Sunday September 27 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Lending in Europe continues to shrink - (www.ft.com) The credit crunch in Europe worsened over the summer as corporate bond finance issuance failed to plug the gap left by a sharp contraction of bank lending. Net lending by banks went further into negative territory in July as companies paid back more loans than they took out new ones. Loans outstanding contracted by a net €25bn ($36bn) in the month, the fifth successive month of an increasing shrinkage of supply. At the same time, there was a retreat in the recent record corporate bond issuance. Bond issuance in July declined for the first time since March, by €20bn month on month to €27bn, although bankers are convinced that it was only seasonal. Bankers said the July trends had continued into August and would affect smaller companies most severely. Morgan Stanley, which compiled the credit crunch numbers from central bank data and Dealogic, said the scant availability of bank lending would penalise smaller companies that have no access to bond markets. “As Europe’s commercial banks de-lever, lending is likely to be squeezed,” said Huw van Steenis, banks analyst. According to Morgan Stanley, there was €319bn of corporate bond issuance in the first seven months of the year and a decline of €33bn in European bank-originated loans. That marked a reversal of the balance of corporate funding from the same time last year, when bank loans totalled €356bn compared with corporate bond issuance of only €119bn. Banks across Europe have insisted in recent months any decline in lending is due to a fall-off in demand, not supply.

Bakery Union Wins Battle, Loses War - (Mish at http://globaleconomicanalysis.blogspot.com/) Congratulations go to Local 50 of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union workers for their hard won victory against the Brynwood Partners and the Stella D'oro cookie factory. In July a National Labor Relations Board judge ruled Brynwood had negotiated in bad faith with Local 50. And now, the rest of the story ... Workers shudder over Stella D'oro cookie factory shuttering in the Bronx: Workers at the Stella D'oro cookie factory in the Bronx were still in shock Thursday as the news sunk in that the business had been sold and was moving to Ohio. They wondered how they'd pay their rents and mortgages, how they'd find another job in today's recession and what they'd do without health insurance. Workers, who already went through a long, bitter strike that ended in July, trudged out at the end of the day's shift Thursday with hangdog faces and tales of heartbreak. Rivera said she cannot afford the $1,200 to $1,600 monthly health insurance payments available through her union, Local 50 of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. "I guess I will go like everyone else on unemployment. Imagine this: 138 people out on the street." After Brynwood bought Stella D'oro from Kraft Foods in 2006, it demanded sharp cuts in wages and benefits. Union workers went on strike in August 2008. The strike ended in July when a National Labor Relations Board judge ruled Brynwood had negotiated in bad faith with Local 50 and ordered it to pay lost wages and benefits. Brynwood then said it would have to sell the firm. Alem Fese, 58, a mixer at the plant for 27 years, said she has a $1,500-a-month mortgage and hasn't written a résumé in nearly three decades. "Who's going to hire me?" she asked. "I don't know what I'm going to do. Really." "Who's going to hire me?" Who's going to hire me? is a very good question. Here's another one. Why didn't the union ask that question before they went on strike, given the threat of the owner to sell? Some people, more importantly some union leaders, would rather have no job than a job at reduced pay, until they have no job, no pay, and no benefits. At some point those workers will be saying Cut My Pay, But Please Give Me A Job. This is a guess on my part, but the pay and benefits those workers get on their next job will probably be far lower than what Brynwood offered. Now those bakers may settling for jobs at Walmart, if they can find a job at all. Wages and benefits NEED to come down. So they will, one way or another. If you don't believe me, then ask GM or Local 50. Union workers in general (and Local 50 workers specifically) need to be wondering if their union exists for the benefit of the workers or the benefit of those collecting union dues. By the way, if you have not figured this out yet, this process is very deflationary.

Whirlpool to shut Indiana plant, cut 1,100 jobs - (www.marketwatch.com) Whirlpool Corp. announced Friday it will close its Evansville, Ind., factory next year, moving the plant's production of top-freezer refrigerators to a facility in Mexico. Citing the need to trim manufacturing capacity, Whirlpool said the mid-2010 plant closure will eliminate 1,100 full-time jobs. Whirlpool, like most manufacturers, has seen its sales slump over the past year as a global economic recession and housing market slump hurt demand for home appliances. Whirlpool's latest revenue numbers show sales in the second quarter fell 18% to $4.17 billion from the second quarter of 2008. Closing the Evansville plant is part of Whirlpool's ongoing drive to consolidate its North American manufacturing operations. The company said it is also considering relocating its Evansville refrigeration product development center, a move that would affect another 300 jobs. "A decision is expected in the near future," the company said. Whirlpool shares rose $1.57, or 2.4%, on the announcement to close at $66.11. The stock, though down 19% from year-ago levels, has rallied nearly 60% since the start of the year. "This was a difficult but necessary decision," Al Holaday, Whirlpool vice president of North American manufacturing operations said in a statement. "To reduce excess capacity and improve costs the decision was made to consolidate production within out existing North American manufacturing facilities. This will allow us to streamline our operations, improve our capacity utilization, reduce product overlap between plants, and meet future production requirements," he added. Whirlpool has been busy downsizing its operations for several years. Last fall it announced plans to ax about 5,000 jobs, or 7% of its workforce, by the end of 2009. The cuts include 500 salaried positions in North America and another 1,900 jobs abroad, mostly in Europe. The company estimated at the time that the job cuts would result in annual savings of about $275 million a year. Whirlpool, based in Benton Harbor, Mich., bought rival U.S. appliance maker Maytag for $1.79 billion in 2006, making it the world's biggest home appliance manufacturer. Shortly after the acquisition, Whirlpool shut Maytag's corporate headquarters in Newton, Iowa, and closed three production facilities, cutting about 4,500 salaried and factory jobs in the process. Whirlpool said the moves announced Friday would not alter its latest full-year earnings outlook of $3.50 to $4.00 a share. Analysts surveyed by FactSet Research are currently looking, on average, for full-year earnings from the company of $3.94 a share.

