. In making the four-step downgrade to Ba1 from A3, Moody’s cited “substantial” risks to economic growth from the austerity measures tied to a 110 billion-euro ($134.5 billion) aid package from the European Union and the International Monetary Fund. The lower rating “incorporates a greater, albeit, low risk of default,” Moody’s said in a statement yesterday in London. The outlook is stable, it said.

Europe’s Banks Face Second Funding Squeeze on Sovereign Crisis - (www.bloomberg.com) European banks at risk of writedowns from the sovereign debt crisis face a funding squeeze that may depress earnings, curb lending and imperil economic recovery in the region. Investors are shunning bank securities on concern Greek, Portuguese and Spanish bonds held by the lenders will plunge in value. Bank bond sales slowed in May to the lowest since Lehman Brothers Holdings Inc.’s failure in 2008 as the extra yield buyers demand to hold the securities over government debt soared to the highest this year. Firms are wary of lending to each other, depositing record funds with the European Central Bank. “There is a lot of mistrust,” said Christoph Rieger, co- head of fixed-income strategy at Commerzbank AG in Frankfurt. “Banks are trading with the ECB rather than with each other.”

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case - (www.bloomberg.com) The cost of fixingFannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history. Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts. “It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry. Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

America's Municipal Debt Racket - (online.wsj.com) New Jersey officials recently celebrated the selection of the new stadium in the Meadowlands sports complex as the site of the 2014 Super Bowl. Absent from the festivities was any sense of the burden the complex has become for taxpayers. Nearly 40 years ago the Garden State borrowed $302 million to begin constructing the Meadowlands. The goal was to pay off the bonds in 25 years. Although the project initially went according to plan, politicians couldn't resist continually refinancing the bonds, siphoning revenues from the complex into the state budget, and using the good credit rating of the New Jersey Sports and Exposition authority to borrow for other, unsuccessful building schemes. Today, the authority that runs the Meadowlands is in hock for $830 million, which it can't pay back. The state, facing its own cavernous budget deficits, has had to assume interest payments—about $100 million this year on bonds that still stretch for decades. This tale of woe has become familiar in the world of municipal finance. Governments have loaded up on debt, stretched out repayment times, and used slick maneuvers to avoid constitutional borrowing limits. While the country's economic troubles have helped expose some of these practices, a sharp decline in tax revenues has prompted more abuse as politicians use long-term debt to kick short-term fiscal problems down the road.

OTHER STORIES:

17 Ways to Clean Up the Gulf Oil Spill - (www.cnbc.com)

Bulls Heartbroken As Stocks Kiss 200-Day, Then Fail - (www.cnbc.com)

Moody's Cuts Greece Government Ratings to Junk - (www.cnbc.com)

Swap Trading Limits Likely to Stay, Despite Bank Efforts - (www.cnbc.com)

Tuesday: Traders Watch Europe, Oil Spill & Reform - (www.cnbc.com)

Global Recovery 'Slow & Tortuous': China Regulator - (www.cnbc.com)

Efforts to Repel Gulf Oil Spill Described as Chaotic - (www.cnbc.com)

Lincoln Considers Compromise on Swaps-Desk Provision - (www.bloomberg.com)

Could ExxonMobil Buy BP? - (www.cnbc.com)

BP Hires Goldman, Blackstone - (www.cnbc.com)

Emergency Bans on Naked CDS Trades Considered by EU - (www.bloomberg.com)

Investors Looking Past Red Flags in Muni Market - (online.wsj.com)

BP Accused of Risky Shortcuts as Obama Tours Gulf - (www.cnbc.com)

China prepares to invest in Greek projects - (www.ft.com)

China hits back at U.S. pressure on yuan - (www.reuters.com)

Europe Industrial Output Rises More Than Forecast - (www.bloomberg.com)

India’s Inflation Unexpectedly Accelerates to 10.16% - (www.bloomberg.com)

Economy in U.S. Slows as States Lose Federal Stimulus Funds - (www.bloomberg.com)

Bullard Says Europe Woes Shouldn’t Delay Fed Increase - (www.bloomberg.com)

