Thursday July 11 Housing and Economic stories

TOP STORIES:

Brazil, Fortune and Fate Turn on Billionaire - (www.nytimes.com) When the Brazilian billionaire Eike Batista appeared on the Charlie Rose show in 2010, he and his country were on a roll. Brazil’s economy, driven by a worldwide commodity boom, grew a blistering 7.5 percent that year. And Mr. Batista’s prodigious holdings — spanning oil, mining, shipping and real estate — were soaring in value. In the interview, Mr. Batista was asked how rich he would become over the next decade. “A hundred billion dollars,” he said, an amount that would most likely have made him the wealthiest person in the world. Today, with the Brazilian stock market and the value of its currency falling as mass demonstrations hobble the country, Mr. Batista’s billions are evaporating. From a peak of $34.5 billion in March 2012, his wealth has dropped to an estimated $4.8 billion, according to the Bloomberg Billionaires Index. His lenders are growing anxious, and there are concerns that he might have to reorganize — and possibly lose control of — his dwindling empire. The rise and fall of the charismatic industrialist mirrors Brazil’s sudden reversal of fortune. 

China Signals No Relief on Cash Squeeze - (online.wsj.com) China's government signaled little respite from the cash crunch that has afflicted its financial system since the beginning of June, suggesting tight conditions could continue to strain markets in the week ahead. A commentary published Sunday by the official Xinhua news agency said there was no shortage of funds in China's financial system. Rather, it said, a combination of speculation and nonbank forms of lending often called shadow finance were contributing to the surge in short-term lending rates. "It's not that there's no money, it's that the money is not in the right places," the commentary said. In a separate statement on Sunday, the People's Bank of China's Monetary Policy Committee made no direct reference to the surge in borrowing costs for banks and repeated commitments to maintaining a prudent monetary policy. Its repetition of boilerplate language on improving liquidity management and maintaining "steady and appropriate growth" of credit suggests China's monetary-policy makers see little urgency in easing the current stress in the financial system. The statement followed the committee's second-quarter meeting.

Brazilians Clash Outside Stadium as Rousseff Pleads Peace - (www.bloomberg.com)  Brazilian police had to restrain demonstrators who threatened to disrupt the Confederations Cup soccer tournament yesterday even after President Dilma Rousseff urged protesters to abandon violence and welcome foreign squads gearing up for next year’s World Cup. More than 100,000 marched in cities throughout Brazil yesterday as protests demanding improved public services and less government corruption entered a third week. The biggest demonstration was in Belo Horizonte, where television images showed protesters clashing with police near the stadium where Mexico’s national team beat Japan. Tens of thousands more demonstrated in Sao Paulo, Rio de Janeiro, Brasilia and the southern city of Santa Maria. Police estimate over 5,000 protested in Salvador, where Brazil defeated Italy. The demonstrations were smaller than on previous occasions and some of the first to occur after the president, in a nationally televised address, vowed to improve social services while urging Brazilians to help her host a “great” World Cup. Government financing for new stadiums has become a symbol of misplaced state spending for protesters who demand better health care, education and public transport.

Irish bankers 'hoodwinked' government over bailout, secret recordings show - (www.guardian.co.uk)  Taped conversations back up the view that Anglo Irish bankers knew that €7bn would never be enough to save the bank.  A top banker with the financial institution that almost bankrupted Ireland boasted that he had picked the figure of €7bn (£5.9bn) they told the Irish government was needed to rescue the Anglo Irish Bank "out of his arse". Taped phone calls between two senior executives at Anglo Irish have compounded suspicions in the Republic that bankers lured the then Fianna Fáil led government during the crash of September 2008 into a costly financial trap by saving the debt-stricken bank with public money. In the end the Irish taxpayer was forced to hand over €30bn to save Anglo Irish Bank from collapse and resulted in the state going cap in hand to the International Monetary Fund, the European Central Bank and the EU to save the country from national bankruptcy. The bank's audio recordings – obtained by The Irish Independent – are of conversations between two senior Anglo Irish managers in September 2008, John Bowe and Peter Fitzgerald. Initially the bank had asked Ireland's central Bank for €7bn to prop up its parlous finances following the Irish property crash. Critics of the bailout have insisted Anglo Irish bank executives always knew that the figure would be far higher – ultimately more than four times higher.

