Tuesday April 26 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

New York State Delays $900 Million World Trade Offer, Citing `Conditions' - (www.bloomberg.com) New York state’s Liberty Development Corp. delayed the sale of $900 million in tax-exempt bonds to finance the 4 World Trade Center project, Goldman Sachs Group Inc. said. The issue was postponed “due to market considerations,” according to a statement released today. A separate $375 million floating-rate offering is also being delayed.

Spain on debt tightrope - (www.ft.com) The evidence of previous eurozone sovereign debt crises suggests investors should now be nervously shunning Spanish government bonds after Portugal’s request for a bail-out. Yet exactly the opposite has happened. When Greece and Ireland needed rescuing last year, yields on Spanish debt rose sharply in the primary and secondary markets. As Ireland struggled through the first stage of its financial nightmare in November, the interest rate spread between Spanish and benchmark German 10-year bonds rose to a euro-era record of just less than 300 basis points, reflecting the higher perceived risk of Spanish paper and the effects of “contagion” across the eurozone. But as the crisis has spread this year to Portugal, a neighbouring economy with close financial and commercial ties to Spain, investors have been so relaxed about the possible impact that the spread between German and Spanish bonds has even narrowed, to about 175bp on Monday. The share prices of the country’s banks have bounced from early-January lows.

Dennis Gartman: Suddenly this looks like an ominous top - (www.businessinsider.com) Suddenly, the market is looking ugly, notes Dennis Gartman in his morning note: THE S&P FUTURE: An Ominous Top?: It’s been a bull market of incredible magnitude for several months, but now the market is showing signs of internal weakness as the RSI makes several lower highs and as the index itself seems to have stalled well below its previous top. Be careful if bullish; be very, very careful.

IMF, EU Officials Meet in Lisbon to Prepare Portuguese Bailout - (www.bloomberg.com) International Monetary Fund, European Commission and European Central Bank officials will be in Lisbon today as they start preparing an estimated 80 billion- euro ($116 billion) aid program for Portugal, the third euro- region nation to request a bailout in a year. The European Union aims to reach an agreement on the aid package on May 16, three weeks before the country’s June 5 early election, which was prompted by the resignation of Prime Minister Jose Socrates after parliament rejected his deficit- cutting plan. Portugal’s bid for emergency aid last week opened what European officials say will be the final chapter in the debt crisis that erupted in Greece last year, spread to Ireland and triggered speculation that the 17-nation euro area might not survive in its current form.

JPMorgan, Bank of America Earnings May Show Weaker Revenue as Loans Stall - (www.bloomberg.com) U.S. banks such as JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) may report weak revenue for the first quarter after lending by the industry dropped in almost every category. Bank loans and leases fell $87.4 billion to $6.97 trillion from the end of 2010 through March 30, or 1.3 percent, according to Federal Reserve data. Deposits at U.S. banks rose the same percentage to $7.97 trillion, showing households and businesses are still hoarding cash instead of borrowing, analysts said. “While loan growth tends to be seasonally weak in the first quarter, this quarter is tracking worse than seasonality would suggest,” Barclays Capital Inc. analysts led by Jason Goldbergwrote in an April 8 report. “We fear companies have been disappointed.”

Is A "Grand Bargain" Brewing? - (www.businssinsider.com) Ever since the collapse of the financial system in 2008, and the subsequent ballooning of federal debt, there has been talk in elite policy circles about a "grand bargain" to "fix" America's terrifying balance sheet. Specifically, the "grand bargain" would see reduced government spending on discretionary items, health and pensions (the Democratic "give" on the deal) in exchange for reduced Pentagon spending and higher taxes (the Republican "give" on the deal). For exactly as long, political analysts have declared the "grand bargain" DOA -- dead on arrival. These pronouncements of immediate death were backed up by lengthy essays on the dysfunction of Washington's political culture, the dysfunction of the major political parties, the hideous influence of lobbyists and "special interests," the dysfunction of the electorate's thought process with regards to benefits and their costs, etc, etc, etc. You've read that piece or something like it twenty times.