US tyre duties spark clash - (www.ft.com) A full-blown trade row erupted on Sunday night between the US and China after Beijing accused Washington of “rampant protectionism” for imposing heavy duties on imported Chinese tyres and threatened action against imports of US poultry and vehicles. Trade relations between two of the world’s biggest economies deteriorated after Barack Obama, US president, signed an order late on Friday to impose a new duty of 35 per cent on Chinese tyre imports on top of an existing 4 per cent tariff. In his first big test on world trade since taking office in January, Mr Obama sided with America’s trade unions, which have complained that a “surge” in imports of Chinese-made tyres had caused 7,000 job losses among US factory workers. Chen Deming, China’s minister of commerce, condemned the decision, saying that it “sends the wrong signal to the world” at a time when Washington and Beijing should be co-operating to deal with the worst economic and financial crisis in decades. “This is a grave act of trade protectionism,” Mr Chen said in a statement. “Not only does it violate WTO rules, it contravenes commitments the United States government made at the [April] G20 financial summit.” China said it would now investigate imports of US poultry and vehicles, responding to complaints from domestic companies. The US warned Beijing against taking retaliatory action. “Retaliation would be inappropriate, as the United States acted entirely within the bounds of trade laws and within the safeguard provision that China itself agreed to upon accession to the World Trade Organisation,” said an official from the Office of the United States Trade Representative. US officials said they were scrutinising the export of poultry and vehicles, but said any action in retaliation by China could result in a complaint by the US to the WTO. The dispute comes less than a fortnight before Mr Obama is due to host world leaders at a summit of G20 nations in Pittsburgh and ahead of his planned visit to China in November. The decision to impose extra tyre tariffs followed a petition by the United Steelworkers union, which represents workers at many US tyre factories. Official US figures show an increase in imports by volume from 14.6m tyres in 2004 to 46m in 2008. The US data shows that the value of tyre imports from China increased from $453.3m in 2004 to $1.8bn in 2008. Four US plants closed in 2006 and 2007 and three more are likely to be closed this year. US production capacity has fallen by 17.8 per cent in the past four years, according to the official data.

Rep. Bachus: "Social Security Could Face Default Within Two Years" - (www.tuscaloosanews.com) Social Security could face a deficit within two years, according to U.S. Rep. Spencer Bachus who met with The Tuscaloosa News editorial board Tuesday. “The situation is much worse than people realize, especially because of the problems brought on by the recession, near depression,” said Bachus, R-Vestavia Hills, in an interview with the Tuscaloosa News editorial board. Bachus, the ranking member of the House Committee on Financial Services, said most people seem unaware of the impending crisis. He initially said Social Security could face "default" within two years, but his staff responded later saying the Congresssman intended to say "deficit." “What this recession has done to Social Security is pretty alarming,” he said. “We’ve known for 15 years that we were going to have to make adjustments to Social Security, but we still thought that was seven or eight years down the road. But if things don’t improve very quickly, we’re going to be dealing with that problem before we know it.” The solvency of Social Security, which provides pensions for people older than 65, has not played a major role in the current debate about health care in Congress. Bachus said it will not likely be addressed in any health-care bill the House eventually passes, although if a Social Security bailout is needed, it will invariably have an impact on government health-care programs. In the debate over health-care reform, Bachus said that he could support a bill that includes privately administered, nonprofit health-care co-operatives, and the elimination of fraud and waste in existing government programs like Medicaid and Medicare. The creation of health-care co-ops run by members is an idea that has gained momentum as Democrats and President Barack Obama seem to have moved away from insisting on a “public option,” a government-run alternative to private health insurance offered by for-profit companies. “I cannot vote for a bill that has the government intruding into the private sector, subsidizing health care and eventually putting the insurance companies out of business,” Bachus said.

OTHER STORIES:

Greenspan: Gold Rally Signals a Move Away from Paper Currencies - (www.bloomberg.com)
Bizarre: Needle Attacks Reported in China - (news.yahoo.com/s/ap)
Insiders Selling Stock Like There's No Tomorrow - (money.cnn.com)
America's Lost Decade - (www.motherjones.com)
Nearly 40 Million Americans Living in Poverty - (www.washingtonpost.com)
Ivy League Schools Report Huge Losses in Endowments - (www.nytimes.com)
Harvard Jumps the Shark - (www.bloomberg.com)
Mice Levitated in Lab Using Magnetic Fields - (www.livescience.com)
New York City Braces for Risk of Higher Seas - (online.wsj.com)

House Prices Could Fall by Another 25% - (www.cnbc.com)

US Foreclosure Filings Top 300,000 for 6th Straight Month - (www.bloomberg.com)

Why the Foreclosure Crisis Won't End - (www.minyanville.com)

As owners leave foreclosed houses, squatters move in - (www.mcclatchydc.com)

Foreclosures remain at near-record pace in CA central valley - (www.centralvalleybusinesstimes.com)

Bay Area foreclosure activity falls 10% - (www.contracostatimes.com)

SF Price reductions across board as high season ends - (www.sfgate.com)

San Francisco renters moving up in down market - (www.sfexaminer.com)

Buyers of Huge Manhattan Complex Face Default Risk - (www.nytimes.com)

Five Questions About Government's Role in the Mortgage Business - (www.seekingalpha.com)

Why Does the Government Hate Renters? - (www.voices.washingtonpost.com)

Banks Profit From TARP, Future Losses Are All Yours - (www.theautomaticearth.blogspot.com)

Get ready for steep rate hikes in 2011 - (www.theprovince.com)

Economy Anecdotes From Around The World - (www.globalpost.com)

Sick and Wrong - (www.rollingstone.com)

Saturday September 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Unemployment benefits about to run out for thousands - (www.northjersey.com) An estimated 33,000 New Jerseyans will receive their final unemployment check Friday, and the state estimates that benefits will dry up for about another 3,500 to 4,000 each week through the end of the year as residents exhaust the unemployment insurance benefits available to them. Help for the unemployed now rests on Congress, where legislation is pending that would extend benefits, likely for another 13 weeks. In New Jersey, and many other states, out of work residents can collect unemployment for 79 weeks. But nationwide, 500.000 people are expected to reach the maximum threshold this month and 1.5 million people by the end of the year, according to the National Employment Law Project (NELP). The national policy and research center is pushing for swift action in Washington to help lessen the burden on residents but also keep the economy afloat. "We want them to do something now, because workers are running out and it's virtually impossible to find a job," said Andrew Stettner, NELP deputy director. U.S. Sen. Robert Menendez, a co-sponsor of the benefits extension bill, said he recognizes the affect the economic downturn has had on state residents, calling it the "toughest times families have experienced in generations." "Not only have workers lost their jobs, but in many cases, new jobs simply aren't yet available. It's crucial that we extend this safety net to help families keep a roof over their heads and put food on the table while they look for new employment," Menendez (D-N.J.) said in a statement. "Many of us in Congress recognize this clearly, and I fully expect action in the Fall." In the meantime, state officials are urging residents to consider state resources, such as food stamps, housing help and utility assistance. The Department of Human Services sent a letter to county welfare agencies, day care centers and faith-based organizations alerting them of the state's situation and giving them instruction for how to direct those in need to help. Department of Human Services spokeswoman Suzanne Esterman said some people that were not eligible for benefits while they received unemployment could now be able to apply. The services, in essence, could service as a stop-gap measure while New Jerseyans are out of benefits.

