Wednesday January 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Wasting thousands per month paying mortgage, and credit rating falls too - (www.huffingtonpost.com) Steven Marks knew he was wasting thousands of dollars every month paying the mortgage on a home he bought during the housing bubble that will never be worth that much again. But he'd read plenty of horror stories about people having serious trouble modifying their mortgages due to bank confusion and misbehavior, so before he started looking for debt relief on his Reno, Nev. home, Marks sent a simple request to Bank of America: Could they tell him who owned his mortgage? And could they document it? Marks didn't get the type of response he was expecting. After initially declining to tell him who owned his loan, Bank of America provided a form letter with the name of the current investor a few weeks later. But they also appear to have lowered his credit score, the preeminent measure of creditworthiness that will principally determine his ability to obtain loans in the future. "I just asked to see my note, and they dinged my credit score. My insurance premiums have already gone up," Marks told HuffPost. "I went to see a lawyer, we're trying to figure out what my options are. After this, we're thinking about some forced mediation. Why keep paying if my credit score gets battered anyway?"

When States Default: 2011, Meet 1841 - (online.wsj.com) Land values soared. States splurged on new programs. Then it all went bust, bringing down banks and state governments with them. This wasn't America in 2011, it was America in 1841, when a now-forgotten depression pushed eight states and a desolate territory called Florida into the unthinkable: They defaulted on debts. This was an incredible step, even then. Fledgling U.S. states like Indiana and Illinois were still building credibility on global debt markets. They rightly feared "a prejudice so deep and wide" that they could never sell bonds in Europe again, said one banker. Their paranoia would be familiar to the shell-shocked California and Illinois of 2011. Each is beset by budget problems so great that some have begun debating default or bankruptcy. These worriers may draw comfort from the state crises that raged and retreated long ago. Most of the states eventually paid off their debts, and changed their laws to safeguard their finances, helping make U.S. states some of the world's best credits. Congress, meanwhile, helped set a precedent that still holds: In 1843, it rejected an elaborate plan for a bailout, with one critic later observing it would "cause recklessness and extravagance" among the states. Surely, someone will dust off those ideas in 2011. Yet for all their similarities, there was an ominous difference from now: Leaders and citizens of the 1840s were more willing to accept new taxes to pay for the infrastructure and to defend, in the earnest words of the time, their "moral duty" of meeting debts. In Indiana and Ohio, property taxes went up eightfold in the early 1840s. New York, Pennsylvania, Maryland, and Massachusetts all installed state property taxes, the first in 40 years for Pennsylvania.

Seattle's Bellevue Towers developer turns project over to lenders - (seattletimes.nwsource.com) The developer of Bellevue Towers, the region's biggest condo project ever, has turned over the development to lenders to avoid foreclosure. Portland-based Gerding Edlen transferred the downtown Bellevue project's unsold units on Thursday to an entity led by investment bank Morgan Stanley, according to county records. The new owners announced price cuts to help spur sales at the 539-unit development, where just 118 sales have closed since the two towers were completed nearly two years ago. "This is an acknowledgment that prices today aren't what they were," Ira Glasser, an adviser to Morgan Stanley, said Monday. At 43 and 42 stories, the project's two towers are the Eastside's tallest buildings. Gerding Edlen built them in large part with $275 million borrowed in January 2007 from a consortium of lenders led by Morgan Stanley. That loan matured a year ago, Glasser said, and the lenders have been paying the project's bills since then. The ownership transition was "an amicable and consensual agreement" to put the towers on new financial footing with minimal disruption, he added. The Bellevue Towers takeover is the latest sign of how far the high-rise, high-end condo market has fallen since the real-estate bubble popped.

B of A Settlement, Another Taxpayer Rip-off - (www.usawatchdog.com) In case you have not heard, Fannie and Freddie (also known as Government-Sponsored Enterprises or GSE’s) settled a big lawsuit with Bank of America Monday. The case was settled for cents on the dollar, even though the GSE’s had had a strong case to force B of A to buy back billions in sour mortgage-backed securities (MBS.) I wrote about some of this in a December 1 post called “Foreclosure Bombshell.” The post was about some of the legal trouble Bank of America was having with the mortgage debacle and the possibility of the banks being forced to buy back billions in sour MBS. Here’s part of what I wrote back then, “Mortgage-backed securities have to meet what is called “contractual representation and warranties.” That basically means the MBS are required to be free of fraud and be exactly what the seller says they are. Do you think mortgage-backed securities are free of fraud? Do you think these securities are the triple-A rated risk free investment the big Wall Street banks claim?—NO WAY! The banks are going to be forced to buy back all the toxic mortgage junk they sold.