OTHER STORIES:

Asian Central Banks Want to Add Yuan to Reserves, Tetangco Says - (www.bloomberg.com)

Japan Sees Greater Hit to Economy as Its Nuclear Crisis Deepens - (www.bloomberg.com)

German March Inflation Unexpectedly Quickens to Two-Year High - (www.bloomberg.com)

German Investor Confidence Fell More Than Forecast in April - (www.bloomberg.com)

Japan Rice Buying May Outstrip Supply on Hoarding, Marubeni's Shibata Says - (www.bloomberg.com)

Japan May Raise Nuclear Accident Rating as Radiation Increases - (www.bloomberg.com)

U.S. Import Prices Increase More Than Forecast on Higher Food, Fuel Costs - (www.bloomberg.com)

U.S. Trade Deficit Narrowed in February as Imports Decrease - (www.bloomberg.com)

Budget Cuts Raise Doubt on Course of Recovery - (www.bloomberg.com)

Gas Prices Rise, and Economists Seek Tipping Point - (www.nytimes.com)

Fed Plays Down Inflation - (online.wsj.com)

Spending Deal Faces Rough Ride in House - (online.wsj.com)

Price Rises Sap Global Recovery, IMF Report Says - (online.wsj.com)

Monday April 25 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Forbes: San Francisco's Economic Outlook among the Worst - (www.baycitizen.org) Forbes is out with a new list of the top "15 cities where the economies are getting worse." Number six: San Francisco.: (By this Forbes means the government-defined San Francisco metropolitan area, which includes Oakland and Fremont but not San Jose). To make its call, Forbes used data provided by Moody's and the government, including the unemployment rate, the percentage of mortgages that are 90 days delinquent, migration and job projections. With an aenemic job growth projection of 0.34 percent and a net population loss of 3,030 expected this year, San Francisco appeared to be slightly better off than Bakersfield and slightly worse than Sacramento. And if that makes it seem like a lot of California cities are among the worst, we're just getting started. Riverside was in for the worst economic news in the country, Forbes said, followed by Stockton, which was named the most miserable city for the second time in three years. Los Angeles was number four. "All of these cities have double-digit unemployment rates and paltry job growth projections. All except LA have housing markets in which prices continue to decline or remain stagnant," Forbes reported.

Federal Reserve lent Huge Sums to Foreign Banks - (www.bloomberg.com) U.S. Federal Reserve Chairman Ben S. Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya. Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s “discount window” lending program, according to Fed documents released yesterday in response to a Freedom of Information Act request. Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion. The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record. The disclosures may stoke a reexamination of the risks posed to U.S. taxpayers by the central bank’s role in global financial markets. “The caricature of the Fed is that it was shoveling money to big New York banks and a bunch of foreigners, and that is not conducive to its long-run reputation,” said Vincent Reinhart, the Fed’s director of monetary affairs from 2001 to 2007.

Mortgage paperwork mess: the next housing shock? - (www.bloomberg.com) Who really owns your mortgage? Scott Pelley explains a bizarre aftershock of the U.S. financial collapse: An epidemic of forged and missing mortgage documents. It's bizarre but, it turns out, Wall Street cut corners when it created those mortgage-backed investments that triggered the financial collapse. Now that banks want to evict people, they're unwinding these exotic investments to find, that often, the legal documents behind the mortgages aren't there. Caught in a jam of their own making, some companies appear to be resorting to forgery and phony paperwork to throw people - down on their luck - out of their homes. In the 1930s we had breadlines; venture out before dawn in America today and you'll find mortgage lines. This past January in Los Angeles, 37,000 homeowners facing foreclosure showed up to an event to beg their bank for lower payments on their mortgage. Some people even slept on the sidewalk to get in line. So many in the country are desperate now that they have to meet in convention centers coast to coast.

Housing Will Remain a Government Program - (www.ibtimes.com) Recently, the Obama Administration seemed to flash a rare sign of laissez-faire thinking when it issued a report calling for the "winding down" of Fannie Mae and Freddie Mac, the two taxpayer-guaranteed institutions now responsible for backing at least 90% of the US mortgage market. In its press release, the Administration acknowledged that the private sector should be the "primary source of mortgage credit," and that their goal is to "bring private capital back to the mortgage market." While such a pro-market stance is welcome, astute observers should recognize the intentions as empty rhetoric. Unfortunately, government domination of the housing sector is already a fait accompli, and any serious attempt to remove artificial support will result in the kind of political pitfalls no politician wants to face. After decades of federal life support, the US housing market has become an invalid that is unable to fend for itself. When the absurd housing bubble finally popped in 2006, prices logically began to plummet back to earth. After national price declines of some 30%, a wave of "stimulus" dollars stopped the free-fall in mid-2009. But after less than one year of "recovery," it looks like prices are headed south again. The widely-followed Case-Shiller Home Price Index fell 3.1% in January; prices are now at their lowest level since the housing market made its first bottom in April 2009. Sales of existing homes were off nearly 10% in February, and new homes sales were at a record low. As the economy worsens, there can be little doubt that housing is headed for a double-dip. The government's "make housing affordable" approach to market intervention is the root of the entire problem. To a large extent, this intervention takes the form of mortgage purchases by government-sponsored Fannie and Freddie. Through these entities, nearly all new loans for homes are now destined for public ownership. When these entities buy a mortgage, they are doing so to help the borrower get the needed financing. They have only a casual interest in the investment quality of the transaction. This is very different motivation from the private investor, who is primarily concerned with getting paid back; and on that basis, wouldn't go anywhere near US housing.