Sunday July 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Government Workers Cost More to Employ - (online.wsj.com) It costs about $12 more per hour to employ a state or local government worker versus a private sector employee, the Labor Department said Wednesday. Employers spent $39.81 per hour worked for state and local government workers in the first quarter compared to $27.73 per hour for those with private industry jobs. The numbers are part of the Labor Department’s quarterly series on employer costs for employee compensation and they wrap in wages and salaries as well as health benefits such as health insurance and retirement packages. The largest share of the costs comes from wages and salaries for both sets of workers: 70.6% for private employees and 65.9% for government workers. The rest of the payment comes in the form of benefits. It costs state and local governments $3.16 per hour to pay for employees’ retirement and savings plans, compared to 96 cents for private workers. Another $4.52 goes to health insurance for public workers, compared to $2.08 for private workers. And governments spend $3 per hour for its workers’ paid leave, compared to $1.88 for private workers.

Obama Faces Rare Defeat on Health Help for Jobless - (www.cnbc.com) If Chuck Lacasse had gotten his pink slip four days earlier, Uncle Sam would have covered most of his family's health insurance while he looked for a new job. But Congress allowed emergency health care assistance for unemployed workers to expire May 31, and seems unwilling to renew it despite pleas from President Barack Obama. Not three months after lawmakers passed his $1 trillion insurance overhaul, Obama is facing a rare defeat on health care at the hands of his own divided Democrats. Moderates have rebelled against adding billions more to the deficit in a treacherous election year. "The same Congress that spent all this political capital trying to get people health insurance is going to take a crucial benefit away from unemployed people," said Andrew Stettner, deputy director of the National Employment Law Project, which advocates for the unemployed. On June 4, Lacasse lost his job as advertising director for a company that makes nutritional supplements. He'll soon have to pay the entire $1,500 monthly premium to keep his family covered under his former employer's health insurance plan.

Keeping Politics Safe for the Rich - (www.nytimes.com) In a burst of judicial activism, the Supreme Court on Tuesday upended the gubernatorial race in Arizona, cutting off matching funds to candidates participating in the state’s public campaign finance system. Suddenly, three candidates, including Gov. Jan Brewer, can no longer receive public funds they had counted on to run against a free-spending wealthy opponent. The court’s reckless order muscling into the race was terse and did not say whether there were any dissents, though it is hard to imagine there were not. An opinion explaining its reasoning will have to wait until the next term, assuming it takes the case, but by that time the state’s general election will be over and its model campaign finance system substantially demolished. It seems likely that the Roberts court will use this case to continue its destruction of the laws and systems set up in recent decades to reduce the influence of big money in politics. By the time it is finished, millionaires and corporations will have regained an enormous voice in American politics, at the expense of candidates who have to raise money the old-fashioned way and, ultimately, at the expense of voters.

Greece is tapping China's deep pockets to help rebuild its economy - (www.washingtonpost.com) Nearly bankrupt and sullied in the eyes of foreign investors, Greece is moving to rebuild its economy by tapping the deep pockets of another ancient civilization: China. Spurred on by government incentives and bargain-basement prices, the Chinese are planning to pump hundreds of millions -- perhaps billions -- of euros into Greece even as other investors run the other way. The cornerstone of those plans is the transformation of the Mediterranean port of Piraeus into the Rotterdam of the south, creating a modern gateway linking Chinese factories with consumers across Europe and North Africa. The port project is emerging as a bellwether for Greek plans to pay down debt and reinvent its broken economy by privatizing inefficient government-owned utilities, trains and even casinos. This week, the Chinese shipping giant Cosco assumed full control of the major container dock in Piraeus, just southwest of Athens. In return, the Chinese have pledged to spend $700 million to construct a new pier and upgrade existing docks.

