The Housing Bubble

Wall Street Pit
Global Market Insight
Wall Street Compensation Collusion
By Larry Doyle|Jul 30, 2009, 4:14 PM

Gaining market intelligence is one thing. Colluding with market participants in business practices is an entirely different issue. The Wall Street compensation process has always operated dangerously close to that line, and would appear to have gone over it in 2008.

This potentially collusive practice is easily disguised in the midst of excessive profitability, but is blatantly obvious when revenues disappear. The Wall Street Journal highlights this practice in writing Banks Paid Big Bonuses as Profits Slid:

- Several of the banks hit hardest by the economic downturn and those that got the most U.S. government aid nonetheless handed out huge bonuses to hundreds of employees last year, according to New York Attorney General Andrew Cuomo.
…
- Some of the other banks, such as Goldman Sachs Group Inc., Morgan Stanley and J.P. Morgan Chase & Co., paid out more in bonuses than their profit for the year, Mr. Cuomo’s office said. Goldman Sachs, for example, earned $2.3 billion, paid out $4.8 billion in bonuses and got $10 billion in TARP funding. Goldman had 212 people get more than $3 million, while 953 got more than $1 million. J.P. Morgan topped the list of large bonuses, with 1,626 people getting more than $1 million and more than 200 people getting at least a $3 million payment.

How and why does this gross misallocation of taxpayer funds occur? Very simply, Wall Street firms collude to keep the compensation levels elevated. How so? They talk to each other to compare and contrast compensation levels across business units and by seniority. This practice has gone on for years. In fact, my better three-quarters was involved in this surveillance back in the mid 1980s when she worked at Drexel Burnham.

Gaining market intelligence when you are paying compensation with your own money is one thing. Paying outrageous compensation packages across the Street with taxpayer funds is an entirely different issue.

Who should be taken to task? The CEOs and Boards of every firm on Wall Street. The pay for performance elevator is supposed to run both ways.

Daily Finance
an AOL money & finance site

While losing billions, 4,793 Wall Streeters made over $1 million in 2008
Peter Cohan
Jul 30th 2009 at 4:40PM

You’ve got to hand it to Andrew Cuomo. The New York attorney general is following a well-worn path to New York power. Like Rudy Giuliani and Eliot Spitzer, Cuomo is using his crackdown on Wall Street corruption as a stepping stone to higher office. The only problem for Cuomo is that he has not yet announced his run for New York governor.

But he is coming up with some great numbers to illustrate just how badly broken Wall Street’s compensation system is. Despite losing billions in 2008, 4,793 bankers and brokers who work there got paid at least $1 million. What is amazing to me is how many of those people worked for firms that lost billions of dollars. Where did they get the money to pay the bonuses if they lost money? I am guessing from government bailouts, like the $700 billion TARP.
…
If something cannot go on forever, it will stop.

–Herbert Stein–

National Public Radio
Turf Wars And Details Bog Down A Banking Overhaul
Adam Davidson and Linda Wertheimer
July 31, 2009

As the global economy continues its slow climb out of last fall’s economic crisis, many in Congress and the U.S. agree it’s time to rework the laws that govern financial institutions. The debate is reminiscent of the current fight over health care, with many calling for change but few agreeing on what the new laws should look like.

The original plan for overhauling market regulations called for finishing the job by May. Adam Davidson, an economics correspondent with NPR’s Planet Money, notes that the Obama administration didn’t present a plan until June. “Now people are saying the July deadline that some had imposed is clearly not going to be met,” Davidson says, “and we’re lucky to get anything on the president’s desk by the end of the calendar year.”
…
America’s age-old split between large urban banks and small rural ones continues to this day, Davidson reports, and that’s also slowing the process of regulatory reform. He says lawmakers tend to divide along party lines when it comes to the nuances, like how big a role the government should play in the economy. Republicans tend toward more market-oriented solutions, while Democrats lean toward more regulation.

“How is this going to affect the powers of the big agencies, like the Fed?” Wertheimer asks.

“I’d say the role of the Fed is probably the single most important, significant and hotly debated issue,” Davidson says. “There’s people who say, ‘Hey, look, the Fed saved our system. They’re the ones who had the best regulation. They’re the ones who came in and rescued these banks. We need to give the Fed a lot more power. They need to be our systemic regulator, overseeing the whole system.’

“Others say, ‘Wait a second — the Fed’s job is monetary policy, basically figuring out how many dollars there should be in the world, and they messed that up really badly.’ ” Davidson explains that critics, especially in the Senate, argue that the Federal Reserve caused the crisis by keeping interest rates too low in 2003 and fueling a bubble in the housing market.
…

A rolling loan gathers no loss.