New Rule: Banks Exempt from New Mortgage Rules - (Mish at globaleconomicanalysis.blogspot.com) Long awaited FDIC "skin-in-the-game" mortgage rules are out. Amusingly, banks are largely exempt from the new rules. On one hand it's hard to make this stuff up, on the other hand it seems laughably easy to believe. My ears say the proposal sounds like it came straight from "The Onion". Please consider FDIC’s plan for ‘skin-in-the-game’ loans: Federal regulators drafting tighter underwriting standards for mortgages are planning to exempt banks from a key rule if they sell loans to two seized mortgage-buying giants. The long-awaited proposal is due to be publicly released by the Federal Deposit Insurance Corp. Tuesday, and the proposal was obtained ahead of that by MarketWatch. At issue is a provision in the Dodd-Frank Act that requires banks to have “skin in the game” — namely, by retaining 5% of the risk of loans they package and sell. The goal is to eliminate what had been a problem underlying the financial crisis, where lenders packaged and sold subprime mortgages of dubious quality. But lawmakers who drafted the legislation also included a measure that would exempt certain high-standard mortgages from the risk-retention rule if their loans met certain high underwriting standards. According to the proposal obtained by MarketWatch, loans sold to mortgage-refinance giants Fannie Mae and Freddie Mac would carry no risk-retention requirement as long as the mortgage giants remained in government conservatorship. Fannie and Freddie were both taken under conservatorship in September 2008, at the height of the financial crisis.

OTHER STORIES:

Lower house prices good for the economy - (www.mybudget360.com)

In Fed Documents, a Bank Run We Knew So Little About - (www.nytimes.com)

Abolish the Federal Reserve - (www.abolishthefederalreserve.org)

Why the Housing Market is Three Times Worse Than You Think - (moneywatch.bnet.com)

The Difference Ten Years Makes - (www.deptofnumbers.com)

Aussie Banks Refuse To Acknowledge The Housing Bubble - (www.businessinsider.com)

China's Ghost Cities and Malls - (www.youtube.com)

The Causes of The Mess We're In - (www.gonzalolira.blogspot.com)

How Inflation Might Have Looked With House Prices Counted - (www.nytimes.com)

Cuba's Weird Economy - (www.permaculture.com.au)

Cheerleaders promoting Real Estate (2007) - (www.youtube.com)

Manhattan Apartment Prices Drop - (www.bloomberg.com)

Demographer sees surge of interest in renting rather than buying - (www.latimes.com)

Sunday April 24 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Iceland Rejects Icesave Debt Deal - (online.wsj.com) Icelandic voters appeared Sunday to have rejected a government-approved deal to repay Britain and the Netherlands $5 billion for their citizens' deposits in the failed online bank Icesave. Partial results of a national referendum suggested the "no" side had gained more than half the votes -- a reflection of enduring anger over the economic havoc wrought by Iceland's risk-taking bankers. Full results were not due until later Sunday. With partial results in from all six of Iceland's constituencies, the no side had almost 57 percent of the votes and the yes camp just over 43 percent. "This is of course a disappointing result," said Prime Minister Johanna Sigurdardottir. Icelanders overwhelmingly rejected a previous deal in a referendum last year. The government hoped a "yes" vote on an improved offer passed by parliament would finally resolve a dispute that has caused friction among the three countries and complicated Iceland's recovery from its economic collapse in 2008. The dispute has grown acrimonious, with Britain and The Netherlands threatening to block Iceland's bid to join the European Union unless it is resolved. "Taxpayers should not be responsible for paying the debts of a private institution," said Sigriur Andersen, a spokeswoman for the Advice group, which opposes the agreement. "I think that sends the wrong message onto the market, and sets a wrong precedent." Icelandic voters want no part of "Icesave". Even the name "IceSave" is preposterous. Iceland was save by the fact voters rejected "Icesave". Icelanders would have been debt-slaves for decades had they accepted the original terms.