France selling 1,700 buildings to help cut debt - (www.news.yahoo.com) Fancy setting up house in a French government ministry? Or retiring to a royal hunting lodge? Line up now for a supersize sale of 1,700 properties by the French state, seeking to shed dilapidated, expensive-to-maintain buildings and chip away at the country's record-high debt. Foreigners are welcome to join the bidding, Budget Minister Francois Baroin said in announcing the sell-off Wednesday — but their cash must be clean. Any buyer, whether a movie star, foreign government or ordinary taxpayer, will undergo thorough background checks. By releasing a long-term list of state properties for sale publicly for the first time, the government appears determined to avoid the kind of controversies and secrecy that dogged some past sales of French property, both public and private, to shady magnates or deposed despots.

Florida Keys Island Mansion Still Has No Takers At Over 70% - (www.$7M) Off! - (www.rocktrueblood) Feast your eyes on the above island in the Florida Keys with house built by a "major recording artist" some years back and which is dropping in price precipitously over the past week. This house has been on the market since September 1, 2006 and has still not found a buyer. Here is the MLS description of this mansion: Private Offshore Island With 3/3.5 Luxury Home In The Keys! Owned & Improved By Major Recording Artist W/ New Pool, Hot Tub, Central Air, Concrete Pier, Jet Boat, 35kw Generator In Sound-proof Shed, 850-gal/Day Desalinization, New Electric, New Landscaping & High-end Finishes. Self-contained, 70' Onshore Lot W/ Concrete Dock, 3-story Custom Home, 360 Degree Ocean Views, Impact Windows & More. At least the Realtor for this listing hasn't been playing games by taking the house off market and putting it back up a half-dozen times to try and hide it's real loss in value over the past 1,376 days. How low will this one go? Well, since September 1, 2006, it has already lost more than 70% of its value. I'll wager this one loses another 20 to 50% from its current listing price of $2,995,000 before it is all over. Stay tuned.

OTHER STORIES:

Obama Tells UK No Hard Feelings over BP Oil Spill - (www.cnbc.com)

South Korea Announces Currency Control Steps - (www.cnbc.com)

'BP Crosstown Cup' Draws Boos at Wrigley Field - (www.cnbc.com)

Debt Trap Makes Scottish Investors Scrutinize U.S. - (www.bloomberg.com)

Borrowing costs so low that Washington couldn't possibly be facing debt crisis... - (www.timiacono.com)

Fed Study Finds "Real" Houseownership Rate - (www.blogs.wsj.com)

Mortgage Demand Slumps for 5th Week - (www.cnbc.com)

China eyes property tax to quell its housing bubble - (www.seattletimes.nwsource.com)

Uncertainty Restores Glitter to an Old Refuge - (www.cnbc.com)

Week Ahead: Market Tries to Shrug Off Euro Worries - (www.cnbc.com)

The housing-market recession is not over - (www.marketwatch.com)

Without buyer bait, US house sales keep slumping - (www.reuters.com)

Mortgage Applications decline 35% over last four weeks - (www.calculatedriskblog.com)

Bernanke Warns of Unsustainable Debt - (www.nytimes.com)

Greenspan's "froth not bubble", 5 years later - (www.lansner.freedomblogging.com)

How the central bank eats your money - (www.nationalpost.com)

BMO Says "Go to Cash - In Plain English" - (www.Mish)

A failure of economic and environmental regulation - (www.newyorker.com)

Estate Tax Dormant, Billionaires Bequest Is Tax-Free - (www.nytimes.com)

Only a fraction of those in need file for bankruptcy - (www.usatoday.com)

Saturday July 3 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Illinois suffers new credit rating blow - (www.ft.com) Illinois’ unwillingness to tackle its budget woes prompted Fitch on Friday to become the second agency in a week to downgrade the cash-strapped state, which is likely to push up the state’s borrowing costs as it prepares to issue new debt. Fitch lowered the rating on Illinois’ general obligation bonds from “A+” to “A” and assigned them a negative outlook, signalling it could downgrade the state further. The move came a week after Moody’s moved the state’s general obligation rating to A1 from Aa3. Standard & Poor’s rates Illinois “A+”. “Something significant needs to happen on either side of the budget – either cutting spending or raising revenues,” said Karen Krop of Fitch. “Now they are relying on deficit borrowing.” Ms Krop said Illinois has budgeted to raise more than $8bn with bonds in the current and next fiscal years. “There doesn’t seem to be an endgame,” she said. Illinois’ budget situation is among the worst in the US. The state faces a $13bn budget deficit for the financial year that begins on July 1. More than $6bn of that is unpaid bills from the current year, which have prompted state prisons to let out inmates early, and the state to cut 20,000 teachers and staff.