American Public Media
Marketplace
Scott Jagow
Jul 30, 2009 12:06 PM
Bad loans still make money

A group of former Countrywide people launched an IPO today with their new company, PennyMac. Take one guess at what they’re doing. And while we’re at it, let’s talk about why the government’s loan modification program isn’t working.

PennyMac is based in Calabasas, California (sound familiar?), and it plans to make money by buying up failing home mortgages from failed banks and then restructuring the loans. From Forbes/Reuters:

PennyMac’s chief executive is Stanford Kurland, a former president and chief operating officer of Countrywide. At least 10 other top PennyMac officials are alumni of Countrywide, which was also based in Calabasas.

Countrywide was once the largest U.S. mortgage lender, but its aggressive lending practices are widely considered to be a major cause of the nation’s housing crisis.

PennyMac’s business has drawn the attention of critics who have accused Kurland and other Countrywide alumni of trying to profit from a housing crisis they helped create.
…

Good Morning everyone!!!

Well, it’s 1800 and I just got some tbone steak, schrimp and cherry pie with the Kool-aide singles my wife sent me! It’s 112 degs and life is good!

Los Angeles Times
Business
MORTGAGES
California’s default rate soars to 9.5%

Delinquencies in June are up sharply from a year ago, when 6% of borrowers were behind on their loans.

By Peter Y. Hong
July 31, 2009

About 1 in 10 Californians with a home loan is now in default, and there’s growing evidence that the mortgage meltdown is spreading to commercial real estate.

The home mortgage delinquency rate — the percentage of borrowers who have missed several payments and are in the first stage of foreclosure — climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.

The staggering number of home mortgage defaults probably will lead to large numbers of foreclosures through at least this year, housing experts say.

“It’s probably a given we’ll see a high number of foreclosures in the next couple of quarters due to the level of defaults plus the recession and jobs lost. There’s plenty more pain to come,” said Andrew LePage, an analyst for real estate research firm MDA DataQuick of San Diego.
…
Mortgage defaults are more likely to result in foreclosure when borrowers owe more on their homes than they are currently worth — commonly called being “upside down” or “underwater” in industry lingo.

That’s the case for many in California who bought homes during the real estate bubble, often with little or even no money down.

When distressed borrowers have equity, they often can sell the property to cover the outstanding mortgage. For upside-down borrowers, that’s usually not an option.

In recent months, about 60% of California mortgages in default ended up foreclosed, LePage said.

Foreclosures should pick up even more now that various government moratoriums and voluntary foreclosure freezes by lenders have expired.

But LePage said the rate of foreclosures may not reach the record level set last year if lenders increase loan modifications or approve more “short sales,” in which homes are sold for less than their mortgage amounts.

The mortgage delinquency rate in June was up sharply from a year ago, when 6% of California mortgages were delinquent and 5.2% in Los Angeles County were in default.

In May 2009, the state default rate was 9.2% and the Los Angeles County rate was 9.5%, according to First American CoreLogic.
…

PennyMac debuts with a thud
Mortgage firm run by ex-Countrywide execs flops in IPO. Buying bad loans makes sense, but competition’s tough and banks don’t want to sell on the cheap

http://money.cnn.com/2009/07/30/markets/thebuzz/index.htm?section=money_topstories

Inventory in the area I want to buy in is shrinking; prices are flat (and still *just* out of my reach); homes are selling. Feels hopeless.

Burn or bulldoze:

http://www.rgj.com/article/20090729/NEWS/90730001

“Fire officials estimated it could take days before investigators know what caused a massive fire Wednesday night to sweep through a vacant South Reno luxury apartment complex under construction that destroyed 22 of 36 buildings.”

“The magnitude of this fire was so large that it’s what firefighters call a ‘career fire’,” Frady said. “You only see a fire like this maybe once in your career if you’re a firefighter.”

“Officials with the complex developer, A.G. Spanos Cos said Thursday they plan to rebuild portions of the high-end facility. Certificates of occupancy had been issued for at least four buildings, and people were scheduled to move in next month, Frady said.”

Maybe it got hit by an upside down lightning bolt (Spanos is the owner of the Chargers).

Morning,

If y’all don’t mind, I’d like to tie up a few loose threads from yesterday and last month in this one, because my comments have sometimes been misunderstood. My approach is very simple but it doesn’t fit neatly into the old red/blue state dichotomy, so I need to explain.