Ratings Agencies Struggle With Mortgage Bonds - (www.dealbook.nytimes.com) Two weeks ago, Standard & Poor’s put out a news release warning that it was poised to lower its ratings on almost 1,200 complex mortgage securities. So what? Isn’t that dog-bites-man at this point? Well, two-thirds of these mortgage bonds were rated only last year, long after the financial crisis. And S.&P. was supposed to have taken the distress of the housing crash and credit crisis into account when it assessed them. But in December, the ratings agency acknowledged that it had made methodological mistakes, including not understanding who would get interest payments when. As everyone knows by now, the credit ratings agencies played an enormous role in creating the conditions that led to the financial crisis. Their willingness to slap triple-A ratings on all manner of Wall Street-engineered mortgage rot was enormously lucrative for the raters, but a disaster for the global economy. Unfortunately, as the episode in December shows, the credit ratings agencies are still struggling to get it right.

OTHER STORIES:

San Diego Economy Still Staggering - (www.sandiegoreader.com)

Chicago's real estate picture not looking good - (www.suntimes.com)

Low price with higher interest better than high price with low interest rate - (www.doctorhousingbubble.com)

Mortgage Database At The Center Of Foreclosure Storm - (www.totalmortgage.com)

Which country has successfully borrowed its way out of a debt crisis? - (theautomaticearth.blogspot.com)

Key players in the debate on housing finance - (www.reuters.com)

Be afraid: a new 'Ice Age' is coming - (www.smh.com.au)

Savers lose billions transferred to debtors via low interest rates - (ukhousebubble.blogspot.com)

5%-10% house-price dip eyed for '11, especially at high end - (lansner.ocregister.com)

Manhattan Housing Prices Dip - (online.wsj.com)

Nightmare Scenarios To Watch For When Buying A House In 2011 - (www.businessinsider.com)

2011: The Year of Foreclosure? - (www.totalmortgage.com)

Housing insurance rates to increase in 2011 - (www.starnewsonline.com)

Excellent cartoon explanation of The American Dream - (www.youtube.com)

Tuesday January 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Christie Hopes to Lure Businesses Fleeing Illinois Taxes – (www.nytimes.com) Watch out, Illinois: New Jersey wants your businesses. It is a time-honored tradition for mayors and governors of neighboring cities and states to compete for large corporations with tax breaks and other incentives. And so it was no surprise that the steep new tax increases approved this week by the governor of Illinois inspired the kind of trash talking heard more often from athletes than from state chief executives. “Escape to Wisconsin,” chortled Scott Walker, the state’s Republican governor. Mitch Daniels, the Republican who runs Indiana, compared Illinois to the Simpsons — “you know, the dysfunctional family down the block?” But New Jersey? Trenton is about 900 miles from Springfield, Ill. Jersey City is a 13-hour drive from Chicago. None of that deterred Gov. Chris Christie, a New Jersey Republican who spent much of last fall stumping around the country, from speaking up even before Gov. Patrick J. Quinn of Illinois, a Democrat, had signed the legislation. “I’m going to Illinois,” Mr. Christie said in an interview on Wednesday. “I mean soon. I’m going to Illinois, personally, and going to start talking to businesses in Illinois and get them to come to New Jersey.”

GM and Chrysler, owned by the government, lobby the government - (www.washingtonpost.com) General Motors and Chrysler, the bailed-out automakers still partially owned by the government, have joined an industry coalition that this week lobbied against proposed federal rules on fuel efficiency. The attempt to push back against regulations pursued by environmental groups follows the automakers' efforts last year in which they opposed measures in an auto safety bill, which had been supported by the Obama administration. The notion of federally owned companies lobbying the government - at times on the opposite side of the architects of their bailout - has drawn repeated criticisms from environmental organizations, safety advocates and watchdog groups. They say the government should have used its influence to block the companies from interfering with legislation that could improve the public welfare, such as environmental controls and safety enhancements. "Even when the government owned 61 percent of General Motors, the company was arguing against government proposals on auto safety and pollution controls," said consumer advocate Ralph Nader. "As the owner of the world's second largest auto company, the government could really have made the company a model."

