The Housing Bubble

If bankers get their way, Floridians facing foreclosure could be kicked out of their homes in as little as three months.

The Florida Bankers Association, the 400-member-strong lenders’ lobby, has presented state legislators with a bill to upend decades of Florida law and establish “non-judicial” foreclosures in Florida by July 1.

What’s a non-judicial foreclosure? Banks would accelerate foreclosures against defaulting homeowners by bypassing the courts. Judges would no longer rule on foreclosure cases.

Some states — 37 in fact — already grant that fast-track foreclosure authority, including California, Georgia, Alabama and Texas. But Florida, with its plethora of vacation and retiree homes, has always been big on homeowner rights.

• The Florida Supreme Court’s newly endorsed mandatory mediation for lenders and homeowners would effectively go bye-bye. The bill provides only for informal meetings between creditors and debtors.

• Even after homeowners are evicted, banks can still pursue them for unpaid mortgage debt. But banks will waive that right if homeowners avoid trashing or stripping the house before the new owner takes over.

The bankers association has titled the bill The Florida Consumer Protection and Homeowner Credit Rehabilitation Act. Association president Alex Sanchez views the bill as a way to break a foreclosure crisis partly caused by mortgage fraud.

He offered a list of innocents the bankers aim to help: neighbors annoyed by abandoned houses next door; condo associations pursuing dues from properties in legal limbo; cities grappling with urban blight; and judges overloaded with thousands of foreclosure cases.

“We don’t want the property. We’re not into the property management business,” Sanchez said of bankers. “We want to get a property out of the courts and sold to a productive Florida family.”

http://www.tampabay.com/news/business/realestate/florida-bankers-move-to-dramatically-speed-up-the-foreclosure-process/1069024

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I thought our Florida brethren might enjoy keeping an eye on this one.

We’ve just been kicking the can…

Watchdog: Bailouts created more risk in system
Bailout watchdog: Response to financial crisis response leaves US with even more risk. ~ January 31, 2010

WASHINGTON (AP) — The government’s response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.

The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.

“Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car,” Barofsky wrote.

China threatens US arms companies.
Beijing ~ Shanghai ~ January 31 2010

China threatened to impose sanctions on US arms firms and cut cooperation with Washington unless it cancels a $6.4bn arms sale to Taiwan, in an unprecedented move signalling Beijing’s growing global power.

Although Beijing ritually protests US weapons sales to the island, it has not previously targeted the companies involved in the trade. Although the US restricts arms sales to China, a number of the companies that would supply systems involved in the new Taiwan package, which include Boeing, United Technologies, Lockheed Martin and Raytheon, could face pressure in other business areas.

Normally the Statesman is realistic about housing issues….

But they still ran an article about remodeling that featured replacing laminate countertops with granite and appliances with s/s.

http://www.idahostatesman.com/life/story/1060069.html

The remodeling industry must really be in a tailspin. I even downloaded a coupon good for free admission to a trade show. Not much of interest there: I walked through in 10 minutes.

Roubini Calls U.S. Growth ‘Dismal and Poor,’ Predicts Slowing.

(Bloomberg) — New York University Professor Nouriel Roubini, who anticipated the financial crisis, called the fourth quarter surge in U.S. economic growth “very dismal and poor” because it relied on temporary factors.

Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010, he said.

“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini told Bloomberg Television in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “I think we are in trouble.”

Roubini said while the world’s largest economy won’t relapse into recession, unemployment will rise from the current 10 percent, posing social and political challenges.

“It’s going to feel like a recession even if technically we’re not going to be in a recession,” he said.

Peter is a Econ Professor at UCI (Irvine) and wrote “The Coming China Wars” Believe it or not, Bob Brinker had him on yesterday, and those two clashed on Bernanke. Peter says he should have gone. Bob evidently likes his policies. Peter said this is a structually broken economy.It was by happenstance, I heard this interview. I am no fan of Brinker.
Note the link is from 2006.
http://www.totalpicture.com/shows/big-picture/peter-navarro.html

Haiti donations: I have been doing fundraising for the Haitian earthquake victims, and have questioned whether donating to a specific orphan through an organization is the best way to go. Based on a few hours of research yesterday, I’ve concluded that at the moment the needs of the general population are greater, and I wasn’t able to find a top-rated ( by Charity Navigator ) orphan-sponsoring charity. I chose to donate to Doctors Without Borders, the Red Cross with the funds specified for Haitian relief, and one organization which had found an already-established orphanage which had collapsed, and had dozens of kids wandering around with no food or water for 3 days, and no adults in sight, so they basically took over caring for these kids. It’s amazing to find how many stories are out there to entice what few dollars people can afford to give. One of the criteria in giving wisely is to choose organizations which are already either very experienced in disaster relief efforts, or an outfit that has already rolled out their medical clinic in Port-au-Prince. I have to laud the organizations working together. A big Canadian Muslim charitable organization is raising $1.5mm for Haitian relief, and is working the the Latter-Day Saints on the ground with water and food efforts, for example.

Tradesmen: Some with attitude problems…. Okay, so I’m ignorant. I don’t enjoy remodelling. I’ve never built a huge ” dream home “. I have to say that the experience of getting the office ready to put onto the market has been a real eye-opener. Some companies, such as our painting company, have been fantastic. The quote was prompt, and quickly adjusted when we added some areas to be painted and subtracted others, and the crew that they’ve sent out has been exemplary. The electrician highly recommended by my sister, however, Mario ( name changed to protect the surly ), turned out to be this guy who “was doin” us a favor by just gracing the building with his presence after 4 days of calls to do the estimate. He’s kind of busy, but will see if he can “fit us in” maybe late next week. Maybe the week after. We called another company that works for $18 an hour more but will do everything on Monday. Spit-spot. They were hungry, and Mario was “doing us a favor” I never do with people who are doing me a favor, because they always screw ya. Always.