Conservatives are correct in saying that an economy reasonably free of government meddling is the best and only route out of the financial crisis. Liberals are correct in saying that executive compensation is completely out of control and that corporations are guilty of predatory, discriminatory, parasitic, and generally abusive behavior.

What conservatives don’t get is that corporations– especially large ones– are NOT free market entities, but rather cartels that are much closer to government agencies in nature. What liberals don’t get is that the answer is not more “regulation” aimed at corporations, because the past 100 years have seen an astronomical increase in the number of regulations, while corporate abuses have only morphed, metastasized and gotten worse.

The unifying insight is that corporations are first, last and always creatures of the government. And an economy which is dominated, as ours is, by large corporations is little better than a socialist state.

The other key point is that “corporate interests” are really the interests of the executives in maintaining their outsized pay packages and protected positions. Liberals sometimes say that corporations put “profits before people”, but in reality, corporate executives care as little about enriching shareholders as they do about customers, employees, or neighbors. They care only about THEMSELVES. Morally and ethically, we must always “pierce the corporate veil” and look at the real interests of the ones in power, not the imaginary ones of a legal fiction. One poster here about a year ago nailed it when he said “Corporations exist to pay the top people.”

If we believe in a free market, and if corporation laws and corporate charters are themselves a gross distortion of that free market, then logically the only remedy is a complete REPEAL of these laws and charters. In other words, the real response to corporate abuses is: don’t regulate, ELIMINATE. What we need is a return to the “Pro-business, anti-corporate” philosophy that prevailed in the early 19th century.

As a side note to ET: I would never suggest granting eminent domain, unlimited taxation or regulation powers to any private business. These powers, in ANY hands, are travesties in a nation that claims to value freedom and equality. My point was that government should not be operating in private sectors such as mail delivery and transportation.

I created a “friends of the housing bubble blog” facebook group. It should be visible from the facebook search. I don’t intend to post much on there, just as a resource for facebook users to join and maybe find other locals to do meetups or some such.

Are the Financial Times writers clueless or something? How many times do I have to repeat it: THE STOCK MARKET ALWAYS GOES UP.

Wall St set to stumble after GDP report
By Michael Mackenzie in New York
Published: July 31 2009 14:07 | Last updated: July 31 2009 14:07

US equity index futures staged a sharp reversal early on Friday and were currently projecting a lower start on Wall Street, after a government report showed that the economy contacted less than expected during the second quarter.

The data also cast a pall over European stocks which had been trading higher prior to the report’s release. In overnight trade Asian stocks rallied sharply, with Japan and Australia closing at a new high for the year.
…

Financial Times
US recession now longest on record
By Alan Rappeport in New York
Published: July 31 2009 13:51 | Last updated: July 31 2009 13:51

The US economy continued to shrink in the second quarter making this recession the longest on record, but the more moderate decline lifted hopes that government stimulus measures could be loosening the grip of the downturn.

Preliminary commerce department figures showed on Friday that US gross domestic product declined by an annualised rate of 1 per cent in the second quarter after declining by a revised 6.4 per cent during the first three months of the year. While the contraction was less severe than the in the previous three quarters, it was the first time since official figures started in 1947 that the US has suffered four consecutive periods of declining output.
…

Glasnost explained?

Financial Times
Bernanke explains Fed’s new openness
By Edward Luce in Washington
Published: July 30 2009 19:19 | Last updated: July 30 2009 21:41

Ben Bernanke has explained his decision to turn the normally secretive US Federal Reserve into something of an open house, saying his unusually large number of recent public appearances are the result of the “extraordinary” times the country faces.

The Fed chairman has turned up at everything from a 60 Minutes television interview to a Kansas City town hall session over the past few weeks, prompting some to wonder if he is trying to ensure he is re­appointed when his four-year term ends in January.
…

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/31/AR2009073101173.html?hpid=topnews

Michigan lawmakers were holding an emergency meeting Friday morning in the office of Sen. Carl Levin, trying to find a way to continue the federal government’s week-old “cash for clunkers,” program, which has proven so popular with consumers that it is almost out of cash.

Handing money out to car dealerships looks like a huge invitation to fraud to me. I hope they have someone who can investigate potential abuses of this system, though I can’t imagine whose responsibility that would be. I know this program must be popular, but this is ridiculous.

I would like to appeal to the collective wisdom, food department. I put in my “second season” tomatoes the other day. In Texas, we have a spring season, a dormant summer, then a fall growing season. (Both seasons together do not produce as much as a summer season in a temperate climate.)

I learned yesterday that several of my plants, the Purple Comanche and another purple heirloom chosen for flavor, having an 80-90 day production time, are not particularly well-suited for the southern fall season.