A debt disaster behind a comic book budget squabble - (www.ft.com) The world had better start paying attention to the US government’s inability to govern. The prevailing mood over this has been strangely complacent. Six months of the fiscal year gone and only now a ramshackle budget? Government brought to the brink of shutdown over trifling disagreements? Absurd, one thinks, but this is Washington. Do as most Americans do, and regard the pantomime with blithe contempt. In the end, out of sheer exhaustion, the actors do their deals and it is business as usual. So it proved with the shutdown farce. Capitol Hill and its followers tracked the quarrel avidly. TV news showed clocks counting down the hours and minutes before “inessential services” would be suspended. Talks between Congress and the White House were covered as though a nuclear strike was imminent. With an hour to go, a deal that no one understood was done. The president stood before the cameras: “Americans of different beliefs came together again,” he said, as if expecting applause. Some laughed; most yawned.

Obama’s new approach to deficit reduction to include spending on entitlements - (www.washingtonpost.com) President Obama this week will lay out a new approach to reducing the nation’s soaring debt, proposing reductions in spending on entitlements such as Medicare and Medicaid and renewing his call for tax increases on the rich. In an effort to go on the offensive in the battle over government spending, Obama will look for cuts in “all corners of government,” senior adviser David Plouffe said on several Sunday talk shows. Although Obama’s health-care law is projected to curtail Medicare spending over time, “we have to do more,” Plouffe said Sunday, marking the first time the administration has made an explicit commitment to changes in entitlement programs for the purpose of deficit reduction. Contrasting the president’s approach with what Republican leaders have put forward, Plouffe said Obama will use a “scalpel” and not a “machete” as he seeks to preserve funding for education and other areas he considers crucial to the country’s long-term economic success.

Germany Warns on Greek Debt, Defying Efforts to Snuff Out Crisis - (www.bloomberg.com) Germany warned that deficit-scarred Greece might need more financial relief, reviving European debt concerns just as Portugal seeks an 80 billion-euro ($116 billion) aid package. German Finance Minister Wolfgang Schaeuble said it is unclear whether Greece, the root of the year-old debt crisis, will need another cut in its bailout rate or a further extension of repayment terms to return to fiscal health. “We, also the Greek government and the Greek colleague, can’t say for good today whether that’s enough,” Schaeuble told reporters after an April 9 meeting of European finance officials in Godollo, Hungary. “Whether that is enough and how this continues will have to be monitored closely.” Germany’s doubts conflicted with official assertions that Greece is on the right track, defying efforts to put an end to the crisis that threatened the survival of the euro, postwar Europe’s signature economic achievement. Last week’s increase in European Central Bank interest rates for the first time in almost three years throws a further cloud over weaker economies.

Former PBOC Adviser: US Treasury Bond Market Bolstered By 'Ponzi Scheme' - (online.wsj.com) A prominent Chinese economist and former adviser to the country's central bank Monday likened the market for U.S. Treasury bonds to a giant ponzi scheme, and argued China should float the yuan in part so it doesn't have to acquire so many Treasury assets. "China should have retreated from the U.S. government bond market a long time ago," Yu Yongding, currently an economist at a state think tank and formerly a member of the People's Bank of China monetary policy committee, wrote in an essay on the Caixin Media Group website. "The (U.S government) bond market was essentially bolstered by a ponzi scheme. The U.S. Federal Reserve's policy of quantitative easing has artificially kept the bonds at a high price. However, the market price of the bonds will eventually fall to a level determined by the fundamentals of the U.S economy," Yu added. China should allow a free floating yuan, he argued, intervening in the foreign exchange market only when necessary, as this would reduce the need to acquire U.S. dollar assets. An appreciation of the yuan would also help control money supply growth and inflation, he added. Yu has no official sway over policy, and his views could hardly be considered the consensus among policymakers. But his sharply worded essay is a window into the contentious debate, taking place largely behind closed doors, between various top officials and scholars in China on the country's exchange rate and foreign investment policies.