[ Lowenstein] The Federal Reserve’s Framers Would Be Shocked - (www.nytimes.com) ONE hundred years ago today,President Woodrow Wilsonwent before Congress and demanded that it “act now” to create the Federal Reserve System. His proposal set off a fierce debate. One of the plan’s most strident critics, Representative Charles A. Lindbergh Sr., the father of the aviator, predicted that the Federal Reserve Act would establish “the most gigantic trust on earth,” and that the Fed would become an economic dictator or, as he put it, an “invisible government by the money power.” Had the congressman witnessed Ben S. Bernanke’s news conference last week, he surely would have felt vindicated. Investors, traders and ordinary citizens listened with rapt attention as Mr. Bernanke, the Fed chairman, spoke of his timetable for scaling down stimulative bond purchases. “If things are worse, we will do more,” he said of the nation’s economy. “If things are better, we will do less.”

OTHER STORIES:

Analysis: Another China central bank worry; companies push into lending - (www.reuters.com)
Markets Insight: China’s Ponzi credit boom faces crunch - (www.ft.com)  
When the Ben and Beijing party comes to an end - (www.reuters.com)

Analysis: Another China central bank worry; companies push into lending - (www.reuters.com)

Exclusive: BOJ's Iwata says won't act on temporary market turbulence - (www.reuters.com)
China central bank says overall liquidity 'reasonable' - (www.reuters.com)

Hollande No Schroeder as Businesses Work Through Ambiguous Rules - (www.bloomberg.com)  

Wednesday July 10 Housing and Economic stories

TOP STORIES:

Bond Auctions Fail From Russia to Korea as Brazil Protests Rage - (www.bloomberg.com)  Developing nations around the world are scaling back or canceling billions of dollars of bond sales as borrowing costs climb the most since 2008, just as spending needs increase amid slowing economic growth. Romania’s Finance Ministry rejected all bids at a seven-year bond sale yesterday because of market volatility, while South Korea raised less than 10 percent of the amount planned in an auction of inflation-linked bonds. Russia scrapped a sale of 15-year ruble-denominated bonds June 19, the second time it canceled an auction this month, and Colombia pared an offering of 20-year peso debt by 40 percent. A cash shortage led to failures last week of China Ministry of Finance debt sales. The tumble in bonds, stocks and currencies, spurred by investors’ biggest retreat from emerging markets in two years, is tightening credit as the Federal Reserve says it may end cheap money that had made investment plentiful. 

Brazil Tycoon's Empire on Edge - (online.wsj.com) Just months after he unveiled it, Brazilian commodity tycoonEike Batista's bid to rebalance his unsteady oil, mining and shipping empire is nearly in tatters, overtaken by a shift in investor sentiment against emerging-market and commodity businesses like those owned by the former powerboat racer. The value of Mr. Batista's assets has plunged, undermining a strategy set in March to raise capital by selling stakes in his companies to new partners to ensure the viability of his cash-intensive businesses. The bond due in 2018 in Mr. Batista's flagship oil company, OGX LLC, reached the distressed level of 33 cents on the dollar Thursday. That compares with 88 cents on March 6. "The price already indicates that investors are seeing a company in a scenario of liquidation," said Marco Aurelio Guerra de Sa, head of the Latin American trading desk at Crédit Agricole Securities in Miami. Spokesmen for Mr. Batista declined to comment. But perhaps the strongest statement in declining confidence in the Batista empire came from Mr. Batista himself, investors say. In May, Mr. Batista sold around $60 million of shares in his flagship oil company at a rock-bottom price of between 1.57 Brazilian reais and 1.85 reais (70 cents and 83 cents) a share. 

Analysis: Creeping mistrust stops euro zone banks lending to peers across bloc - (www.reuters.com) Euro zone banks are refusing to lend to peers in other countries in the common currency bloc, signaling a worrying fall in confidence that appears to have worsened since the Cyprus bailout earlier this year, data analyzed by Reuters showed. In a trend that could reignite fears about the euro and its banks, European Central Bank data shows the share of interbank funding that crosses borders within the euro zone dropped by a third, to just 22.5 percent in April from 34.5 percent at the beginning of 2008. Banks are now lending to other banks across euro zone borders at only about the same rate as when the single currency was first launched, 15 years ago. The silent retreat to within national borders is most pronounced in the troubled economies of southern Europe but is seen even in Germany.