If we have a cool fall or early frost, I will have a lot of large GREEN $14.50 tomatoes!

What can I do with green tomatoes? I know that some can ripen in the house wrapped in newspaper, but I may have a lot. Fanny Flagg’s novel includes a recipe for fried green tomatoes, but I doubt we’d eat something breaded and fried more than once. Can you make jelly, juice, pickles, a condiment, use them as an ingredient in exotic salads or cooking?

BB is pushing back, this audit plan is the last thing the FED wants. I wonder why? It’s not for the reasons given by BB. I hope we can keep the pressure on and get an audit! Bye,bye, FED.

Fed Audit Supported By 75% Of Americans: Survey.

The calls to audit the Federal Reserve have come fast and furious in the last few weeks. Fed Chairman Ben Bernanke is continuing to push back against a House bill that would give the Comptroller General - the head of the Government Accountability Office - the power to audit the central bank.

But, judging by the results of a new survey, the vast majority of Americans already support a Fed audit. 75 percent of Americans back auditing the Federal Reserve, according to Rassmussen Reports.

Opponents of the Federal Reserve Transparency Act Of 2009 - introduced by Rep. Ron Paul (R-Texas) - say that putting the Fed under the control of Congress would limit the bank’s independence. (The bill has gained support from over half of the House of Representatives).

There is also growing concern from Fed supporters that Congress could exert political influence over monetary policy - though, many would argue that the Fed is already influenced by politics. But, according to the Rasmussen survey, only nine percent of adults surveyed were against the idea of a Fed audit.

The Washington Post recently said the bill “would destroy financial markets’ faith in the Fed and, by extension, the value of the U.S. dollar.” Economist Dean Baker, who’s been a vocal critic of the Fed, took the Post to task. He added: “The country is likely to lose more than $6 trillion in output ($20,000 per person) due to the Fed’s inept job performance.”

The “right wing” nut jobs insist on speaking out:

Town Hall Meetings Not Going As Planned

On the eve of the August recess, members of Congress are reporting meetings that have gone terribly awry, marked by angry, sign-carrying mobs and disruptive behavior. In at least one case, a congressman has stopped holding town hall events because the situation has spiraled so far out of control.

“I had felt they would be pointless,” Rep. Tim Bishop (D-N.Y.) told POLITICO, referring to his recent decision to suspend the events in his Long Island district. “There is no point in meeting with my constituents and [to] listen to them and have them listen to you if what is basically an unruly mob prevents you from having an intelligent conversation.”

Really?

Well Tim, guess what: you work for your constituents, not the other way around.

It would appear to this commentator that the Reps and Senators who feel “besieged” by their constituents in town hall meetings might have paid better attention in September and October when they were told by 300:1 margins not to pass the EESA/TARP bill.

Or when they were told repeatedly to NOT try to advance amnesty for illegal aliens and refuse to enforce our immigration laws.

Or when they were told repeatedly to quit bailing out the irresponsible, looking the other way while the populace is looted systematically by those in the banking and other “coddled” industries.

There are a whole host of issues like this, and Congress seems to think (because it has gotten away with it for years) that ignoring the voters is not only acceptable, but is indeed a good idea.

Let me remind Mr. Bishop, along with the other Congressfolk, that the entirety of our government serves at our pleasure, not the other way around. Specifically, let me cite The Declaration of Independence:

….That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness….

Loud voices of dissent and sign-waving constituents are an unmistakable sign that our government has pressed the line of tolerance, and may, if it does not reverse course, exceed it.

And before someone claims that I am some sort of “right-wing nut” or similar, let me point out that the above text is not mine - they are the words of the founders of our nation, who believed that absent consent government does not exist - that’s tyranny, not government.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

(From K. Denninger)

Isn’t counter-cyclical stimulus a good thing? Everyone says so. Without it, said Ben Bernanke, we might have entered a Second Great Depression. And we don’t know…maybe he’s right. The private sector is no longer borrowing and spending like it used to; now, the feds have to do it, right?

Where have you been, dear reader? That’s not the way it works. The credit explosion in the bubble years didn’t really make households richer - it made them poorer. That’s why they’re struggling to pay their bills now. And the credit explosion in the public sector now isn’t going to make people richer either; it’s going to make them poorer too. Soon, the United States will be struggling to pay its debts too.