OTHER STORIES:

Yellen Says Commodity-Price Rise Doesn’t Warrant Policy Shift - (www.bloomberg.com)

Obama’s deficit-reduction plan to include cuts to Medicare-Medicaid, tax increases for wealthy - (www.washingtonpost.com)

IMF Cuts 2011 U.S. Growth Forecast on Oil, ‘Lackluster’ Pace of Job Gains - (www.bloomberg.com)

Japan May Raise Nuclear Accident Rating as Radiation Increases - (www.bloomberg.com)

Soros Warns Moral Hazard ‘Looms Larger’ as Volcker Says Big Banks Can Fail - (www.bloomberg.com)

Best Currency Forecasters See Dollar Weakness as QE2 End Looms - (www.bloomberg.com)

Stiglitz Calls for New Global Reserve Currency to Prevent Trade Imbalances - (www.bloomberg.com)

China Meat Binge Fuels Iowa-Sized Soybean Imports to Feed 689 Million Pigs - (www.bloomberg.com)

Saturday April 23 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Malls Face Surge in Vacancies - (online.wsj.com) Even as the economy picks up steam, many of the nation's malls and shopping centers are suffering a hangover due to changing consumer habits and the fallout from a massive building boom. Mall vacancies hit their highest level in at least 11 years in the first quarter, new figures from real-estate research company Reis Inc. showed. In the top 80 U.S. markets, the average vacancy rate was 9.1%, up from 8.7%. The outlook is especially bad for strip malls and other neighborhood shopping centers. Their vacancy rate is expected to top 11.1% later this year, up from 10.9%, Reis predicts. That would be the highest level since 1990. In 2005, the mall-vacancy rate hit a low of 5.1%. For strip centers the boom-time low vacancy rate was 6.7% that same year. Not all retail properties have suffered as much, especially on the high end. Large, publicly traded mall owners like Simon Property Group Inc. and Taubman Centers Inc., which tend to own top-tier properties, have trimmed their vacancy rates to 7% or lower and lifted their lease rates in the past year, buoying their stock.

Concerns Emerge as a Fed Rate Falls - (online.wsj.com) A sharp and unintentional decline in the Federal Reserve's key interest rate in recent days is raising eyebrows in financial markets and shining a light on the challenges the central bank could face steering monetary policy in the months ahead. The federal-funds rate, an overnight bank lending rate that affects borrowing costs throughout the economy, has fallen to 0.09% from 0.13% in the past week and from 0.2% in late December. While the numbers are small, such movement is unusual. The Fed's target for this rate is between zero and 0.25%, but the rate has generally held close to the high end of that range since the central bank set it in December 2008. This is the Fed's key policy rate and the Fed usually finds it easier to control its moves. When it wants to fend off inflation, it raises this rate to tighten policy. But a confluence of events, including the cash it has pumped into the financial system, threatens to make this task more complicated.

AIRPLANES, SPACESHIPS AND SUBMARINES: The Ridiculous, Sexy Life Of Richard Branson - (www.businessinsider.com) Billionaire bad boy Richard Branson has thrown his hat into the ocean exploration ring with the recent launch of Virgin Oceanic. This of course comes after his success with Virgin Galactic and Virgin Airlines. These are only his business ventures - what does he do in his free time? We took a look into the opulent life of this incredible entrepreneur.

Government Shutdown Threatens 800,000 U.S. Workers as Obama Seeks Solution - (www.bloomberg.com) In the event of a government shutdown, the National Institutes of Health won’t admit new patients, some taxpayers will wait longer for refunds and any furloughed civil servants with federally issued BlackBerrys must turn them off. A failure by Congress to extend the government’s spending authority, which expires tomorrow, would force the closure of national parks, monuments and museums. Federal agencies -- such as the National Labor Relations Board -- that don’t protect lives, property or national security also would be shuttered. As Democratic and Republican leaders in Congress seek agreement on a spending measure for the rest of the 2011 fiscal year, the Obama administration has warned of economic disruption from even a short shutdown. More than 800,000 “non-essential” federal workers -- out of a civilian workforce of 2.1 million -- would be furloughed until new spending legislation was passed. Agencies have drafted contingency plans for who would work and who wouldn’t.

Bears Give Up: Biggest Switch in Sentiment in 7 Years - (www.cnbc.com) The number of investors with a bearish outlook plunged by more than a third in one week according to a widely followed investor survey released Wednesday, the largest amount of bears to throw in the towel in this poll since 2003. The survey ending April 5 came as the indomitable Dow Jones Industrial Average touched its highest intraday point since the two-year bull market began. Middle East turmoil, an Irish bailout, fears of a municipal bond crisis, a nuclear disaster in Japan and an impending end to the Federal Reserve’s quantitative easing has failed to keep the market down this year. And the bears are simply done fighting the tape.