NY State Shell Game - Municipalities Borrow from Pension Fund to make Required Pension Fund Contributions - (Mish at globaleconomicanalysis.blogspot.com) When it comes to pension funding schemes, NY governor David Paterson and the NY legislature have taken can-kicking to ever increasing levels of absurdity. Please consider State Plan Makes Fund Both Borrower and Lender. Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund. And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund. As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits. “It’s a classic Albany example of kicking the can down the road,” said Harry Wilson, the Republican candidate for comptroller, who holds an M.B.A. from Harvard. Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013. But Mr. Paterson and other state officials hope the stock market will have rebounded to such a degree by that time that the state’s overall pension contribution burden will have been reduced.

Banks set new store on building gold vaults - (www.ft.com) Some of the world’s biggest banks and security companies are building vaults to store gold bars and coins worth tens of billions of dollars, cashing in on resurgent demand and record prices. The growing interest in gold among investors worried about the global economy and Europe’s sovereign debt crisis has led to a shortage of long-term storage space. Bankers said that vaulting had become highly profitable. Rising bullion prices translate into higher storage fees, which are usually calculated as a percentage of the gold price. Gold prices this week rose to a nominal record of $1,251.20 a troy ounce, up 14.5 per cent since January. On Friday, bullion traded at $1,226. “Physical gold is being sought more than ever and that is causing all sorts of strains,” said Peter Hambro, chairman of Petropavlovsk, the gold miner.

New York Money Manager Chimay Charged With Larceny, Forgery - (www.bloomberg.com) New York money manager Guy Albert de Chimay was indicted in New York on grand larceny and forgery charges, according to the Manhattan District Attorney’s office. Chimay, 47, chairman and chief investment officer of Chimay Capital Management Inc., was arrested yesterday in Wrightsville Beach, North Carolina, on a New York state warrant, said Adam Kaufmann, chief of the investigation division of the Manhattan District Attorney’s office. The U.S. Securities and Exchange Commission sued Chimay yesterday, accusing him and his firm of fraud for touting investments he claimed were tied to the Chimay royal family of Belgium, and then stealing millions of dollars to pay his divorce lawyers and the mortgage on his house in the Hamptons on Long Island east of New York City. “He lied to investors, took their money and used it to support his lifestyle,” Kaufmann said in a phone interview.

TPG admits to big buy-out paper losses - (www.ft.com) TPG, the private equity firm, is sitting on billions of dollars in paper losses on some of its biggest investments during the buy-out boom, according to a report sent to its investors. The firm’s paper losses on just four buy-outs – of Energy Future Holdings, the former TXU, Freescale Semiconductor, Harrah’s Entertainment and Univision Communications – amount to nearly $2.9bn (€2.4bn). TPG invested $4.7bn in the deals. The estimated value of the investments was detailed in a report dated May 28 sent to investors in the TPG Partners V fund. Overall, the performance of the fund during the quarter ending 31 March was “relatively flat”, with an overall paper gain of $42m, the report said. The paper losses on the investments in TXU, Freescale, Harrah’s and Univision make it unlikely TPG will be able to cash out of these holdings and return any proceeds to investors soon. However, it will have many years to turn round the fortunes of the companies before it is obliged to reward investors. The firm has returned about $8bn to investors since the beginning of last year. TPG declined to comment.