That’s the moral lesson: borrowing makes you poorer. Unless you’re using the money to increase output, there’s no economic health it in. In other words, if a factory sees an opportunity, it might borrow to expand. The extra output should produce enough profit to allow it to repay the loan…and come out ahead. But if you borrow to consume, at the end of the day you’re poorer. That’s the lesson of the Bubble Years. That’s the lesson consumers need to learn every couple of generations. And now, they seem to have learned it. They remember that the economy ran hot in the bubble époque, but it didn’t do them any good. And while the stimulus of that era did stimulate consumption, it was not genuine wealth building.

- B.Bonner

The Czech krona was 18.5 to the dollar this time last month. The annualized rate of decline since then is:

((17.9380/18.5)^12-1)*100 = -31 percent.

CURRENCY VALUE CHANGE % CHANGE TIME
EUR-USD 1.4255 0.0180 1.2800% 12:08
GBP-USD 1.6702 0.0208 1.2630% 12:08
USD-CHF 1.0692 -0.0184 -1.6890% 12:08
USD-SEK 7.2244 -0.1882 -2.5396% 12:08
USD-DKK 5.2243 -0.0658 -1.2434% 12:08
USD-NOK 6.1239 -0.1052 -1.6888% 12:08
USD-CZK 17.9380 -0.2392 -1.3157% 12:08
USD-SKK 21.1290 -0.2771 -1.2943% 12:08
USD-PLN 2.9105 -0.0450 -1.5218% 12:09
USD-HUF 187.0030 -3.4925 -1.8334% 12:08
USD-RUB 31.4560 -0.0552 -0.1753% 12:08
USD-TRY 1.4728 -0.0060 -0.4057% 12:08
USD-ILS 3.7823 -0.0027 -0.0713% 11:58

So was O.J.

“That’s the difference between governments and individuals. Governments don’t care, individuals do.”
~Mark Twain

“Bad news for Maureen Dowd, Kathleen Parker, Peggy Noonan, David Letterman, and all the other big-time pundits who dislike Sarah Palin. She’s not going to retire and shoot moose. She’s not going to raise money for the Republican party, either”.

“She’s probably going to work for candidates of any party who will help lead the nation back to the Constitution and sanity. At the moment she seems to be the only person around who can unify the growing central core of citizens who yearn for an interval of national stability”.
- News Clip

Thundercrack!

Stimulus Bill Funds Go to Art Houses Showing ‘Pervert’ Revues, Underground Pornography.
Thursday, July 30, 2009

The National Endowment for the Arts may be spending some of the money it received from the Recovery and Reinvestment Act to fund nude simulated-sex dances, Saturday night “pervert” revues and the airing of pornographic horror films at art houses in San Francisco.

The NEA was given $80 million of the government’s $787 billion economic stimulus bill to spread around to needy artists nationwide, and most of the money is being spent to help preserve jobs in museums, orchestras, theaters and dance troupes that have been hit hard by the recession.

But some of the NEA’s grants are spicing up more than the economy. A few of their more risque choices have some taxpayer advocates hot under the collar, including a $50,000 infusion for the Frameline film house, which recently screened Thundercrack, “the world’s only underground kinky art porno horror film, complete with four men, three women and a gorilla.”

“When you spend so much money in a short amount of time … you’re going to have nonsense like this, and that’s why the stimulus should never have been done in the first place,” said David Williams, vice president for policy at Citizens Against Government Waste.

FWIW…. Dutchess, Putnam and Westchester Counties, NY

For Rent signs are popping up daily. Very random, no detectable pattern.

Just heard Chris Dodd has prostate cancer. I don’t wish cancer on anyone, but perhaps he won’t run again.
Nah, he’ll run.

AIG is going down the tubes - again.

http://finance.yahoo.com/banking-budgeting/article/107445/after-rescue-new-weakness-seen-at-aig.html?sec=topStories&pos=5&asset=&ccode=

Now it’s their so-called “solid” insurance business. I’m betting that if AIG goes insolvent, then WS will go up 30%. Time to buy stocks.

Roidy
P.S. For those of you who are sarcasm impaired, I would ask some of us who aren’t to explain the joke. Ty, Roidy

How government “stimulus” money helped a Tennessee pie company:

“The Armstrong Pie Company in Perry County used taxpayers’ money to expand: ‘New workers [hired with stimulus money] have helped the company triple its pie production and expand its reach through central Tennessee.’

“A quick question: what happened to the pie companies that lost market share to Armstrong? And another: how is the economy any better off by stimulating one pie company to make more pies at the expense of other pie companies? And a final one: even if total pie consumption goes up – a larger pie! – where’s the benefit?”

Cash for clunkers could be a big scam: Couldn’t dealerships collect crappy old cars or even just titles to transfer to new car buyers right before they buy a new car? I would not put this past the local stealerships around here.