She lived beyond her meager means - (www.nytimes.com) Millions of Americans have lost homes, jobs and savings to the financial crisis and recession. While greed and extravagance played roles, many lived beyond their means because their paychecks shrank. This article is adapted from “Past Due: The End of Easy Money and the Renewal of the American Economy,” by Peter S. Goodman, a reporter for The New York Times. The book, to be published Tuesday by Times Books, explores the origins of the crisis and suggests ways to reinvigorate the economy. ONE afternoon in November 2006, a policeman spotted an expired license plate on Dorothy Thomas’s 10-year-old Toyota Corolla as she drove through San Jose, Calif. He ordered her to pull over. Struggling under the weight of thousands of dollars in credit card bills, Ms. Thomas was perpetually short of cash. She had not bought a $10 auto registration sticker. The officer checked his database and recognized that she had already been ticketed once before for the same thing. He arranged to have her car towed away. “I got down on my knees and begged that officer,” Ms. Thomas recalled. As she watched her car being hauled off, she sensed that this was the beginning of a descent into a crisis from which she might not easily escape. Without money to pay the towing and storage fees, she could not extract her car from the lot, and the tab soon grew to $1,600. Without a car, she could not reach the hospital where she worked in the administrative offices, so she lost her $16-an-hour job. Without a paycheck, she could no longer pay the rent on her modest home. She moved to Oakland, where a friend lived in a beaten-down, rented house on a street they called Crack Avenue. By year’s end, Ms. Thomas, then 49, was occupying a bunk at a homeless shelter, searching in vain for a job in an economy plagued by unemployment. Across the United States a sense has taken hold that the Great Recession and the financial crisis are predominantly a result of national profligacy, as if the economy had been undone by insatiable shoppers, foolhardy home buyers and greedy investment bankers. Extravagance and recklessness certainly played crucial roles, and yet they are only part of the explanation. Many have lived beyond their incomes simply because incomes have been outstripped by the costs of middle-class life. By the fall of 2008, most American workers were bringing home roughly the same weekly wages they had earned in 1983, after accounting for inflation. “For middle- and low-wage workers, the median wage basically went nowhere over these years,” said the economist Jared Bernstein. Spirited and eloquent, Ms. Thomas had worked her way up from rural Oklahoma poverty, enduring the strains of forcibly integrated schools, before settling in California. She had become one of the first African-Americans to sell cosmetics at a Sacramento department store. Then, she forged a career in medical billing, at one point making $22 an hour. She had lived beyond her means, but not out of decadence. For years, she had rented homes in better neighborhoods than she could afford in order to send her two daughters to quality schools. She had run up credit card balances to pay for summer science camps and school supplies. She had never earned more than a high school diploma, but one of her daughters already had a master’s in education; the other was about to start college. “I truly bought into the idea that education is the way out of poverty,” Ms. Thomas said. “If your kids are going to school with kids who are preprogrammed to go to college, then that’s what they will expect. I didn’t get myself out of poverty. But I got my daughters out. I was the bridge.” Long before “subprime” entered the American lexicon, before Wall Street convulsed with the collapse of giant institutions and the financial world seized with fear, a slower-moving crisis was already under way for tens of millions of ordinary people like Ms. Thomas. The shock of recent times has merely intensified this deeper crisis, rendering void a mode of living that was already unsustainable. As wages stagnated, and as the costs of health care and education spiraled higher, easy money filled the gap: shrinking paychecks were masked by an explosion of consumer credit and by a pair of investment manias that made money surge through the American economy — one centered on the supposedly limitless promise of the Internet, the other propelled by faith that real estate values could only climb. On the backs of these fantasies, the financial system lent out ridiculous sums of money to businesses and homeowners, as if the laws of supply and demand had been repealed.

3 more bank failures bring 2009 total to 92 - (www.marketwatch.com) Regulators closed three more banks Friday, bringing the 2009 total to 92. Closings announced by the Federal Deposit Insurance Corp.:

· Chicago-based Corus Bank, (CORS 0.26, -0.07, -21.26%) which had $7 billion in assets and $7 billion in deposits as of June 30, the FDIC said. The bank's deposits have been assumed by MB Financial Bank, the FDIC added. MB Financial(MBFI 17.03, +0.52, +3.15%) will pay the FDIC a premium of 0.2% to assume all of the failed bank's deposits, and has agreed to purchase roughly $3 billion of its assets, "comprised mainly of cash and marketable securities," the regulator said. Reports of Corus Bank's failure had surfaced earlier Friday. The Corus failure will cost the federal deposit-insurance fund $1.7 billion.

· Venture Bank, Lacey, Wash., which as of July 28 had total assets of $970 million and total deposits of $903 million according to the FDIC. The FDIC said First-Citizens Bank & Trust Co., Raleigh, N.C., will assume all of the deposits of Venture Bank; will buy $874 million of the assets and entered into a share-loss transaction for $715 million of the assets. The FDIC said it will retain the remaining assets for later disposition. It estimated the cost to the deposit insurance fund at $298 million. Venture Bank, based in an Olympia suburb, is the third in Washington to fail this year and the first since Westsound Bank in Bremerton on May 8.

· Brickwell Community Bank, Woodbury, Minn., which had $72 million in assets and $63 million in deposits as of July 24, according to the FDIC. Its deposits have been assumed by Mitchell, S.D.-based CorTrust Bank. Brickwell, based in a Minneapolis-St. Paul suburb, is the third bank to fail in Minnesota this year and will cost the deposit-insurance fund $22 million.

The closures have cost the federal deposit-insurance fund more than $1.7 billion as the credit crisis continues claiming victims.