Seven State Pension Plans will be Out of Money by 2020 - (Mish at globaleconomicanalysis.blogspot.com) In a system, gone completely loony, pension plans in seven state will be busted by 2020 yet the states keep hiring public workers. Please consider Pension Plans Go Broke as Public Payrolls Expand. Seven states will run out of money to pay public pensions by 2020. That hasn’t stopped them from hiring new employees. The seven are Illinois, Connecticut, Indiana, New Jersey, Hawaii, Louisiana and Oklahoma, according to Joshua D. Rauh of the Kellogg School of Management at Northwestern University. Combined, they added 9,700 workers to both state and local government payrolls between December 2007 and April of this year, says the U.S. Bureau of Labor Statistics. Generous and bloated are the terms that have been used to describe them; critics have set up websites to pillory those government retirees who enjoy $100,000-plus annual pensions and other goodies, such as health-care benefits for themselves and their families for life. “Are State Public Pensions Sustainable? Why the Federal Government Should Worry About State Pension Liabilities” is the title of Rauh’s recent study. It’s a provocative piece of work, especially for one of its tables, titled, “When Might State Pension Funds Run Dry?”

OTHER STORIES:

Uncertainty Restores Glitter to an Old Refuge, Gold - (www.nytimes.com)

BP Crisis Wipes $19 Billion From Energy Bonds: Credit Markets - (www.bloomberg.com)

New rules for Wall Street must clear final hurdles - (www.usatoday.com)

Coffee prices soar on lack of availability - (www.ft.com)

China workers get to grips with labour rights - (www.bloomberg.com)

Korea Unveils Steps To Ease Impact Of Rapid Capital Flows - (online.wsj.com)

Honda Strike Reflects Deepening China Wage Conflicts - (www.bloomberg.com)

Disease Threatens Japan’s Beef Trade - (www.nytimes.com)

China May Foreign Investment Rises for 10th Month - (www.bloomberg.com)

Consumer confidence is up, but spending is slow to follow - (www.washingtonpost.com)

Fed to conduct first test auction of bank CDs - (news.yahoo.com/s/ap)

Gulf oil spill upping price for domestic shrimp - (news.yahoo.com/s/ap)

Finally, Borrowers Score Points - (www.nytimes.com)

A Tourist Mecca Fears a Long-Term Oil Smear - (www.nytimes.com)

Wake-Up Time for a Dream - (www.nytimes.com)

Friday July 2 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Commercial Loans That Vanished in Property Bust Reappear - (www.nytimes.com) The W Hotel in Union Square has had an eventful six months. The 270-room hotel changed hands in December after the private equitydivision of Dubai World defaulted on a $117 million mezzanine loan in the face of dwindling business. But the lender, LEM Mezzanine, could itself lose the hotel in coming months as a result of its filing for bankruptcy protection earlier this year. Mezzanine loans, which are secured by stock or other ownership stakes in a company, became a popular form of secondary financing during the real estate boom, offering high returns to investors and high interest rates for borrowers. There is an estimated $100 billion in mezzanine loans outstanding across the country, and when the economy slowed and business slumped they became a special headache for borrowers. But despite built-in risks, lenders say mezzanine loans are beginning to resurface, albeit slowly.

Is Massive Refinancing During Bubble Years a Ticking Bomb? - (www.realestatechannel.com) During 2004-2005, it was California which led the way in refinancings. Keep in mind that many of the largest unregulated mortgage lenders were headquartered in California. They were only too willing to shovel out refinance loans to practically any homeowner in California who could sign a document. For those two years, the California numbers are simply mind-boggling. According to mortgagedataweb.com, which derives its figures from municipal recordings, slightly more than 2.6 million California mortgages were refinanced in 2004 and another 2.4 million the next year. The average size of these refinanced mortgages was a surprisingly small $200,000. That's because most of them were second lien Home Equity Line of Credit loans (HELOCs) many of which were taken out by long-time homeowners who refinanced several times as home prices climbed seemingly toward the sky. The following short sale situation, described in a September 2009 post in the socalbubble.com blog, was not at all uncommon in California: "The homeowner had purchased some 20+ years earlier, but had withdrawn over $500K [refis] in the last decade." He goes on to explain that "The most amazing thing to me during the housing downturn is the number and amount of refis that I have seen. It seems MOST of Southern California took out several hundred thousand dollars each from their houses; enough to buy entire houses outright in most other places in the country." To get a sense of what really went on in southern California, here is a description of one homeowner's refinancing which was recently posted on the Irvine Housing Blog:

· The property was purchased on 11/13/1999 for $485,000.