Try not to catch yerself a falling knife.

Commentary The Buzz
Hmm … tastes like recession

Wall Street was buoyed by the GDP report. But consumers still aren’t spending. And until they do, investors may have to be wary of the recovery talk.

By Paul R. La Monica, CNNMoney dot com editor at large
Last Updated: July 31, 2009: 12:55 PM ET

Stocks have enjoyed a huge pop since early March. Some experts think the markets are heading even higher but others worry that investors have priced in unreasonble recovery hopes.

NEW YORK (CNNMoney.com) — Score one for the green shoots crowd. The second-quarter gross domestic product report Friday clearly showed that the economy is in fact stabilizing.

Stocks were up slightly on the GDP news — a bit of a surprise considering that investors had appeared to already factor in that the nation’s gross domestic product probably shrunk at a much lower rate than in the previous two quarters. The S&P 500, after all, has surged more than 45% since early March.

So even though it’s premature to give the economy a clean bill of health and say the recession is really over, many financial experts said it is growing increasingly difficult to be negative about the outlook for the economy and markets.

“There is still a lot of momentum in the market so I wouldn’t be surprised to see stocks move higher over next few weeks,” said Robert Phillips, co-founder of Spectrum Management Group of Raymond James & Associates, a money management firm in Indianapolis. “The world’s not going to be fixed overnight but we’re headed in the right direction.”
…

STATE’S A WRECK? PARTY!
GOV AT CLUB BASH AMID A NEW DI$ASTER
Post Correspondent July 31, 2009
ALBANY — What’s Gov. Paterson got to celebrate?

Just hours before delivering news of soaring budget deficits and lagging revenues from the recent millionaire’s tax, the party-hearty Paterson was spotted hobnobbing at a Chelsea hot spot with “new BFF” Russell Simmons and others from the hip-hop set.

The night-owl chief executive reportedly lingered for hours at the West 21st Street nightclub Taj, which was the site of several overlapping cocktail parties, including an invitation-only birthday bash for BET executive Rhonda Cowan, a longtime Paterson friend.

Stagnant poll numbers, lackluster campaign fund-raising and the threat of a challenge within his own party didn’t keep the Democratic governor from enjoying himself at the midweek fiesta.

“God’s Favorite MC,” Frank Jugga, contributed “mike flava,” and music promoter Dontay Thompson leaped on a table. Hot 97 deejay Funkmaster Flex was there, too.

Just hours later, Paterson called on the Legislature to address a yawning budget gap that has swelled to $2.1 billion in just three months.

The governor blamed his latest bleak forecast, which pushes the state’s budget gap to $38.2 billion over the next four years, on plunging tax collections and job losses.

Plummeting tax revenues were behind much of the shortfall.

How is Freddie Mac dealing with its delinquent loans? I ask because I just got laid off and CitiMortgage told me that they will work out a 6 month “plan” where I pay a fraction of the mortgage payment.

So I asked them what happens if I’m still unemployed 6 months later (which I believe is very probable). I was told that it would be up to the investor: Freddie Mac. She insuated that Freddie would probably extend the deal. for a while.

Anyway, this sounds pretty good: we get to stay in the house making what would be the equivalent of rent on a small house (perhaps). I will find out in a few weeks what their offer is. If it stinks I’ll just let them foreclose (I’m way underwater) and move into a rental.

I’m also considering switching careers and becoming a HS math teacher. The pay is quite a bit less, but having summers off and not having to work 60-80 hrs a week doesn’t sound all that bad. I’m also fluent in Spanish, so that will make me an ideal candidate (already spoke with the school district HR). I’m missing acouple of math classes that I can take at the local JC/CC, then pass the PRAXIS test and I’ll have an “alternative license). In theory I could start as early an next January.

The financial sector is committing similar crimes against the public-at-large across the pond.

Telegraph dot co dot uk

Bankers are getting away with murder
Our savings and taxes are being used as a piggy-bank for the City, says
Jeremy Warner

Published: 4:38PM BST 31 Jul 2009

Adair Turner, the chairman of the Financial Services Authority, has said it, and now the cross-party Treasury Committee of MPs has said it, albeit it in a rather different way. But neither has said it strongly enough. Despite the worst banking crisis in history, costing the taxpayer £1.3 trillion in public support, bankers are behaving as if nothing of any significance has changed at all.