Insight: Losses loom for investors enmeshed in mortgage chaos - (www.reuters.com) Since the financial crash, banks have been accused of wrongfully foreclosing on U.S. homeowners because they failed to create and maintain proper mortgage paperwork. Now, there are signs that chaotic document management is harming investors in mortgage bonds, too. A review of loan documents, property records and the monthly reports made available to investors show that mortgage servicers are reporting that individual houses are still in foreclosure long after they have been sold to new buyers or the underlying mortgages have been paid off. These delays enable banks and other mortgage servicers to continue to charge monthly fees to investors in these mortgage-backed securities, the banks' investor reports show. It means that investors are buying mortgage bonds that may have billions of dollars of undisclosed losses that will become apparent only at a later stage. Mortgage experts said it could also lead to a new round of litigation for banks just when some appeared to have been putting their mortgage problems behind them.

Bond market sell-off causes stress in $2tn ETF industry - (www.ft.com) A wave of selling caused many exchange traded funds to tumble below the value of their underlying assets as a bond market sell-off caused stress in the $2tn ETF industry. ETFs track baskets of underlying assets, such as emerging-market stocks or municipal bonds, but discounts widened sharply on Thursday as dealers struggled to keep up with the sell orders. Emerging-markets ETFs were among the worst affected, as investors took fright that the end of Federal Reserve monetary easing would lead to outflows from developing countries. For example, the share price of the iShares MSCI Emerging Markets Index fell to a 6.5 per cent discount to the underlying asset value. The selling also caused disruptions in the plumbing behind several ETFs. Citigroup stopped accepting orders to redeem underlying assets from ETF issuers, after one trading desk reached its allocated risk limits.

OTHER STORIES:

One million march across Brazil in biggest protests yet - (www.reuters.com)

Greek coalition in disarray, small party considers quitting - (www.reuters.com)

IMF to suspend aid payments to Greece unless bailout hole plugged - (www.ft.com)

China central bank holds line on shadow banking as rates spike - (www.bloomberg.com)  

China Money Rates Drop From Records on PBOC Cash Boost - (www.bloomberg.com)  

China Wealth Products to Add Interbank Rate Pressure, Fitch Says - (www.bloomberg.com)  

Tuesday July 9 Housing and Economic stories

TOP STORIES:

China Interbank Market Freezes As Overnight Repo Explodes To 25%  - (www.zerohedge.com) It seems liquidity (or counterparty mistrust) is beginning to reach extreme levels in China as the nation's banking system is now quoting overnight repo transactions at 25%. The explosion in funding costs echoes the collapse in trust (and surge in TED spread) among US banks in the run-up to the Lehman bankruptcy. MSCI Asia-Pac stocks are down over 3% with China's Shanghai Composite -2.5% at seven-month lows.

• China’s 1-day Repo Rate Climbs to Highest Since at Least 2006
• MNI - CHINA OVERNIGHT REPO FIXING AT RECORD HIGH

China's bond market is also collapsing: Yield on 3.1% govt bonds due January 2016 jumps 39 bps to 3.749%, biggest rise since notes were issued in January

Convicted mortgage kingpin fails to report for prison - (www.detroitnews.com) Ronnie Duke, the one-time mortgage kingpin sentenced to 13 years in prison for his role in one of the country's largest fraud scams, failed this week to surrender to federal prison officials. Duke, 46, was ordered in April to begin his sentence by June 3. A federal magistrate signed a warrant for his arrest on Thursday, court records show. Duke was convicted for his role in a scheme that used fake documents to secure hundreds of loans on homes throughout Metro Detroit from 2003 to 2007, triggering nearly $95 million in losses as it bankrolled a lavish lifestyle for Duke and his co-conspirators. Harold Gurewitz, Duke's attorney, declined comment. However, he said he has withdrawn his appeal of Duke's sentence, filed with the U.S. 6th Circuit Court of Appeals, on Thursday because he had been unable to talk with Duke. U.S. District Judge Julian Abele Cook allowed Duke to surrender Monday to the Bureau of Prisons officials at a West Virginia correctional facility. As of Thursday he had not arrived.

Detroit retirees angry, anxious over EM's pension proposals - (www.detroitnews.com) Gerald Kent is insulted. William Schultheis is upset. Roger Doppelberger is indignant. And along with 20,000 other city of Detroit retirees, they’re worried. When Detroit’s emergency manager meets with unions and pension boards today, he’ll discuss how the city can cut its costs for retiree health care. But retired city workers fear that the budget ax will bite into their pensions, too. Take Kent, who worked in the city’s Building and Safety Engineering Department as an inspector from 1997 until his retirement in December 2011. Now living in Southfield, Kent says that after generating nearly $30 million in fees and fines through his work, his pension is about 38 percent of his final salary. “That pays for not only me, but about five others, benefits and pension,” Kent wrote in an email to The News. “I kept my promise to serve the city of my birth, to uphold the laws and codes honestly. To ask me to accept a cut in my pension is an insult to the years of good service I provided.”