· On 5/13/2003 they opened a HELOC for $63,400

· On 1/26/2004 they got a HELOC for $100,000.

· On 2/1/2005 they refinanced with a $634,500 Option ARM with a 1% teaser rate.

· On 3/23/2005 they obtained a $80,000 HELOC.

· On 8/10/2005 they got a HELOC for $100,000.

· On 11/3/2006 they refinanced with a $688,000 first mortgage and a $85,000 HELOC

Realtors spent $4.3M to corrupt our laws in Q1 - (www.businessweek.com) The National Association of Realtors spent $4.3 million lobbying the federal government in the first quarter of the year as it pressed for measures to aid the hobbled housing market, a recent disclosure form shows. That amount was 24 percent less than the $5.7 million the Chicago-based group's spent a year earlier and 23 percent less than the $5.6 million it spent in the fourth quarter of 2009. The Realtors group is one of the most powerful lobbying forces on Capitol Hill. With allies in the real estate industry, the group and its members successfully pressed last year for a tax credit of up to $8,000 for first-time home buyers. Lawmakers then decided, after intense lobbying, to extend and expand the incentive until April 30. The group also lobbied on foreclosure relief, predatory lending, lead paint, protections for endangered species, flood insurance and other issues, according to an April 20 filing with the House clerk's office.

In Brutal Job Market, More Than a Million Quit Looking - (www.cnbc.com) If you think the jobs situation has become pretty hopeless, you're not alone. Roughly 1.1 million workers have given up hope of finding employment. The staggering level of "discouraged workers" as the government calls them has swelled to historic proportions in 2010, past the million barrier for the first time since the Bureau of Labor Statistics has been tracking the number. Though a bit off its all-time high of 1.2 million recorded in February, the metric stands as perhaps the most daunting statistic of last Friday's gloomy jobs report, which showed that almost all the new employment is coming from temporary government Census jobs and not the kind that will sustain an economy. "The fact that people are sitting down indicates just how bad the market is for some categories of people," says Peter Morici, professor at the University of Maryland's Smith School of Business and the former chief economist at the US International Trade Commission.

OTHER STORIES:

UK Exec Blasts Obama - (www.cnbc.com)

Gulf Spill Sludge Hits Florida - (www.cnbc.com)

EU Banks Pass Moody's Debt 'Stress Test' - (www.cnbc.com)

Obama to Push Small-Biz Agenda at Friday Event - (www.cnbc.com)

Is housing already double dipping? - (www.seekingalpha.com)

What Do You Own - Really? - (www.endoftheamericandream.com)

Senator: US Liquidity Crisis Coming in 2 Years—Unless… - (www.cnbc.com)

Japan PM Warns of Default if Debt Not Fixed - (www.cnbc.com)

Oil Spill May Corrode US-UK 'Special Relationship' - (www.cnbc.com)

Bank of America to pay borrowers $108 million to settle excessive charges - (www.sfgate.com)

Crisis panel issues subpoena to Goldman Sachs - (www.marketwatch.com)

Canadian realtors lower housing forecast as market weakens - (www.nationalpost.com)

Real estate will dampen Florida's economy for years - (www.tbo.com)

Economist: Housing crisis to linger for years - (www.freep.com)

US Economist Fears Greek Debt Default in August - (www.cnbc.com)

US Doubles Gulf Oil Spill Estimate to 40K Barrels a Day - (www.cnbc.com)

Profit On Your House's Price - Even If It's Falling - (www.sfgate.com)

Will China's Housing Market Crash? How to profit - (www.tycoonresearch.com)

May Property Sales Drop in Shanghai, Beijing - (www.businessweek.com)

Surviving Dubai's Real Estate Crash - (knowledge.wharton.upenn.edu)

5 Steps Of A Bubble - (www.sfgate.com)

Empty houses in the desert: American suburbanization meets the resource crises - (PDF – www.commoncurrent.com)

Houses in Dayton, OH on eBay with starting bid of $1 - (www.daytondailynews.com)

The Secret Powers Of Time - (www.wimp.com)