U.S. Shuts Corus Bank of Chicago - (www.nytimes.com) The bank that was the most aggressive financer of condominium construction loans during the real estate boom was closed by federal regulators Friday night, and the Federal Deposit Insurance Corporation estimated that the bank’s $4 billion in outstanding loans and real estate were worth less than 60 cents on the dollar. The lender, Corus Bankshares, based in Chicago, whose loan portfolio tripled to $4.5 billion in the four years from 2001 to 2005, reported earlier this year that its capital had been wiped out by losses on loans, and its takeover by regulators was expected. The F.D.I.C. said that the bank’s deposits would be transferred to MB Financial Bank of Chicago, and that MB would acquire $3 billion of Corus’s assets, principally cash and securities. The regulator said it planned to sell the approximately $4 billion of outstanding loans and other assets, including foreclosed real estate, in a private placement within a month. It did not say what price it expected to receive, but estimated the loss to its insurance fund at $1.7 billion. In Corus’s last filing with the government, for June 30, it said it had $3.7 billion in outstanding loans, of which $3.2 billion were construction loans. It reported owning $463 million in real estate, nearly all of it in condominiums taken in foreclosures. Corus, formerly known as River Forest Bancorp, had only 11 branches. But it ventured out across the country in recent years, gaining a reputation for aggressive lending to finance condominium projects. At the peak of its lending activities, in 2005, only 5 percent of its loans were for projects in the Chicago area. Instead, most of its loans were in the hottest markets at the time — markets that have since suffered sharp declines. A total of 29 percent of the loans were in Florida, and 20 percent in California. New York City and Washington each had 14 percent of the portfolio, and Las Vegas had 6 percent. Earlier Friday, Edward W. Glickman, the brother of Robert J. Glickman, Corus’s former chief executive, disclosed he had sold more than 1 million shares this week, at prices ranging from 26 to 29 cents a share. He retained 2.4 million shares.

But Who Is Watching Regulators? - (www.nytimes.com) NOTHING succeeds like failure, as the saying goes. And nowhere is this dismal truth more evident than in our financial regulatory system, one year after the bankruptcy filing of Lehman Brothers. Even though calamitous lending practices laid waste to the nation’s economy, surprisingly little has changed about how the financial arena operates and is supervised. Sure, a couple of venerable brokerage firms have vanished, but many of the same players remain on the scene, in the same positions of power. Senior regulators who stood idly by for years as financial firms built their houses of cards have been rewarded with even bigger jobs or are jockeying for increased responsibilities. The Federal Reserve Board, for example, wants to become the financial system’s uber-regulator, even though its officials did nothing as banks made deadly decisions to lend recklessly and leverage themselves to the max. Awarding increased power to those who failed in their oversight duties flies in the face of all notions of accountability. Imagine hiring Angelo R. Mozilo, the former chief of Countrywide Financial, to run a global financial institution, or installing E. Stanley O’Neal, who presided over a disastrous period at Merrill Lynch, at the helm of a major investment firm. Yet those in the public sector ask us to believe that regulators who snoozed during the credit bubble will be alert to emerging problems on their beats when the next mania begins. That’s asking a lot, isn’t it? Here’s a novel thought. Instead of creating more regulations to try to prevent this kind of mess from recurring, why not figure out how to hold regulators accountable when they perform as poorly as they did in recent years? Edward J. Kane, a professor of finance at Boston College and an authority on the ethical and operational aspects of regulatory failure, has some ideas about how to do this and right our damaged system in the process. He outlined them in a recent paper titled “Unmet Duties in Managing Financial Safety Nets.” This ugly financial episode we’ve all had to live through makes clear, Mr. Kane says, that taxpayers must protect themselves against two things: the corrupting influence of bureaucratic self-interest among regulators and the political clout wielded by the large institutions they are supposed to police. Finally, he argues, taxpayers must demand that the government publicize the costs of efforts taken to save the financial system from itself.

Wells Fargo vows 'decisive action' in alleged use of Malibu mansion by an executive - (www.latimes.com) Wells Fargo & Co., seeking to distance itself from a company executive's alleged personal use of a $12-million beachfront Malibu home owned by the bank, said Friday that it would "take decisive action" against any employee "who may have violated Wells Fargo's policies." The bank's strongly worded statement came as it faced a potentially embarrassing public relations imbroglio in the aftermath of reports that one of its senior executives had lived in the home that was surrendered by victims of Bernard L. Madoff's massive fraud. "I almost fell out of my chair" when reading about the Wells Fargo allegations Friday morning, said Jerry Swerling, director of public relations studies at USC's Annenberg School for Communication. "That these folks could think this would not somehow become public astonishes me." The Times reported this week that Cheronda Guyton, a Wells Fargo senior vice president responsible for foreclosed commercial properties, allegedly spent weekends this summer at the home with her family. The paper cited eyewitness reports from residents of the exclusive Malibu Colony gated community. Guyton has not responded to phone calls or e-mails seeking comment. In a statement, the bank said that its rules of conduct prohibited employees from "personal use of properties held by Wells Fargo." The company reiterated Friday that it had launched a full investigation into the allegations. The San Francisco bank also said it regretted "the disruption to the neighboring property owners since these allegations were made." The property was transferred to Wells Fargo in May by the home's then-owners, bank customers who were said to have suffered heavy losses in Madoff's Ponzi scheme. Neighbors recounted a summer evening during which guests arriving for a party at the plush modern home were ferried on a dinghy from a yacht offshore. The use of the house, Swerling said, suggests that Wells Fargo has failed to ensure that executives "make concern for the company's reputation an organization-wide priority. They need to ask themselves, 'Is this consistent with who we want to be?' If it's not consistent, don't do it." Kevin Stein, associate director of the California Reinvestment Coalition, an advocacy group for low-income tenants, said the executive's alleged use of the Malibu house looked especially bad inasmuch as Wells Fargo and other banks often swiftly evicted renters from foreclosed houses to speed their resale. "At the same time at least one bank executive was [reportedly] moving into a house in Malibu, I was imagining that scene a few miles away in the San Fernando Valley where people are getting kicked out because Wells Fargo says they have to put those houses back on the market immediately," Stein said. He said his group was working with Wells Fargo and other lenders to defer selling foreclosed homes that were occupied by tenants so renters could remain in them longer. "I expect this is an aberration. I don't know if it is widespread, but I hope it is not widespread," Stein said of the Malibu situation. Even if the incident was isolated, he said, the harm to the image of Wells Fargo and the banking industry is more broad. "It plays into the public's distrust and skepticism about the role of large financial institutions in this crisis." Real estate agents contacted by The Times on Friday said they had not heard of similar cases, despite the huge increase in homes surrendered to lenders in the last two years as the housing market collapsed.