The easy money-making practices of the past are back, with record bonuses and retention fees, even in banks that have required massive state bailouts. The reform agenda is fast running into the sand. Worse, savers and customers are being leeched as never before to rebuild balance sheets damaged by bad lending decisions, while sovereign guarantees to prevent the banking system from collapsing are cynically being used to underwrite a recruitment and remuneration binge that eclipses even that of the boom.

After years of suffering at the hands of the “borrow now, pay later” culture, the careful were promised that whatever else the banking crisis brought, at least it would drive a seminal change back to the old-fashioned values of thrift and self-reliance.

How wrong can you be. It’s hard to impossible to get a real rate of return on your cash right now. The bankers have squeezed savings rates to virtually zero, even as they jack up what they charge to borrowers. So there is nothing clever about the supercharged operating profits bankers are once more generating: they are simply widening the spread.
…

California could have $15 billion shortfalls
Richard Procter, San Francisco Chronicle Sacramento Bureau
Friday, July 31, 2009

(07-31) 04:00 PDT Sacramento - –

The plan signed by Gov. Arnold Schwarzenegger this week to balance the state’s budget could leave California facing shortfalls in future years of more than $15 billion, according to an analysis released Thursday by a major Wall Street credit rating firm.

Moody’s also criticized California’s plan to take more than $1 billion from counties’ redevelopment agencies this year to help close its $24 billion deficit, saying that could jeopardize those agencies’ credit ratings.

Moody’s is one of several firms, including Fitch Ratings, that downgraded the state’s credit ratings this month after legislators failed to pass a budget by the June 30 deadline.

Emily Raimes, Moody’s vice president and senior analyst, said that the plan adopted this week may stop the state’s credit rating from dropping further, but added that eliminating the deficit “was achieved through a combination of cuts, raids on local funds, accounting maneuvers and one-time revenues that leave the state poorly positioned for budgetary balance in future years.”
…

Kentucky Shows States Widening Deficits for Stimulus

When the U.S. government made stimulus funds available to develop batteries for hybrid and all-electric vehicles, eight states waged a bidding war to lure manufacturers such as EnerSys and Exide Technologies and get a piece of the $2 billion pot.

“The economic war among states is very much a zero-sum game, with Peter robbing Paul,” said Greg LeRoy, executive director of Good Jobs First, a Washington-based center that tracks economic-development deals.

Link here

But here’s the kicker… in regards to states offering incentives to companies to relocate, one expert had this to say: “Sure, it looks like job creation from a parochial perspective,” Art Rolnick [research director at the Federal Reserve Bank of Minneapolis] said. “From a national perspective, it’s counterproductive and not good public policy.”

Hahahah. That’s funny Art. So, tell me again how state’s offering subsidies to companies to relocate isn’t good for the national economy but countries offering subsidies (through lower labor/environmental regulation and taxes) to relocate our jobs is in our national best interest. Hilarious… I’ve started wearing the Comedian’s smiley-face pin everywhere I go because I can’t take this crap seriously anymore. It’s one big joke…

Not a gator,

If you’re still out there and haven’t left town yet, I’ve two more suggestions for grazing that I can’t believe I left out:

Saburo’s: Huge amount of sushi for the $$.
Toro Bravo: Great tapas, although a little spendy.

It`s another Friday night smack down.

Regulators shut down banks in five states
By MARCY GORDON and IEVA M. AUGSTUMS
AP Business Writers

WASHINGTON — Regulators on Friday shut down banks in Florida, New Jersey, Ohio, Oklahoma and Illinois, boosting to 69 the number of federally insured banks to fail this year amid the pressures of the weak economy and mounting loan defaults.

The Federal Deposit Insurance Corp. was appointed receiver of the five banks.

The agency shut down Integrity Bank of Jupiter, Fla., with $119 million in assets and $102 million in deposits, and First BankAmericano, based in Elizabeth, N.J., with $166 million in assets and $157 million in deposits.

Also closed were Peoples Community Bank, West Chester, Ohio, with $705.8 million in assets and $598.2 million in deposits; First State Bank of Altus, in Altus, Okla., with $103.4 million in assets and $98.2 million in deposits; and Mutual Bank of Harvey, Ill., with $1.6 billion in assets and $1.6 billion in deposits.

Mutual Bank was the largest of the five. It was closed Friday by the Illinois Department of Financial Professional Regulation’s division of banking, which appointed the FDIC as receiver. United Central Bank of Garland, Texas, is assuming the deposits and essentially all of the assets. In addition, the FDIC and First United Central Bank entered into a loss-sharing agreement covering $1.3 billion of the assets of Mutual Bank. Its 12 branches will reopen Saturday as offices of United Central Bank.