New Hit to Strapped States - (online.wsj.com) With the market for municipal bonds tumbling, cities, hospitals, schools and other public borrowers are scrambling to refinance tens of billions of dollars of debt this year, another sign that the once-safe market is under duress. The muni bond market was hit with the latest wave of bad news Thursday, prompting a selloff that sent the market to its lowest level since the financial crisis. A New Jersey agency was forced to cut the size of a bond issue by about 40% because of mediocre demand, and pay a higher rate than expected. And mutual fund giant Vanguard Group shelved plans for three new muni bond funds, citing market turmoil. "We believe that this delay is prudent given the high level of volatility in the municipal bond market," said Rebecca Katz, spokeswoman for the nation's biggest fund company. The market has fallen every day this week, and investors have been net sellers of their holdings in municipal-bond mutual funds for nine straight weeks, according to fund tracker Lipper FMI. Yields on 30-year triple-A rated general obligation bonds shot higher to 5.01% on Thursday, reflecting a spike in perceived risk, according to Thomson Reuters Municipal Market Data. The last time those bonds yielded 5% was Jan. 30, 2009, during the financial crisis. Amid the selloff, public borrowers such as states and utilities face a wave of refinancing stemming from deals cut mostly during the crisis. The deals involved letters of credit from banks that were designed to keep financing costs down for government entities in need of cash.

Uncle Sam Wants His AAA Rating - (www.nytimes.com) Is Wall Street listening to the Tea Party? Two major credit ratings agencies warned Thursday that the United States might tarnish its triple-A credit rating if its national debt kept growing. It was not the first time the agencies, Standard & Poor’s and Moody’s Investors Service, warned that the nation’s gilt-edged rating might fall into jeopardy. But the two statements, made within hours of each other, were seized on by deficit hawks as further evidence that the government must reduce spending and debt to avert disaster. That is just what many Tea Party supporters insist. But many economists say the reckoning, if it comes, is still years or even decades away. The bond market shrugged at Thursday’s news. Indeed, even some experts who want to see the deficit reduced said now is not the time to cut federal spending drastically, given the weakness in the economy and high unemployment. But others see the mounting national debt as a potential danger. What once seemed unthinkable — that one day the United States government would no longer be accorded the highest credit rating — is now not only thinkable, but increasingly probable.

Pack Mentality Grips Hedge Funds - (online.wsj.com) Hedge funds scooped up shares of credit-card companies like big spenders on a shopping spree, making Visa Inc. and MasterCard Inc. among the most popular hedge-fund trades. The bets paid off for a while. But when bad news hit in May, many funds—including 10 hedge funds run by investors connected to the well-known Tiger Management LLC—rushed for the exits, together. Shares plunged. Hedge funds are crowding into more of the same trades these days, amplifying market swings during crises and unnerving investors. Such trading has stoked market jitters in recent months and helped to diminish the impact of corporate fundamentals on stock-market movements. Droves of small investors have reacted by pulling money from the market, questioning its stability and whether fast-moving traders are distorting prices. The pack behavior undermines the image of hedge-fund chiefs as savvy money managers who sniff out investment opportunities that others don't see—thereby justifying the hefty fees they charge clients. It also suggests that hedge funds are having a harder time coming up with money-making ideas in rocky markets.

OTHER STORIES:

Consumer Sentiment in U.S. Unexpectedly Declines - (www.bloomberg.com)

Consumer Prices in U.S. Rose 0.5% in December on Fuel - (www.bloomberg.com)

U.S. Retail Sales Climbed in December for Sixth Month- (www.bloomberg.com)

JPMorgan Net Rises 47% on Lower Credit Costs, Beats Estimates - (www.bloomberg.com)

SEC Probes Financial Firms on Possible Bribes to Sovereign Funds - (www.bloomberg.com)

Commodity Options Traders Make Record Bearish Wagers After Rise - (www.bloomberg.com)

China Policy May Reverse Global Flows, Levinson Says - (www.bloomberg.com)

Crude Falls for a Second Day on Signs U.S. Recovery Is Slowing - (www.bloomberg.com)

Rice Stockpiles in Vietnam Drop on Record Exports, Group Says - (www.bloomberg.com)

US ‘battle for acreage’ will shape key food markets - (www.ft.com)