OTHER STORIES:

But Who Is Watching Regulators? - (www.nytimes.com)

Waiting for the next Lehman Brothers - (business.timesonline.co.uk)

Insiders sell like there's no tomorrow - (money.cnn.com)

The Consumer Credit Game Is OVER - (www.market-ticker.org)

US tyre duties spark clash - (www.ft.com)

Surging Euro Puts Bloc's Rebound at Risk - (online.wsj.com)

China Government ‘Strongly Opposes’ U.S. Tire Tariff Imposition - (www.bloomberg.com)

Why we’ve not got the ideal Fed boss - (www.ft.com)

Big Spenders? They Wish - (www.nytimes.com)

Global economic crisis to continue: IMF chief - (www.reuters.com)

U.S. posts $111.4 billion August budget deficit - (www.reuters.com)

A Year After a Cataclysm, Little Change on Wall St. - (www.nytimes.com)

Hidden costs emerge from the debris of Lehman crash - (www.ft.com)

Wall Street’s Math Wizards Forgot a Few Variables - (www.nytimes.com)

Tales From Lehman’s Crypt - (www.nytimes.com)

Bank failure that triggered the panic - (www.ft.com)

It is never too early to fear inflation - (www.ft.com)

Friday September 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Will Obama crack open ACORN Housing in his new found pursuit of the purveyors of mortgage fraud? - (www.examiner.com) On May 20th Obama signed the “Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act” into law. This bill is designed to further help homeowners adjust their mortgages….Many of the subprime mortgages were given without checking consumers’ credit scores, allowing no down payments and allowing non-traditional income to be counted as income, in other words, people who were being paid under-the-table (not paying taxes on this) were allowed to count this income when applying for a mortgage. Furthermore there were many ‘exotic’ mortgages as they are referred to in the industry, such as paying interest only for a certain number of years which builds no equity for the consumer and does not pay down the principle of the loan. On top of this it does not provide the consumer with the reality of what the payments will be when the principle payments actually kick in. This is just one type of loan that caused a lot of people to have their homes foreclosed upon; they simply could not afford the principle payments once they finally came to be. Through the direct actions of ACORN Housing, banks were giving people who were not ‘normally’ creditworthy loans that had low interest rates at first but were adjustable. When the rates were adjusted up, the consumers simply could not afford the higher payments. The forcing of banks by groups like ACORN using the Community Reinvestment Act to give loans to people otherwise not able to receive them is a huge cause of the housing bubble and why so many have been forced into foreclosure. ACORN receives millions of dollars of taxpayer money to help people every year yet they are hurting these very people by aiding them in getting the subprime or exotic loans that have caused nothing but problems for the consumers, the banking industry and the economy overall and responsible taxpayers may now be included in this list. The non-partisan Consumers Rights League did an extensive in-depth investigation into ACORN Housing and their mortgage practices in 2008 which they submitted to Congress recommending at the very least that Congress investigate ACORN Housing’s mortgage practices. I implore you to read their full report here: http://www.consumersrightsleague.org/UploadedFiles/ACORN_AHC_Report.pdf To date there has been no investigation into ACORN Housing. Maybe now that Obama is seeking to prosecute all organizations that were involved with these practices, he will read the Consumers Rights League investigation and actually have the Department of Justice perform a further investigation? Maybe someone in Congress will actually think twice before giving more money to ACORN for housing activities? Actually Michelle Bachmann(R-MN) amended the Housing Bill to disallow any groups that have been indicted for voter registration fraud from receiving any money but Barney Frank(D-MA) changed that. I think ACORN Housing being involved in the mortgage crisis would have proven a bit more substantial as a reason to disallow more funds to be steered their way. In 2008 ACORN Housing began their own mortgage brokerage firm in Florida, Acorn Loans. One of their selling points to getting a mortgage is still listed on the ACORN Housing's website: “Flexible credit guidelines and income requirements including the use of non-traditional income” Correct me if I am wrong but isn’t getting paid under-the-table against the law? How does a person actually verify this income if they aren’t legally getting paid? Of course there is no other information on the website, if you are interested you actually have to call the number. ACORN Housing is proud to acknowledge that they are working with Bank of America (one of the banks that provided ‘exotic’ loans to ACORN’s consumers which aided in the foreclosure rates) and Fannie Mae. I don’t think I need to explain anything further about the corruption at Fannie Mae. Maybe that is why Barney Frank wanted to be sure that ACORN Housing still received taxpayer funds from the Housing Bill, otherwise he’d have to admit that a company he has protected for years is working with an organization of the type that his boss now wants to prosecute.

ACORN workers caught on tape allegedly advising on prostitution - (www.cnn.com) Two employees at the Baltimore, Maryland, branch of the liberal community organizing group ACORN were caught on tape allegedly offering advice to a pair posing as a pimp and prostitute on setting up a prostitution ring and evading the IRS. The video footage -- which has been edited and goes to black in some areas -- was recorded and and posted online Thursday by James O'Keefe, a conservative activist. He was joined on the video by another conservative, Hannah Giles, who posed as the prostitute in the filmmakers' undercover sting. The video shows the pair approaching two women working at the ACORN Baltimore office and asking them for advice on how to set up a prostitution ring involving more than a dozen underage girls from El Salvador. One of the ACORN workers suggests that Giles refer to herself as a "performing artist" on tax forms and declare some of the girls as dependents to receive child tax credits. "Stop saying prostitution," the woman, identified by the filmmaker as an ACORN tax expert, tells Giles. The other woman tells them, "You want to keep them clean ... make sure they go to school." Both women appear enthusiastic to help. Calls to ACORN's Baltimore offices were not immediately returned Thursday. A local spokeswoman told The Associated Press that both employees seen in the video were fired. "The portrayal is false and defamatory and an attempt at 'gotcha journalism,' " said Scott Levenson, a spokesman at ACORN's national offices. "This film crew tried to pull this sham at other offices and failed. ACORN wants to see the full video before commenting further." The conservative filmmakers unsuccessfully attempted similar ruses at the group's offices in Philadelphia, Pennsylvania, Los Angeles, California, and New York, Levenson said. Law enforcement officials in the Baltimore area wouldn't confirm whether they are investigating the alleged incident at the local ACORN office. However, authorities said that under Maryland law, such undercover video may not be admissible in court as evidence. CNN attempted to reach O'Keefe and Giles; O'Keefe was not available for comment and Giles canceled an interview scheduled for Thursday. ACORN -- an acronym for the Association of Community Organizations for Reform Now -- made headlines last year when Republican groups seized on allegations of voter registration fraud by the group in Florida and several other states, claiming its workers were trying to push the election in Barack Obama's favor. On Wednesday, arrest warrants were issued for 11 Florida voter registration workers suspected of submitting false information on hundreds of voter registration cards, according to court documents. The Florida investigation was triggered by ACORN officials who noticed irregularities in forms they were receiving. Founded in 1970, ACORN calls itself "the nation's largest grassroots community organization of low- and moderate-income people." The group says it has more than 400,000 member families organized into more than 1,200 neighborhood chapters in 110 cities. Besides voter registration, the group focuses on issues such as predatory lending, minimum wage and funding for public schools, according to its Web site. It also provides free tax-return preparation for low-income people and screening for state and federal benefit programs.