First State Bank of Altus was closed by the Oklahoma State Banking Department, which appointed the FDIC as receiver. Herring Bank, based in Amarillo, Texas, is assuming the deposits and about $64.4 million of the assets of First State Bank of Altus and the FDIC will retain the remaining assets for eventual sale. The failed bank’s branches will reopen Saturday as offices of Herring Bank.

The FDIC said that Stonegate Bank, based in Fort Lauderdale, Fla., had agreed to assume all the deposits and about $52 million of the assets of Integrity Bank. The agency will retain the remaining assets for eventual sale. Integrity Bank’s sole office in Jupiter will reopen Monday as a branch of Stonegate Bank.

Crown Bank, based in Brick, N.J., has agreed to assume the assets and deposits of First BankAmericano. The failed bank’s six branches will reopen Saturday as offices of Crown Bank.

First National Bank, based in Hamilton, Ohio, is buying the assets and deposits of Peoples Community Bank. In addition, the FDIC and First Financial Bank entered into a loss-sharing agreement covering $657.6 million of the assets of Peoples Community Bank. Its 19 branches will reopen Monday as offices of First Financial Bank.

The 69 bank failures nationwide this year compare with 25 last year and three in 2007.

The FDIC estimates that the cost to the deposit insurance fund from the failure of Integrity Bank will be around $46 million, that of First BankAmericano $15 million, Peoples Community Bank $129.5 million, First State Bank of Altus $25.2 million and Mutual Bank $696 million.

As the economy has soured — with unemployment rising, home prices tumbling and loan defaults soaring — bank failures have cascaded and sapped billions out of the deposit insurance fund. It now stands at its lowest level since 1993, $13 billion as of the first quarter.

While losses on home mortgages may be leveling off, delinquencies on commercial real estate loans remain a hot spot of potential trouble, FDIC officials say. If the recession deepens, defaults on the high-risk loans could spike. Many regional banks hold large numbers of them.

The number of banks on the FDIC’s list of problem institutions leaped to 305 in the first quarter — the highest number since 1994 during the savings and loan crisis — from 252 in the fourth quarter. The FDIC expects U.S. bank failures to cost the insurance fund around $70 billion through 2013.

The May closing of struggling Florida thrift BankUnited FSB is expected to cost the insurance fund $4.9 billion, the second-largest hit since the financial crisis began. The costliest was the July 2008 seizure of big California lender IndyMac Bank, on which the insurance fund is estimated to have lost $10.7 billion.

The largest U.S. bank failure ever also came last year: Seattle-based thrift Washington Mutual Inc. fell in September, with about $307 billion in assets. It was acquired by JPMorgan Chase & Co. for $1.9 billion in a deal brokered by the FDIC.

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From the Fresno Bee’s business blog:

Tsunami coming?

When real estate broker Terance Frazier is asked about the projected next wave of foreclosures, he points to a chart compiled by his intern, Trent Souza.

Souza matched up scheduled auction dates at the Fresno County courthouse with government-imposed moratoriums and found, not surprisingly, that banks didn’t repossess as many homes during those periods.

Then, he tallied up the number of new default notices and discovered that, barring more government intervention, the number of foreclosures could more than double between September, when the last moratorium expires, and year’s end.

Frazier, who buys and resells foreclosures, said bank-owned properties have been piling up as lenders, adhering to moratoriums, postponed the auctions. Those could start hitting the marketplace in early 2010, increasing supply and possibly keeping prices down.

Frazier says the moratoriums delayed the recovery of the housing market and also fuzzy predictions. “We don’t know what the government will do,” he said. “Until that inventory hits the market, we won’t recover.”

It remains to be seen if real estate agents will be able to sell the foreclosures as quickly as they are now. Lower-priced foreclosures get multiple offers and many realty agents want more to sell.

But, experts predict more moderate and higher-end families to lose their houses during this recession, which is the worst in decades. At least 1 of every 10 home loans in Fresno County was at least 90 days delinquent in June, according to market tracker First American CoreLogic.

Banks say they are modifying more loans and doing more short sales, where they negotiate negotiate a sale with the owner before it goes to foreclosure.

But Frazier thinks lenders should reappraise properties, issue a new loan at a reduced interest rate for the true value and then either issue a no-interest mortgage for the remainder of the old loan, or arrange to be paid a cut of any profit from the sale of the house.

That would cut payments enough to keep the homeowner from defaulting and put money into their pockets - money that could be used to buy cars, appliances, eat in restaurants and otherwise stimulate the economy.

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Sandy Nax covers real estate and business for The Fresno Bee. He can be reached at 441-6495 or snax@fresnobee.com