OTHER STORIES:

Rush to Use Crops as Fuel Raises Food Prices and Hunger Fears - (www.bloomberg.com)

Top M&A law firms at center of new insider case - (www.reuters.com)

Latin America’s Biggest Borrower Boosts Market Share to 65%: Mexico Credit - (www.bloomberg.com)

Trichet Heading for ‘Hefty’ Rate Increase Cycle, Investors Say - (www.bloomberg.com)

Traders uncertain as ‘loose’ era ends - (www.ft.com)

ECB Raises Key Interest Rate to 1.25% to Stem Faster Inflation - (www.bloomberg.com)

Portugal Seeks EU Bailout, Joining Greece, Ireland - (www.bloomberg.com)

Bank of England holds rates, leaves limelight to ECB - (www.reuters.com)

Office Vacancies in Tokyo, Osaka Rise to Record After Worst Japan Temblor - (www.bloomberg.com)

BOJ Offers Quake-Aid Loans, Cuts Japan Economy Assessment - (www.bloomberg.com)

Initial Jobless Claims in U.S. Fell 10,000 Last Week to 382,000 - (www.bloomberg.com)

Economic impact of shutdown: Damage would increase with duration - (www.washingtonpost.com)

World trade to grow 6.5 percent by volume in 2011: WTO - (www.reuters.com)

Friday April 22 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Fed’s Biggest Foreign-Bank Bailout Kept U.S. Municipal Financing on Track - (www.bloomberg.com) A European bank that received the most Federal Reserve discount window help during the financial crisis received a total of about $300 billion in loans, guarantees and cash infusions from governments and central banks. It also owned subsidiaries implicated in bid-rigging that prosecutors say defrauded U.S. taxpayers. Details of Fed lending released last week show that Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $37 billion, with an average daily loan amount of $12.3 billion in the 18 months after Lehman Brothers Holdings Inc. collapsed in September 2008. The House subcommittee that oversees the Fed plans hearings on the central bank’s discount window lending to offshore financial institutions next month. By lending to Dexia, the Fed kept money flowing into local government projects throughout the U.S. as well as the money market funds that invested in them. Dexia guaranteed bonds issued by entities as varied as the Texas State Veterans Land Board in Austin and the Los Angeles County Metropolitan Transportation Authority. “If Dexia went bankrupt, it could have been a catastrophe for municipal finance and money funds,” said Matt Fabian, a Concord, Massachusetts-based senior analyst and managing director at Municipal Markets Advisors, an independent research company. “The market has extensive exposure to foreign banks.”

States Fear Local Effects If Shutdown Cuts Off Cash - (www.nytimes.com) Already straining to make ends meet as the longest downturn sincethe Great Depression grinds on, state and local governments are now facing a new, unwelcome question: What would a shutdown of the federal government mean for their struggles to balance their budgets? If a shutdown were to happen, the federal money that helps states pay the administrative costs of their stretched unemployment programs could dry up, forcing states to advance the money to keep the programs running. Federal grants for a variety of programs — including research, higher education and training local law enforcement officers — could be delayed. Furloughing nonessential federal workers and halting payments to federal contractors could have a domino effect as local tax collections plummet in the Washington area and other places with many federal workers. And if national parks were closed, some states could lose tourism business, and the local tax revenues they generate.

U.S. Fiscal Crisis in Spitting Distance: Laurence Kotlikoff - (www.bloomberg.com) To be clear, the real problem isn’t paying for our current spending. The real problem is paying for the 78 million baby boomers as they retire and claim their promised Medicare, Medicaid and Social Security benefits, and as spending on the new health-care exchanges expands far beyond what’s been projected. There is one bright spot. Paul Ryan, chairman of the House Budget Committee, has included a version of the Rivlin-Ryan Medicare plan in the Republican budget proposal. This bipartisan proposal, co-authored with Alice Rivlin, former CBO director and head of the Office of Management and Budget under Bill Clinton, would transform Medicare from its current fee-for-service, defined-benefit structure into a defined contribution system in which the government’s liability is strictly capped. Rivlin-Ryan would be a huge step in the right direction, but what’s really needed is a complete redo that would keep total government health-care spending where it is now, at about 10 percent of GDP.