One Year After the Financial Crisis, The Consumer Economy is Dead - (www.mcclatchydc.com) One year after the near collapse of the global financial system, this much is clear: The financial world as we knew it is over, and something new is rising from its ashes. Historians will look to September 2008 as a watershed for the U.S. economy. On Sept. 7, the government seized mortgage titans Fannie Mae and Freddie Mac. Eight days later, investment bank Lehman Brothers filed for bankruptcy, sparking a global financial panic that threatened to topple blue-chip financial institutions around the world. In the several months that followed, governments from Washington to Beijing responded with unprecedented intervention into financial markets and across their economies, seeking to stop the wreckage and stem the damage. One year later, the easy-money system that financed the boom era from the 1980s until a year ago is smashed. Once-ravenous U.S. consumers are saving money and paying down debt. Banks are building reserves and hoarding cash. And governments are fashioning a new global financial order. Congress and the Obama administration have lost faith in self-regulated markets. Together, they're writing the most sweeping new regulations over finance since the Great Depression. And in this ever-more-connected global economy, Washington is working with its partners through the G-20 group of nations to develop worldwide rules to govern finance. "Our objective is to design an economic framework where we're going to have a more balanced pattern of growth globally, less reliant on a buildup of unsustainable borrowing . . . and not just here, but around the world," said Treasury Secretary Timothy Geithner. The first faint signs that the U.S. economy may be clawing its way back from the worst recession since the Great Depression are only now starting to appear, a year after the panic began. Similar indications are sprouting in Europe, China and Japan. Still, economists concur that a quarter-century of economic growth fueled by cheap credit is over. Many analysts also think that an extended period of slow job growth and suppressed wage growth will keep consumers — and the businesses that sell to them — in the dumps for years. "Those things are likely to be subpar for a long period of time," said Martin Regalia, the chief economist for the U.S. Chamber of Commerce. "I think it means that we probably see potential rates of growth that are in the 2-2.5 (percent) range, or maybe . . . 1.8-1.9 (percent)." A growth rate of 3 percent to 3.5 percent is considered average. The unemployment rate rose to 9.7 percent in August and is expected to peak above 10 percent in the months ahead. It's already there in at least 15 states. Regalia thinks that it could be five years before the U.S. economy generates enough jobs to overcome those lost and to employ the new workers entering the labor force. All this is likely to keep consumers on the sidelines.

Overspending on Debit Cards is a Boon for Banks - (www.nytimes.com) When Peter Means returned to graduate school after a career as a civil servant, he turned to a debit card to help him spend his money more carefully. So he was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks — and a $34 fee. He got the $6.50 student discount at the movie theater — but no discount on the $34 fee. He paid $6.76 at Lowe’s for screws — and yet another $34 fee. All told, he owed $238 in extra charges for just a day’s worth of activity. Mr. Means, who is 59 and lives in Colorado, figured employees at his bank, Wells Fargo, would show some mercy since each purchase was less than $12. In addition, a deposit from a few days earlier would have covered everything had it not taken days to clear. But they would not budge. Banks and credit unions have long pitched debit cards as a convenient and prudent way to buy. But a growing number are now allowing consumers to exceed their balances — for a price. Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance. In fact, banks now make more covering overdrafts than they do on penalty fees from credit cards. But because consumers use debit cards far more often than credit cards, a cascade of fees can be set off quickly, often for people who are least able to afford it. Some banks further increase their revenue by manipulating the order of a customer’s transactions in a way that causes more of them to incur overdraft fees.

US trade gap shows biggest jump 10 years - (www.ft.com) The US trade gap swelled by the most in a more than a decade in July due to a surge of imports driven by a jump in demand for foreign cars, oil and consumer goods, official figures showed on Thursday. The trade deficit grew by 16.3 per cent from June to $32bn, with exports trailing imports. The result surprised economists who were expecting the gap to remain flat near $27bn. The US trade deficit with the rest of the world has plunged by 51 per cent from a year ago, as both imports and exports fell amid the global recession. Analysts have called the smaller deficit one of the few bright spots amid the downturn, and it has eased some of the economy’s overall contraction. “Both exports and imports were meaningfully stronger than expected, consistent with the reactivation of activity notably in the manufacturing and tradables sectors after the lights briefly went out following the Lehman’s debacle,” said Alan Ruskin, a strategist at RBS Greenwich Capital. Imports jumped by 4.7 per cent to $159.6bn, signalling a welcome rise in domestic demand for car parts and computers. Much of the demand for car parts was spurred by the popular “cash for clunkers” car rebate programme, as auto makers ramped up production. Exports rose by 2.2 per cent to $127.6bn on greater global appetite for cars, engines and industrial goods. Joshua Shapiro, chief US economist at MFR, argues that exports will start to receive a boost from better economic conditions abroad and that the benefits from weaker imports will fade in the coming months. “A situation where trade volumes are growing but the US deficit is stabilising is a much better environment than what was suffered through recently, when the US deficit narrowed but global trade volumes withered,” Mr Shapiro said. The US continued to import goods from may of its preferred partners. Its bilateral trade deficit with China, Washington’s biggest and most politically sensitive shortfall, grew in July to $20.4bn. The US’s grade gaps with Japan and the European Union also grew, while the deficit with Mexico narrowed.

OTHER STORIES:

Now its the Ladybugs that are disappearing - (www.redorbit.com)
Federal Reserve: The Recession is Over! - (www.google.com/hostednews/ap)
As Cheaper Chinese Tires Roll In, Obama Faces an Early Trade Test - (www.washingtonpost.com)
Google Plans New Mirror for Cheaper Solar Power - (www.reuters.com)
Treasury Sees Millions More Foreclosures Ahead - (www.abcnews.go.com)
US Braces for a Long Flu Season - (online.wsj.com)
Cellphone Radiation Levels Vary Widely - (www.usatoday.com)

U.S. Concerned on Debt Demand, Treasury’s Dollar Says - (www.bloomberg.com)

TARP: Treasury Looks to Shift Rescue's Focus To Small Businesses and Community Banks - (www.washingtonpost.com)

Harvard, Yale Endowments Decline 30% on Private-Equity Losses - (www.bloomberg.com)

SEC faces reform ultimatum - (www.ft.com)

Cautiously, Small Investors Edge Back Into Stocks - (www.nytimes.com)