Monday January 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

New Jersey Cuts Bond Sale After Christie’s Comments - (www.bloomberg.com) New Jersey Governor Chris Christie has learned that talking about state insolvency may have a cost. About 20 minutes after Christie, 48, told a town-hall meeting in Paramus today that health-care costs “will bankrupt” the state, the New Jersey Economic Development Authority cut its tax-exempt school-related bond offering by more than half to $712.3 million. “It doesn’t help to try and sell a $1 billion deal on the same day the governor is talking about the state going bankrupt due to health-care costs,” said Mike Pietronico, who oversees $360 million as chief executive officer of Miller Tabak Asset Management in New York. Michael Drewniak, a spokesman for Christie, said the bond-sale cut wasn't connected to the governor's comments. Health-care spending “will bankrupt” the state unless it requires workers to pay more for medical coverage, Christie said. New Jersey will spend $4.3 billion on health insurance this year, and that cost will rise 40 percent within four years, Christie, a first-term Republican, said at the town-hall meeting.

BUSTED: Unsealed Docs Show The Fed Was Fully Warned Of A Housing Crisis - (www.businessinsider.com) New minutes released today show Fed members were fully aware of the growing housing bubble in the U.S. in June of 2005. The materials include several presentations made on the subject of the emerging housing bubble in the U.S. economy. They have titles like "Is Housing Overvalued?" by Joshua Gallin and "Monetary Policy Implications of a House Price Bubble" by John C. Williams of the San Francisco Fed. In October of 2005, future Federal Reserve Chairman Ben Bernanke told Congress he didn't think we were in a housing bubble. Bernanke was not at the June 2005 meeting, having recently become Chairman of President George W. Bush's Council of Economic Advisers.

Vanguard Pulls Three Planned Muni-Bond Funds Amid ‘Volatility’ - (www.bloomberg.com) Vanguard Group Inc., the world’s largest mutual-fund company, withdrew a request filed last year with regulators to open three municipal-bond index funds amid concern that state finances may deteriorate. “We’ve deferred the launch for an indefinite period of time because we believe market volatility could impact the funds’ ability to track their benchmarks and deliver their objectives,” John Woerth, a spokesman for the Valley Forge, Pennsylvania-based company, said today in a telephone interview. Permission from the U.S. Securities and Exchange Commission for the offerings and associated exchange-traded funds to open was set to expire tomorrow, he said. Analyst Meredith Whitney said on CNBC yesterday that she expected accelerated withdrawals from the municipal-bond market as state finances deteriorate in the next six months. Last month Whitney, who correctly predicted Citigroup Inc.’s dividend cut in 2008, forecast 50 to 100 significant muni-bond defaults this year totaling “hundreds of billions” of dollars. Investors have pulled a net $22.7 billion from municipal- bond mutual funds in the past nine weeks, according to data from the Investment Company Institute in Washington.

Wisconsin’s Borrowing Costs Climb as Subsidy Ends: Muni Credit - (www.bloomberg.com) Wisconsin, whose 2011 tax revenue is forecast to increase 4.7 percent, is paying two-thirds more to borrow money this week than in an August sale of taxable Build America Bonds as it returns to the tax-exempt market. Wisconsin is selling $429 million in tax-free debt this week with yields of 3.75 percent on bonds maturing in May 2021, according to data compiled by Bloomberg. Last year, its sale of Build Americas included 10-year securities priced to yield 3.45 percent. Minus the 35 percent federal subsidy on interest costs, Wisconsin paid 2.24 percent, Bloomberg data show. The Build America Bonds program wasn’t extended by Congress and expired on Dec. 31. The subsidy was created under President Barack Obama’s economic-stimulus legislation as a means of driving down borrowing costs for localities and funneling money to job-creating construction projects. More than $187 billion of the bonds were sold.

SIMON JOHNSON: Bill Daley’s Appointment Proves "The Bankers Have Won" - (www.businessinsider.com) President Obama's new chief of staff, Bill Daley has been greeted with cheers and jeers - from both sides of the aisle - for his strong business and banking ties. To some, like Sen. Mitch McConnell, it's a positive sign the President has taken more pro-business stance. To Simon Johnson, author of 13 Bankers and the former IMF chief economist, it's a sign "the bankers have won completely." The fact that President Obama's top aide is the former Midwest chairman of JPMorgan Chase proves "the White House fails to understand that, at the heart of our economy, we have a huge time-bomb," according to Johnson. (See: Obama Shows His True Colors ... and They're PRO-Business (Still). Why is Daley's appointment so troubling to Johnson? "These banks again have unfettered access to the very top of the political decision making in the United States and, reflects the fact their status is completely undiminished, despite all the mistake they made and all the damage they did to the rest of the economy," he tells Henry in this clip.