Portugal Seeks Financial Aid From European Union - (www.cnbc.com) Portugal's prime minister said Wednesday his country has asked for financing assistance from the European Union due to its high debts and difficulty raising money on international markets. "The government decided today to ask the European Commission for financial help," Prime Minister Jose Socrates said. Portugal becomes the third financially troubled eurozone country after Greece and Ireland to request assistance from Europe's bailout fund and the International Monetary Fund. Analysts expect Portugal will need up to €80 billion ($114.4 billion). The precise amount of aid will be determined shortly, according to Economic and Monetary Affairs Commissioner Olli Rehn. Such an announcement had long been expected as Portugal, one of the 17-nation eurozone's smallest and weakest economies, struggled to finance its economy. Following a rejection of additional austerity measures by its parliament last month, Portugal has seen its borrowing costs rise to unsustainably high levels.

OTHER STORIES:

Commerzbank, Intesa Seek $19 Billion as Basel Rules Loom - (www.bloomberg.com)

Beijing's Waning Interest in Rate Hikes - (online.wsj.com)

Obama, congressional leaders make no progress on budget - (www.washingtonpost.com)

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

Bernanke May Have to Overcome Fed Split on Maintaining Stimulus Past June - (www.bloomberg.com)

Fed Minutes Show Inflation Debate - (online.wsj.com)

U.S. Sees Array of New Threats at Japan’s Nuclear Plant - (www.nytimes.com)

Screening the Day’s Catch for Radiation - (www.nytimes.com)

Fishing Halted in Japan’s Ibaraki Prefecture as Nuclear Plant Taints Sea - (www.bloomberg.com)

Thursday April 21 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Fed Help Kept Banks Afloat, Until It Didn’t - (www.nytimes.com) During the frenetic months of the financial crisis, the Federal Reserve stretched the limits of its legal authority by lending money to more than 100 banks that subsequently failed. The loans through the so-called discount window transformed a little-used program for banks that run low on cash into a source of long-term financing for troubled institutions, some of which borrowed regularly from the Fed for more than a year. The central bank took little risk in making the loans, protecting itself by demanding large amounts of collateral. But propping up failing banks can increase the eventual cleanup costs for the Federal Deposit Insurance Corporation because it keeps struggling banks afloat, allowing them to get even deeper in debt. It also can clog the arteries of the financial system, tying up money in banks that are no longer making new loans. County Bank, the largest bank in Merced County, California, took a $4.8 million loan from the discount window in March 2008 after announcing the first annual loss in its 30-year history, news that prompted depositors to withdraw $52 million.

Midtown Hustlers Are Selling 2,000 Cigarettes A Day Hot Off The Train From Virginia - (www.businessinsider.com) New York taxes $4.35 on top of every pack of cigarettes. Virginia taxes only 30 cents. This presents an enormous, albeit illegal, arbitrage opportunity for street vendors (via Kid Dynamite). Since Governor Paterson's big tax hike last summer, the local cigarette black market has been on fire, according to the NYT's Joseph Goldstein. Lonnie Warner, aka Lonnie Loosie, said he's selling ten times as many cigarettes as last year: Mr. Warner said he bought his cigarettes — almost always Newports — for a bit over $50 a carton from smugglers who get them in states like Virginia, where the state tax is well under a dollar a pack. He then resells them for 75 cents each, two for $1 or $8 for a pack ($7 for friends). Mr. Warner said he and each of his two partners took home $120 to $150 a day, profit made from selling about 2,000 cigarettes, mostly two at a time. Each transaction is a misdemeanor offense.

Poll reveals baby boomers' retirement fears - (finance.yahoo.com) Baby boomers are starting to retire, but many are agonizing about their finances and believe they'll need to work longer than they had planned, a new poll finds. The 77 million-strong generation born between 1946 and 1964 has clung tenaciously to its youth. Now, boomers are getting nervous about retirement. Only 11 percent say they are strongly convinced they will be able to live in comfort. A total of 55 percent said they were either somewhat or very certain they could retire with financial security. But another 44 percent express little or no faith they'll have enough money when their careers end. Further underscoring the financial squeeze, 1 in 4 boomers still working say they'll never retire. That's about the same number as those who say they have no retirement savings. The Associated Press-LifeGoesStrong.com poll comes as politicians face growing pressure to curb record federal deficits, and budget hawks of both parties have expressed a willingness to scale back Social Security, the government's biggest program. The survey suggests how politically risky that would be: 64 percent of boomers see Social Security as the keystone of their retirement earnings, far outpacing pensions, investments and other income.