Recession Takes Toll on Living Standards - (online.wsj.com)

Millions More Thrust Into Poverty - (www.washingtonpost.com)

Oil costs drive up producer prices - (www.ft.com)

Thursday September 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Wealthy Families Succumb to Bankruptcy as Real Estate Crashes - (www.bloomberg.com) Wealthy individuals’ Chapter 11 bankruptcy filings jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center, a research firm in Burlingame, California. More individuals or families with at least $1,010,650 in secured debt and $336,900 unsecured are using Chapter 11 of the U.S. bankruptcy code typically associated with business reorganizations. Falling U.S. home prices leave them unable to refinance or sell properties when they drop below the value of the mortgage, said Joseph Baldi, a Chicago bankruptcy attorney. Chapter 11 is more expensive and time-consuming for debtors and creditors than a Chapter 7 liquidation of assets. Wealthier people filing for bankruptcy typically have large homes, two car payments and children in private schools, said Leslie Linfield, executive director of the Institute for Financial Literacy in Portland, Maine, a credit-counseling and research group. “You’re living on the edge, you’re juggling those financial balls,” Linfield said. “When one ball goes, they all fall down.” Listings of homes for sale worth $1 million or more increased 27.3 percent in July from October, according to Zillow.com, a Web site that tracks real estate transactions. The number of homes sold with a value between $1 million to $2 million fell 23 percent in July from a year earlier, according to the Chicago-based National Association of Realtors. There was a 21-month supply, up from 16 months last year. Expensive Real Estate: Actor Stephen Baldwin sought voluntary Chapter 11 bankruptcy protection in July after lenders began foreclosure proceedings. Baldwin, 43, listed $1.1 million in assets and $2.3 million in debt in documents filed in U.S. Bankruptcy Court in White Plains, New York. His home is valued at $1.1 million and the banks sought to recover about $1.2 million in mortgage loans, according to court papers. “There are a lot of people with real estate, and they can’t afford it,” said Baldi, the Chicago attorney, who is scheduled to speak to the American Bankruptcy Institute on Chapter 11 next month. “They can’t make the payments, and they can’t sell the house.” About 4.3 percent of U.S. homes, or one in 25 properties, were in foreclosure in the second quarter, according to an Aug. 20 report from the Mortgage Bankers Association in Washington. That’s the most in three decades of data.

Home Prices Could Fall by Another 25%: Whitney - (www.cnbc.com) Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday. "No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when." Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said. "If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said. If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said. "A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said. Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards. "Obviously that doesn't bode well for spending," Whitney said.

In Florida, Vestiges of the Boom - (www.nytimes.com) On the corner of Flamingo Road and Pink Flamingo Lane, beyond the putting green, the crystalline lagoon and the Sawgrass Mills mall, a soaring monument to the great condominium bust bakes under the Florida sun. The Tao Sawgrass, as the twin-towered complex is known, was built on the western fringes of Fort Lauderdale with easy money from the now tottering condo king of American finance: Corus Bancshares of Chicago. Only about 50 of the 396 units have been sold. The 26-story Tao — begun in 2006, just as the Florida real estate market imploded — is one of the many troubled condominium projects that have mired Corus in red ink and now threaten its survival. Federal authorities are racing to broker a sale of Corus to avert yet another costly banking collapse. After failing to find a buyer for the entire company, regulators are moving to cleave the bank in two and sell its banking operations and condominium loans separately. The hope is to clinch a deal by the end of the month. Some big-time real estate investors are circling, among them Thomas J. Barrack, who first made his fortune in the aftermath of the savings and loan crisis; Barry S. Sternlicht, the man behind the Starwood empire; Jay Sugarman of iStar Financial, the public real estate giant; and New York developer Stephen M. Ross, sometimes called the King of Columbus Circle, in league with Lubert-Adler, a big property investor in Philadelphia. Whatever the outcome, Corus will go down as the great enabler of condo madness, and its travails are a harbinger of the pain yet to come in the troubled world of commercial real estate. More than any other condo lender, Corus epitomized the easy lending and lax oversight of the go-go years — and the pain of the ensuing bust. Its share price, which was nearly $13 in February of 2008, has plummeted into the land of penny stocks, closing at 25 cents Wednesday. Corus barreled into hot markets like California, Florida and Nevada and then kept lending as those markets boiled over. Rather than diversify, it concentrated its lending bets by financing only a handful of big, risky projects. And it poured its idle cash into a small group of other banks and financial companies that were upended when the crisis struck. The primary regulator of Corus, the Office of the Comptroller of the Currency, failed to sound the alarm until Corus was deeply troubled. “They are the perfect analogy of a boom-bust bank,” said Jack McCabe, the head of a real estate research and consulting firm in South Florida. Corus executives, he said, behaved more like property speculators than bankers. The failure of Corus would cost an already strained Federal Deposit Insurance Corporation billions. It would also underscore the wave of troubled commercial real estate loans now threatening to crash down on much of the American banking industry. Construction and land loans are now the biggest problem for hundreds of deeply troubled lenders and pose far greater dangers than commercial loans or home mortgages, according to Foresight Analytics, a banking industry research firm.