OTHER STORIES:

Treasury Two-to-30-Year Yield Spread at Record Before Bond Sale - (www.bloomberg.com)

Hedge Funds Lever Up to Pre-Lehman Level as Banks Play Safe - (www.cnbc.com)

China, Korea moves underscore rising food prices dilemma - (www.reuters.com)

Gold Shows Central Bank Losing Inflation Battle: India Credit - (www.bloomberg.com)

Chile Economists Forecast Rate Increase as Inflation Bets Climb - (www.bloomberg.com)

India Must ‘Copy’ China Policy to Control Food Prices - (www.bloomberg.com)

Prices Soar on Crop Woes - (www.online.wsj.com)

S&P, Moody's Warn On U.S. Credit Rating - (www.online.wsj.com)

Sunday January 23 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Illinois Lawmakers Boost Income Tax 67 Percent to Help Fill Gap - (www.bloomberg.com) Illinois lawmakers in the waning hours of their term passed a 67 percent income-tax increase, the largest in the state’s history, to help close a $13 billion budget deficit. The boost in the tax rate to 5 percent from 3 percent was approved by both chambers. Governor Pat Quinn, a Democrat, has supported an increase. A new Legislature will be sworn in today. The increase, intended to last through 2014, is aimed at fixing Illinois’s worst fiscal crisis, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions. The deficit amounts to about half of planned general-fund spending for this fiscal year, which ends in June. “The wolf is at the door and we have some very difficult decisions to make,” said Representative Gregory Harris, a Democrat from Chicago. Democrats in the House of Representatives passed the measure by the minimum necessary vote, 60-57, with no Republican support.

Businesses don't like increase , but neighboring states do - (www.chicagotribune.com) Illinois' current 4.8 percent corporate tax rate would go to 7 percent until 2015. While the size of the state corporate income tax hike ultimately was whittled down a bit, Illinois businesses still feel gored, and neighboring states began circling immediately to woo relocations. The 11th-hour modification "is a joke," said Ty Fahner, president of the Civic Committee of the Commercial Club ofChicago. "It's like saying I'm going to hit you hard, and now I'm going to hit you a little. I believe it's disingenuous and it puts Illinois in a terrible spot in terms of creating or keeping jobs here." The outcry by business leaders, and even Chicago Mayor Richard Daley, was not lost on neighboring states. "We won't be the only ones coming to poach companies out of your state, and I guess we'll be well-received by frustrated firms there," said Indiana Commerce Secretary Mitch Roob. Indiana Gov. Mitch Daniels joked that having Illinois as a neighbor "is like living next door to 'The Simpsons,' you know, the dysfunctional family down the block" during a chat this week on the Don Wade & Roma morning show on WLS-AM 890.

Strained States Turning to Laws to Curb Labor Unions - (www.nytimes.com) Faced with growing budget deficits and restive taxpayers, elected officials from Maine to Alabama, Ohio to Arizona, are pushing new legislation to limit the power of labor unions, particularly those representing government workers, in collective bargaining and politics. On Wednesday, for example, New York’s new Democratic governor, Andrew M. Cuomo, is expected to call for a one-year salary freeze for state workers, a move that would save $200 million to $400 million and challenge labor’s traditional clout in Albany. But in some cases — mostly in states with Republican governors and Republican statehouse majorities — officials are seeking more far-reaching, structural changes that would weaken the bargaining power and political influence of unions, including private sector ones. For example, Republican lawmakers in Indiana, Maine, Missouri and seven other states plan to introduce legislation that would bar private sector unions from forcing workers they represent to pay dues or fees, reducing the flow of funds into union treasuries. In Ohio, the new Republican governor, following the precedent of many other states, wants to ban strikes by public school teachers. Some new governors, most notably Scott Walker of Wisconsin, are even threatening to take away government workers’ right to form unions and bargain contracts. “We can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots,” Mr. Walker, a Republican, said in a speech. “The bottom line is that we are going to look at every legal means we have to try to put that balance more on the side of taxpayers.”

Germany and France want Portugal to accept aid - (news.yahoo.com) Citing Der Spiegel. Germany and France want Portugal to accept an international bailout as soon as possible in order to prevent its debt crisis spreading to other countries, German magazine Der Spiegel reported on Saturday. Without citing its sources, the magazine said government experts from both European heavyweights were concerned Lisbon will soon not be able to finance its debt at reasonable rates, after its borrowing costs rose at the end of last year.
Berlin and Paris also want euro zone countries to publicly commit to do whatever it takes to protect the bloc's single currency, including topping up a 750 billion euro ($968 billion) rescue fund if necessary.