Echoes of Mao in China cash crunch - (www.ft.com) As China’s credit crunch takes a turn for the worse, the question of why the central bank has permitted market conditions to deteriorate so suddenly and so sharply looms ever larger. Short-term money market rates surged to more than 10 per cent on Thursday, a record high and nearly triple their level just two weeks ago, after the central bank refused to inject extra funds into the strained financial system. Analysts have mostly viewed the squeeze in economic terms, as a warning to lenders that they must rein in dangerously fast credit growth. But in the midst of the extreme market stress, a statement issued late Wednesday by the central bank raised the possibility that politics are also playing an important role. Bankers had been calling for the central bank to ease the pressure and a few investors had even predicted that it might cut interest rates. Instead, the People’s Bank of China ordered a thorough implementation of the new “mass line education” campaign launched this week by President Xi Jinping – a campaign that in its propaganda-style and potential scope carries echoes of the Mao era.

Emerging Markets Crack as $3.9 Trillion Funds Unwind: Currencies - (www.bloomberg.com) Investors are pulling money from emerging markets at the fastest pace in two years as slowing economic growth and the prospect of less global stimulus sink stocks, bonds and currencies from India to Brazil. More than $19 billion left funds investing in developing-nation assets in the three weeks to June 12, the most since 2011, according to EPFR Global. Foreign investors dumped an unprecedented $5.6 billion of Brazilian stocks and $3.2 billion of Indian bonds this month, exchange data show. JPMorgan Chase & Co.’s emerging-currency index is down 1.4 percent this quarter, while the rupee and Turkish lira hit record lows and the real reached its weakest level since 2009. “These are pre-quake tremors: something big is coming,” Stephen Jen, the co-founder of hedge fund SLJ Macro Partners LLP, said in a phone interview from London on June 12. “There’s tremendous deceleration in emerging markets. You may see crisis-like price actions without having a crisis.”

Fears rise over how Portugal and Ireland exit bailout schemes - (www.ft.com) Less than a year before European leaders hope to chalk up success for their handling of the sovereign debt crises in Ireland and Portugal, rising bond yields and long-term interest rates are causing concern over how the two countries will exit their bailout programmes. Amid expectations that central banks in the US, Japan and elsewhere will tighten monetary policy, yields on Portugal’s benchmark 10-year bonds surged to 6.6 per cent last week from a low of 5.2 per cent in late May. Ireland’s 10-year yields also moved higher, rising to more than 4 per cent from a low of 3.5 per cent last month.

“Lisbon and Dublin’s return to the market could be affected if interest rates continue to rise as markets make adjustments between yields and the real returns countries can offer,” said Filipe Silva, head of public debt management at Portugal’s Banco Carregosa.

OTHER STORIES:

Brazil Protests Persist After Cities Revoke Fare Increase - (www.bloomberg.com)

Constitution may not protect Detroit's pensions - (www.detroitnews.com)

Detroit emergency manager orders probe of city's pension funds - (www.detroitnews.com)

Hard days ahead for Detroit retirees - (www.detroitnews.com)

Bundesbank's Dombret: ESM bank recapitalization should be last option - (www.bloomberg.com)

China Manufacturing Contraction Deepens Amid Cash Pinch: Economy - (www.bloomberg.com)

Chinese Govt Says Financial System Must Support Economy - (www.bloomberg.com)

China Money Rates Jump to Records as PBOC Lets Cash Crunch Build - (www.bloomberg.com)

Five Banks Must Raise $21.2 Billion in New Capital, BOE Says - (www.bloomberg.com)

Monday July 8 Housing and Economic stories

TOP STORIES:

Spanish Banks Risk Loan-Book Losses as Economy Shrinks, IMF Says - (www.bloomberg.com) The International Monetary Fund said Spain’s recession is putting the country’s lenders at risk of a further deterioration on their loans. “The macro downsides could trigger a negative feedback loop between credit and the economy, with deteriorating loan books and pressure on profits,” the IMF said in a report today. Banks should continue to “reinforce the quality and quantity of capital, including by being very prudent on cash dividends.” Spanish banks’ bad loans rose in April to 10.9 percent of their total lending from 10.5 percent a month earlier as companies and individuals are buffeted by a contraction that pushed unemployment to 27 percent. Economy Minister Luis de Guindos said yesterday lenders will need 2 billion euros ($2.7 billion) of capital to offset losses related to new rules that demand higher provisions for refinancing and restructured loans.