ROGOFF: Our Tax Systems Are "Byzantine Labyrinths Funnelling Money To Powerful Interests" - (www.businessinsider.com) Economist Kenneth Rogoff believes that the current lack of worry over the global government debt crisis will make future scholars question our wisdom. In an editorial for the FT, Rogoff cited his and Carmen Reinhart's research that said debt-to-income ratios are near postwar highs across economies and if interest rates rise sharply many countries will experience problems. Rogoff says our lack of worry today will look "foolish" in the future, when debt problems come to roost. He suggests we streamline our tax system and contain entitlement spending to fight this future, and described our current tax systems as "Byzantine labyrinths funnelling money to powerful interests, creating staggering inefficiencies." Rogoff's comments echo previous research he has done, that shows countries where the debt to GDP percentage rises above 90% experience economic slowdowns. The fears he elucidates, about rising debt yields slamming countries with high debt levels, aren't too different from the arguments made by Niall Ferguson or Societe Generale's Dylan Grice.

Europe's sovereign bond troubles continue - (www.bloomberg.com) Portugal’s 10-year government bonds dropped for the 11th consecutive day after Moody’s Investors Service lowered the nation’s credit rating for the second time in three weeks amid expectations it will need a bailout. Irish bonds advanced for a third day, narrowing the yield difference to Portuguese securities. German 10-year government bond yields were within three basis points of the highest in almost 15 months on bets the European Central Bank will raise interest rates this week. A gauge of euro-area services gained more than initially estimated and a separate report today showed retail sales shrank 0.1 percent in February. “We have seen all these downgrades taking place, which were very aggressive,” said Ioannis Sokos, a fixed-income strategist at BNP Paribas SA in London. Portuguese “yields remain very high and there is no reason to see them lower before a government is formed and new fiscal measures are agreed.” Portuguese 10-year government yields gained 17 basis points to 8.76 percent as of 4:43 p.m. in London, after reaching a record 8.80 percent. The securities’ 11-day drop is the longest run since the 16 days through Dec. 27. The 3.85 percent security due April 2021 fell 0.88, or 8.80 euros per 1,000-euro ($1,421) face amount, to 68.09. The two-year note yield rose 33 basis points to 9.15 percent.

‘Mortal Wound’: Japan Disaster Could Trigger Global Liquidity Crisis - (www.finance.yahoo.com) The ripple effects from Japan's crisis worsened considerably Monday. First and foremost, engineers at the crippled Fukushima Daiichi nuclear power plant struggled to contain leakage of radioactive water into the sea. Second, Toyota announced it will shut down all of its North America factories due to parts shortages while AutoNation warned "production disruptions will significantly impact product availability from Japanese auto manufacturers in the second and third quarters of 2011." These announcements follow GM's temporary shutdown of its Shreveport plant and reports Apple is facing a shortfall of batteries for its iPad 2 as a result of the disaster in Japan. Chris Martenson, author of The Crash Course, expects more "product shortages and associated work stoppages" in the coming weeks, and warns Japan's natural and nuclear disaster could inflict a "mortal wound" on the global economy. As the title of his book and video series implies, Martenson has a proclivity to see events unfolding in a worst-case manner. But there is typically logic to his thesis, as is the case here.

OTHER STORIES:

Hedge funds had ‘challenging’ March - (www.marketwatch.com)

Nasdaq to rebalance index, to cut Apple's weighting - (www.reuters.com)

ING Sees ‘Liquidity Bubble’ in European Leveraged Buyout Financing Market - (www.bloomberg.com)

SEC Probes Backdoor Mergers by Chinese Firms - (www.online.wsj.com)

China Raises Interest Rates to Counter Inflation Pressure - (www.bloomberg.com)

Portugal Rating Cut to Baa1 From A3 by Moody’s on Bailout View - (www.bloomberg.com)

Not cheap or cheerful: south China's new paradigm - (finance.yahoo.com)

ISM Services Index in U.S. Fell to 57.3 in March From 59.7 - (www.bloomberg.com)

Bernanke Says Fed Must Monitor Inflation ‘Extremely Closely’ - (www.bloomberg.com)

Inflation inflicting pain, as wages fail to keep pace with price hikes - (www.washingtonpost.com)

Plant Operator Measures Higher Radiation in Sea - (www.nytimes.com)

Japan sets first radiation standard for fish - (news.yahoo.com/s/ap)

Fishing Group Protests Radioactive Dumping as Tsukiji Market Sales Plummet - (www.bloomberg.com)