For B. of A., mortgage ‘put backs’ aren’t over - (www.marketwatch.com) Bank of America Corp. unveiled a $2.8 billion deal with Freddie Mac and Fannie Mae on Monday that settles legal spats over losses on hundreds of billions of dollars in home loans that the lender sold to the government-owned mortgage giants. However, the agreement only deals with part of Bank of America’s exposure to mortgage repurchase, or “put back,” requests, according to analysts. The bank said it paid Freddie Mac $1.28 billion in cash on Dec. 31 to extinguish “all outstanding and potential mortgage repurchase and make-whole claims” from alleged breaches of representations and warranties on home loans sold by Countrywide Financial to Freddie through 2008. This covers 787,000 loans with a total unpaid principal balance of $127 billion, the bank noted. Bank of America also said Monday that it agreed to pay Fannie Mae $1.52 billion in cash. But this payment only deals with 12,045 Countrywide loans with about $2.7 billion of unpaid principal balance. It also resolves specific outstanding repurchase or make-whole claims, or extends the cure period for missing documentation-related claims, on another 5,760 Countrywide loans with roughly $1.3 billion of unpaid principal balance, the company noted. “We have largely addressed the remaining GSE repurchase exposure for legacy Countrywide and the other Bank of America entities,” Bank of America Chief Financial Officer Charles Noski said during a conference call with analysts on Monday.

OTHER STORIES:

Import Prices in U.S. Rise 1.1%, Led by Fuels, Food - (www.bloomberg.com)

Rising Chinese Inflation to Show Up in U.S. Imports - (www.nytimes.com)

Fed’s Bullard Says Too Soon to Reduce QE on Improved Outlook - (www.bloomberg.com)

Mortgage applications increased last week: MBA - (www.reuters.com)

Housing’s Anemic Rebound to Give Little Boost to U.S. Economy - (www.bloomberg.com)

Fed Officials Signal Intent to Back Bond Buys . - (www.online.wsj.com)

Apple, Verizon Took Years to Clear IPhone Differences - (www.bloomberg.com)

Goldman Bankers, Ascendant Again - (www.online.wsj.com)

Saturday January 22 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Downturn's Ugly Trademark: Steep, Lasting Drop in Wages - (www.online.wsj.com) In California, former auto worker Maria Gregg was out of work five months last year before landing a new job—at a nearly 20% pay cut. In Massachusetts, Kevin Cronan, who lost his $150,000-a-year job as a money manager in early 2009, is now frothing cappuccinos at a Starbucks for $8.85 an hour. In Wisconsin, Dale Szabo, a former manufacturing manager with two master's degrees, has been searching years for a job comparable to the one he lost in 2003. He's now a school janitor. They are among the lucky. There are 14.5 million people on the unemployment rolls, including 6.4 million who have been jobless for more than six months. But the decline in their fortunes points to a signature outcome of the long downturn in the labor market. Even at times of high unemployment in the past, wages have been very slow to fall; economists describe them as "sticky." To an extent rarely seen in recessions since the Great Depression, wages for a swath of the labor force this time have taken a sharp and swift fall.

Foreigners Shun Europe’s Bonds, and Debt Piles Up - (www.nytimes.com) Greece. Ireland. And now, it seems, Portugal. While the circumstances that have driven these debt-ridden members ofthe euro zone to the brink differ, they share one common characteristic: all three countries aggressively tapped their domestic banking systems for more debt long after they had been shut out of international bond markets. With its 10-year debt trading near the record high of 7 percent reached last week, Portugal will try on Wednesday to sustain what many have come to see as nothing more than a form of bond market charades. It will try to raise up to 1.25 billion euros ($1.62 billion) in long-term financing — debt that is expected to come largely from the country’s already depleted banking system.

Brown Makes Universities, Poor Californians Bear Biggest Cuts - (www.bloomberg.com) The world’s biggest banks are seeking to revive global efforts to create a resolution mechanism to deal with failing financial giants in a bid to stave off higher capital charges and other options that they say could damage their bottom lines. The Institute of International Finance, a leading industry group, is lobbying to put the issue on the agenda when leaders of the G20 leading economies next gather. On Wednesday, IIF representatives are meeting French officials, who will host this year’s gathering in November, to press their case. The big banks are acting at a time when the US and European Union are independently developing conflicting plans to deal with large bank failures, and as the Financial Stability Board, a global group of central bankers and regulators, develops its own recommendations for making supersized banks safer. The banks want a higher level group that would have the power to address both legal and regulatory issues on a global scale.