Banks Load Up on Mortgages, in New Way‎ - (online.wsj.com) Banks have been silent partners in the meteoric rise of the Federal Housing Administration. In the past year, the nation's financial institutions have snapped up securities backed by Ginnie Mae, a government-owned agency that guarantees payments on mortgages backed by the FHA. That helped drive demand for Ginnie securities and created an outlet for billions of dollars of FHA-backed loans made to borrowers who in many cases couldn't afford big down payments. As of June 30, the roughly 8,500 federally insured banks and thrifts were holding $113.5 billion of Ginnie securities, compared with just $41 billion a year earlier, according to a Wall Street Journal analysis of bank financial disclosures. It is the largest amount that banks have reported holding since at least 1994. Banks, sometimes with the blessing of federal regulators, have been loading up on Ginnie securities for one main reason: They make their balance sheets look healthier. Since the securities are guaranteed by the government, federal banking regulators have deemed them risk-free, meaning that adding them to a bank's investment portfolio, or replacing assets deemed riskier, lowers the overall risk of the portfolio in the eyes of regulators. Some banks have used government cash infusions under the Troubled Asset Relief Program to buy Ginnie Mae bonds. Having an eager buyer for its securities has made it easier for Ginnie Mae to increase the amount of debt it issues, though there appears to be no connection between the banks' increased appetite and the increasing supply of Ginnie Mae securities. Because Ginnie Mae can issue significant amounts of securities, the FHA can back more loans and the high demand helps keep interest rates low. The irony is that banks that are reluctant to lend and are trying to unload their own mortgage holdings are at the same time helping to prop up the housing market by buying up securities backed by mortgages. Through August, Ginnie had backed $298 billion of mortgage-backed securities in 2009, the most in its 41-year history and nearly double the amount in the same period last year. That represents about 20% of total new mortgages in the U.S. In addition to FHA-backed loans, Ginnie also guarantees securities comprising mortgages backed by the Department of Veterans Affairs and other federal agencies. Ginnie and the FHA, units of the U.S. Department of Housing and Urban Development, have become two of the most powerful mortgage financiers in the U.S. When banks make home loans, the FHA insures them against default. Then the mortgages are pooled together and packaged into mortgage-backed securities. Ginnie guarantees that buyers of those securities -- including banks and other investors -- will continue to receive interest and principal payments on the debt, even if borrowers start to default. FHA Paying the Price? Over the past year, FHA has played a key role in supporting the struggling housing market by buying up mortgages made to home buyers who can't afford big down payments or homeowners who want to refinance but have little equity in their homes. The FHA may be paying a price for all its lending. Rising losses on the mortgages have drained the agency's reserves. Holding Ginnie bonds help banks look better because federal bank-capital guidelines give the Ginnie securities a "risk weighting" of 0%. That means banks don't have to hold any cash in reserve to protect against losses. By contrast, securities backed by Fannie Mae and Freddie Mac, the two mortgage giants seized by the government,carry a 20% risk weighting, meaning some cash needs to be set aside to hold them, even though most banks and investors think there is scant risk of Fannie or Freddie securities defaulting. Privately issued mortgage-backed securities can receive risk weightings of 50%, while many other types of debt carry 100%. Because of the different risk weightings, bankers say they are selling relatively safe assets like Fannie securities and replacing them with Ginnie securities. The move doesn't shrink banks' balance sheets or remove their troubled assets. But it reduces their total assets on a risk-weighted basis. That is important because risk-weighted assets are the denominator in some key ratios of bank capital. "With the pressure for capital, that's really made the Ginnie Maes more attractive," said John C. Clark, chief executive of First State Bank in Union City, Tenn. The bank's holdings of Ginnie securities jumped to $66 million at June 30 from less than $4 million a year earlier. Like some peers, First State bankrolled those purchases partly with taxpayer dollars that were intended to stabilize the banking industry and jump-start lending. The 32-branch bank used a "significant portion" of the $20 million it received through TARP to buy Ginnie securities, Mr. Clark said.

FDIC Said to Weigh Six-Month Extension for Debt Guarantee Pleas - (www.bloomberg.com) The Federal Deposit Insurance Corp. proposed a six-month, emergency-only extension to its debt guarantee program as regulators move to wean companies from federal aid approved at the height of last year’s credit crisis. The five-member FDIC board today unanimously approved seeking comment for 15 days on extending the program. The FDIC now guarantees eligible debt issued before the scheduled Oct. 31 expiration by banks that get agency approval and pay a fee. “It has been a successful program but we would like to end it,” FDIC ChairmanSheila Bair said at a Washington meeting. Credit markets are recovering and she doesn’t expect banks to need further access to the program, meaning the agency should now seek input whether to go “cold turkey” or offer an emergency mechanism for a final six months, she said. Bankers have pressed the FDIC to spell out how it will end the program, which Federal Reserve Chairman Ben S. Bernanke has said was instrumental in keeping markets stable during the worst of the 2008 financial crisis. The program is part of the Temporary Liquidity Guarantee Program; a portion for business checking accounts was extended in August for six months. “The point here is to allow for an orderly transition out of a government-backed system,” said Robert Strand, a senior economist at the American Bankers Association in Washington, in a telephone interview yesterday. The ABA had asked the FDIC to “worry about the cutoff points and the suddenness” of ending the guarantees, to make sure closing down the program doesn’t roil markets, he said. FDIC Permission: Under the limited extension, designed to help the FDIC phase out the program, banks would have to apply to the board for permission to access the aid and show that they were unable to issue non-guaranteed debt due to market disruptions or other emergency circumstances. As proposed, the emergency facility would cover debt issued through April 30, 2010, for any banks that win agency approval. The program’s debt guarantees extend through Dec. 31, 2012. “It’s a reasonable safeguard, and when things start declining again it’s helpful to have that option,” said Gregory Habeeb, who manages $7.5 billion in fixed-income assets at Calvert Asset Management Co. in Bethesda, Maryland. “The fact that it was extended is called ‘bad and good.’ The bad is that it’s still needed. The good is it’s still there if needed.” The FDIC had about $320 billion in outstanding debt guaranteed by the program as of July 31, from firms including Citigroup Inc. and General Electric Co. Regulators are weaning banks from U.S. backing by requiring them to issue debt without guarantees before repaying Troubled Asset Relief Program funds and escaping restrictions attached to the aid.

OTHER STORIES:

Marijuana Farming Increases Amid Ailing Economy - (www.cnbc.com)

Foreclosures Up From Last Year; Near Record Levels - (www.cnbc.com)

Slideshow: Highest State Foreclosure Rates - (www.cnbc.com)

Oil prices approaches $72 on falling dollar - (www.reuters.com)

FDIC Said to Weigh Six-Month Extension for Debt Guarantee Pleas - (www.bloomberg.com)

CIC Looks to Pile Cash Into U.S. Real Estate - (online.wsj.com)

Companies Rush to Sell Shares While They Can - (www.cnbc.com)

As an Exotic Mortgage Resets, Payments Skyrocket - (www.nytimes.com)

OPEC Committee Recommends Keeping Quotas Unchanged - (www.bloomberg.com)

Goldman chief hits at complex products - (www.ft.com)

Inflation Fear Pushes U.S. Endowments Deeper Into Commodities - (www.bloomberg.com)

Monsanto Plans Deeper Staff Cuts - (www.cnbc.com)

Another Wave of Foreclosures Looms - (www.washingtonpost.com)

US citizens in rush for offshore tax advice - (www.ft.com)

UBS Ordered to Post $35 Million Bond in Fraud Case - (www.cnbc.com)

China Growing 9.5% Evident as New Vehicle Sales Soar - (www.bloomberg.com)

Chinese Jet Ambitions Take Aim at Aging Airbus, Boeing Models - (www.bloomberg.com)

China Steel Output Rises 2% in August, Umetal Says - (www.bloomberg.com)

Mexico Government Seeks Taxes, Spending Cuts to Avoid Downgrade - (www.bloomberg.com)