China cash crunch deepens as PBOC withholds funding  - (www.ft.com) China’s cash crunch deepened yesterday/WEDNESDAY after the central bank withheld funding from the financial system, putting pressure on overextended lenders. Short-term interbank rates jumped more than 200 basis points to a record high of nearly 8 per cent for loans of one month or less, in the latest indication of how tight credit has become in China. The main reason for the lack of liquidity has been the central bank’s reluctance to pump liquidity into the money market, wrongfooting banks that had expected Beijing would continue to support them with large cash injections. Signalling that the cash crunch could persist for a while, the China Securities Journal, a major state-run newspaper, ran a front-page commentary saying China was at a turning point in monetary policy. “We cannot use as fast money supply growth as in the past, or even faster, to promote economic growth,” the newspaper said. “This means that authorities must control the pace of money supply growth.”

CMBS Sales Face $15 Billion Drop on Interest-Rate Jump, S&P Says - (www.bloomberg.com) Rising interest rates may trim issuance of commercial-mortgage bonds by $15 billion this year, according to Standard & Poor’s.

An increase of 55 basis points on 10-year Treasury yields coupled with a rise of 30 basis points on relative yields on top-ranked securities linked to property loans will put a damper on the resurgent market, S&P analysts led by Howard Esaki said yesterday in a note to clients. The analysts estimate 2013 sales of $65 billion after adjusting for the rising rates. Commercial-mortgage bond sales that Credit Suisse Group AG says are poised to climb as much as 50 percent to $70 billion are being checked by investor concern that the Federal Reserve will soon pare $85 billion of monthly bond purchases. The unprecedented stimulus has suppressed interest rates and pushed investors into higher-yielding assets.

Bernanke Exit Signaled by Obama Means Tapering, Feldstein Says - (www.bloomberg.com) President Barack Obama clearly signaled this week that Federal Reserve chairman Ben S. Bernanke will be leaving the central bank when his term ends in January and that looming departure means Bernanke will want to begin tapering asset purchases this year, said Harvard University economics professor Martin Feldstein. The Fed has been making $85 billion in monthly bond purchases in an effort to spur job growth and galvanize faster U.S. economic expansion. The policy making Federal Open Market Committee is meeting today in Washington, with four more FOMC meetings scheduled before the end of the year.

6 Indicted for Scam Involving Inflated Appraisals and Kickbacks - (www.mortgagefraudblog.com) According to the 21 count indictment, Tibakweitira was a real estate agent forCentury 21 Advantage Realty and its successor, Elite Real Estate Group. Tibakweitira recruited his wife Makundi, and others, including Wambura, Mwihava and Boas, to act as straw purchasers of homes. Johnson owned CJ Lending and Able Estate & Company which provided credit repair services. The indictment alleges that from March 2007 to November 2008, the defendants sought mortgages for properties at values in excess of the properties’ actual market values. Tibakweitira allegedly procured inflated appraisals and created false addendums to the sales contracts requiring large amounts of loan proceeds to be disbursed for renovations or repairs. The defendants allegedly used stolen or false identities, false documents – including W-2 forms, earnings statements, and bank statements – and false credit information to induce lenders to provide residential mortgage loans to the straw buyers. Large amounts of the proceeds of the fraudulently obtained loans were allegedly disbursed from escrow accounts to Destiny Property Management, LLC andDestiny Property Management Company, which were shell companies owned byTibakweitira, for repairs and renovations that were never made. 

OTHER STORIES:

Climate change threatens trouble in the near future, World Bank says - (www.washingtonpost.com)

Coronavirus May Bring SARS-Like Scenario, EU Report Says - (www.bloomberg.com)

Erdogan Calls Protests a Conspiracy, Vows to Strengthen Police - (www.bloomberg.com)

Japan Exports Surge Most Since 2010 in Boost for Abe: Economy - (www.bloomberg.com)

Kuroda Says BOJ Can Ease More If Conditions Change Significantly - (www.bloomberg.com)
PBOC Sacrifices Growth as Bank Curbs Invert Swaps - (www.bloomberg.com)

King Loses Final BOE Vote as Majority Sees Recovery Strength - (www.bloomberg.com)

Mortgage-Bond Auction Failures Reach Most in 2013 as Prices Drop - (www.bloomberg.com)

Moody's may remove Brazil "positive" outlook as growth lags - (www.reuters.com)