Risk of bust after boom haunts Latin America - (www.ft.com) Nobody has described the mixed blessings of commodity wealth more pithily than Juan Pablo Pérez Alfonzo, Venezuela’s oil minister in the 1960s and one of the founders of Opec. “Oil will bring us ruin,” he said. “Oil is the devil’s excrement.” Half a century later, Latin America is finding new truth in his words. Oil can become a commodity curse. But so too the other raw materials so abundant in the region, from sugar and copper to iron ore and soyabeans. Ostensibly, the continent is thriving. Some even talk of the coming “Latin American decade”, fuelled by an Asian-driven commodity boom that has produced a thirteenfold increase in trade with China since 2000. But there is a Janus face to this abundance: alongside soaring commodities prices have come extreme economic dislocations, especially in currencies.

Portuguese Bond Sale May Make Bailout ‘Inevitable’: Euro Credit - (www.bloomberg.com) Portuguese yields may be rising to levels that force the nation to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund to avert default. The nation plans a 10-year sale tomorrow, the first bond auction by any of the euro region’s most indebted countries this year. Its existing 10-year debt has yielded more than 7 percent in 10 of the past 62 days, according to Bloomberg data. Greece needed a rescue within 17 days of its 10-year yield breaching 7 percent on April 6, while Ireland lasted less than a month after it cracked that level in October. “Even if we see a successful auction, it doesn’t mean anything, because at rates above 7 percent it’s not sustainable,” said Ioannis Sokos, a strategist at BNP Paribas SA in London. “It is inevitable that Portugal has to turn to the EU and IMF if they keep borrowing at these levels.”

OTHER STORIES:

Judges Berate Bank Lawyers in Foreclosures - (www.cnbc.com)

Debate rages over muni bond defaults - (www.ft.com)

NY Office Market Pulls Further Ahead of Rest of US - (www.cnbc.com)

China’s Biggest Lenders Said to Expect About 14% Loan Growth - (www.bloomberg.com)

Big banks seek plan for failures - (www.ft.com)

Longest Bonds Sustain ‘Edge of a Cliff’ Budget: Japan Credit - (www.bloomberg.com)

Socrates Says Portugal Doesn’t Need Aid, Deficit Lower - (www.bloomberg.com)

Bank of China Allows US Trading of Yuan: Report - (www.cnbc.com)

Housing Market Slips Into Depression Territory - (www.cnbc.com)

Friday January 21 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

EU plans for bondholder haircuts unsettles debt markets - (www.telegraph.co.uk) Michel Barnier, the single market commissioner, will publish a “consultation paper” outlining ways to shield taxpayers from banking crises. It is the first stage of what will almost certainly become a binding law. “We are pursuing the idea of a debt write-down or conversion to help stabilise a failing bank and reduce the need for public funds,” said an EU source. Fears that this could evolve into a crusade against bondholders set off fresh jitters on EMU debt markets yesterday, pushing yields on 10-year Greek bonds to a record 12.59pc. Portugal managed to sell €500m (£425m) of debt at a crucial auction but had to pay 3.67pc on six-month bills, double the rate in September. “It is an unsustainable dynamic,” said Lena Komileva from Tullett Prebon. Credit Default Swaps on Irish bonds jumped 16 points to 620 after Switzerland’s central bank said it would no longer accept Irish debt as collateral. The Commission paper refers only to bank debt, unlike Germany’s proposals for sovereign “haircuts”. Mr Barnier hopes to restrict burden-sharing to future debt only, fearing that a catch-all approach risks setting off a fresh EMU crisis.

The Crisis That Isn’t Going Away - (www.nytimes.com) Europe’s sovereign debt crisis is back — if it ever went away. Less than a month after bailing out Ireland, and after a holiday lull in the markets that may have looked mistakenly like calming, the European Union is again struggling to persuade investors that it has the cash and the will to address the root cause of its travails: a growing debt burden that is strangling governments and their banks. On Friday, the yield on Portuguese 10-year bonds hit a recent high of 7.1 percent, the cost of insuring the debt of banks in Italy and Spain rose sharply, and the euro hit a three-month low against the dollar. Driving the recent market weakness was a report by the European Commission that proposed that holders of senior bank debt be required to take a loss when a bank fails. European authorities took pains to say that the rules would not apply to the more than 1 trillion euros ($1.3 trillion) in current bank and sovereign debt in the 17-member euro zone. But investors were not biting. They chose instead to interpret the report as a signal that they would be forced to take losses on their obligations.

Government Uses Our Tax Dollars To Push Mortgage Debt - (www.patrick.net) Why should our tax dollars be used against our own citizens, trying to trap them in mortgage debt? Check out this propaganda page from the department of Housing and Urban Development (HUD) at http://www.hud.gov/offices/hsg/sfh/buying/buyhm.cfm. 100 Questions & Answers About Buying A New Home:

Dear Future Homeowner: They start out assuming everyone should buy a house. That’s just wrong, because millions of people save money every month by renting the same thing more cheaply. They should be showing a rent-vs-buy calculator, but it’s not there because they just want you to buy no matter how bad it is for you. A home is a financial asset and more: it’s a place to live and raise children; it’s a plan for the future; it’s an investment in your community. That’s why we at the U.S. Department of Housing and Urban Development want all Americans to have an opportunity to enjoy the benefits of owning a home. And we are especially proud of our work to help first-time homebuyers: thanks to our special programs, more than 81% of FHA-insured loans went to first-time homebuyers during 2000. It’s also a death trap for your finances, but they don’t mention that. They talk about benefits but not the dangers. Nor do they mention that those FHA-insured loans had absolutely no benefit to buyers, because the extra lending simply caused prices to rise, forcing buyers to spend more. That extra debt did benefit banks though. Funny how that benefit was not mentioned…

Federal Reserve Really Purchasing Over 60% of 2011's Fiscal Deficit? - (gonzalolira.blogspot.com) The other day, in my post “The Lull Before the Storm”, I mentioned that for fiscal year 2011, the Federal Reserve would be purchasing over 60% of the Federal government deficit. In other words, the Fed would be dancing the Monetization Waltz, just like Latin American countries used to back in the 1970’s: Proof positive that America is indeed a banana republic—only with nukes. A lot of people didn’t believe me—or wanted me to check my figures. Or wanted to know if I was having an acid flashback from those aformentioned 1970’s. A lot of people couldn’t believe it.

US will soon be more unequal than Brazil - (www.opinionator.blogs.nytimes.com) The city of Rio de Janeiro is infamous for the fact that one can look out from a precarious shack on a hill in a miserable favela and see practically into the window of a luxury high-rise condominium. Parts of Brazil look like southern California. Parts of it look like Haiti. Many countries display great wealth side by side with great poverty. But until recently, Brazil was the most unequal country in the world. Today, however, Brazil’s level of economic inequality is dropping at a faster rate than that of almost any other country. Between 2003 and 2009, the income of poor Brazilians has grown seven times as much as the income of rich Brazilians. Poverty has fallen during that time from 22 percent of the population to 7 percent. Contrast this with the United States, where from 1980 to 2005, more than four-fifths of the increase in Americans’ income went to the top 1 percent of earners. (see this great series in Slate by Timothy Noah on American inequality) Productivity among low and middle-income American workers increased, but their incomes did not. If current trends continue, the United States may soon be more unequal than Brazil.

OTHER STORIES:

Gasoline prices' rise evokes 2008 - (www.latimes.com)

Primary dealers raise Treasury yield forecasts: Reuters poll - (www.reuters.com)

Portugal says not under pressure to take bailout - (www.reuters.com)

BOJ’s Nishimura Urges Avoidance of Debt Monetization - (www.bloomberg.com)

Indian Adviser Sees Rate Increase as Food Prices Gain - (www.bloomberg.com)

China GDP grew about 10 percent in 2010 - Vice Premier - (www.reuters.com)

The housing market does not need "saving" - (www.jewishworldreview.com)

Manhattanites Move to Luxury Rentals as Cost Falls Versus Buying - (www.bloomberg.com)

Manhattan Apartment Sales Fall 7.2% After Tax-Credit Boost Ends - (www.bloomberg.com)

The Truth about the US Housing Market - (www.unconventionaleconomist.com)

Help get the corporations out of government - (www.movetoamend.org)

The Senate filibuster: Time for a change - (www.latimes.com)

Federal Reserve is robbing the public in open daylight - (www.mybudget360.com)

Overheating East to falter before the bankrupt West recovers - (www.telegraph.co.uk)

In Investing, Its When You Start and When You Finish - (www.nytimes.com)