On punishing realtors for getting buyers into deals they can’t afford:
Way back almost 30 years ago, I sold real estate to the public for 1 year. Let me begin by saying, I wasn’t very good at it. I wasn’t good at getting rid of the lookie-lous fast enough, and they wore out my tires and used up my gas. My forte in real estate, if I have one, is middle-class rentals that I own and rent to middle class folks. No section 8. Tried that too, and I don’t like dealing with people who are high and disorganized and who let the kids wreck the house. Anyway, back then, we had to “qualify” prospective buyers ourselves, whether it be for FHA mortgages, straight bank mortgages, etc. to see if they could pay for the homes prior to showing them. Then, we could only show homes in the price range they qualified for. Sounds good, right ? It didn’t work that way, because we couldn’t pull credit reports on them, and, big surprise, PEOPLE LIE because they want MORE. People lied to me many times about their assets and their cc debt, BECAUSE THEY WANTED TO SEE NICER HOUSES. Today, that desire has been magnified by 1000x. Realtors want to make a commission, so they let people see whatever they want, and then try to shoehorn them into some deal which everyone knows will fall apart down the road, but by then the banks and the realtors have moved on down the line. If the banks are dumb enough to make “hope” loans on properties based on their intrinsic value if occupied by Martians in 2050 ( I think that’s the current standard ), and the FHA is dumb enough to back that loan up, or some other institution is dumb enough to buy the paper without thoroughly investigating its soundness, then it’s all good, right ? The whole system was set up for failure, lo those many years ago. I think that letting the system fall apart, letting the foreclosures occur, letting the unwise banks be closed, letting the homes go into foreclosure and rot for awhile, is the only way to unwind. It can’t be stopped. I’ve seen many, many foreclosures process through the system in my neighborhood, and have looked at many foreclosures myself, although we haven’t bought any. Eventually, a single mom with a good job who needs a house for her kids, or a guy who can swing a hammer and has a family, come along, and buy the house for half of what it orignally sold for, and it gets fixed up, and reoccupied. It’s working, although boy is the process painful.

The idea that “Russia did it to US” or “China did it to US” handily avoids addressing the elephant stinking up the room, which is the question of whether the ginormous TBTF mortgage securitizer business model wasn’t a recipe for eventual financial disaster.

The Financial Times
Paulson claims Russia tried to foment Fannie-Freddie crisis
By Krishna Guha in Washington
Published: January 29 2010 21:06 | Last updated: January 29 2010 21:06

Russia proposed to China that the two nations should sell Fannie Mae and Freddie Mac bonds in 2008 to force the US government to bail out the giant mortgage-finance companies, former US Treasury secretary Hank Paulson has claimed.

The allegation is in his memoir On the Brink in which he also suggests that Alistair Darling, the UK chancellor, blocked a rescue takeover of Lehman Brothers by Barclays Bank when he refused to support special treatment by UK regulators.

Mr Paulson said that he was told about the Russian plan when he was in Beijing for the Olympics in August 2008. Russia had gone to war with Georgia, a US ally, on August 8.

“Russian officials had made a top-level approach to the Chinese, suggesting that together they might sell big chunks of their GSE holdings to force the US to use its emergency authorities to prop up these companies,” he said.

Fannie and Freddie are known as GSEs or government sponsored enterprises.

“The Chinese had declined to go along with the disruptive scheme, but the report was deeply troubling,” he said. A senior Russian official told the Financial Times that he could not comment on the allegation.
…
EDITOR’S CHOICE

Barclays Capital defends Lehman deal - Jan-29
John Gapper: How America let banks off the leash - Dec-16
Man in the News: Hank Paulson - Sep-26
In depth: Lehman: the aftershock - Jan-29
Paulson grilled over crisis decisions - Jul-17
The lessons: A Lehman deal would not have saved us - Dec-14

Whatever the banker men propose as a remedy for the problem of systemic risk seems unlikely to fix it. An independently assembled transnational regulatory authority should come up with an appropriate remedy, rather than deferring to the preferences of the perpetrators of the global financial crisis.

The Wall Street Journal
Bankers in favour of paying global fee
By Patrick Jenkins in Davos and Tom Braithwaite in Washington
Published: January 30 2010 00:02 | Last updated: January 30 2010 00:02

Some of the world’s most prominent bankers have come out in favour of a global bank wind-down fund, a concession from the industry after weeks of fighting proposals for new taxes in the US and Europe.

Government rescue packages for banksJosef Ackermann, chief executive of Deutsche Bank, told the Financial Times on Friday : “To help solve the too-big-to-fail problem I’m advocating a European rescue and resolution fund for banks. Of course, the capital for this fund would have to come from banks to a large degree.”

Bob Diamond, president of Barclays , also supported the idea of a global levy, which could see banks contribute tens or even hundreds of billions of dollars over a period of years.

“I think every G20 country would like to have an insurance scheme that would help cover the cost of any future bank failure,” he told the FT at the World Economic Forum in Davos. “A co-ordinated global system is preferable to an unlevel playing field.”
…

The Financial Times
Obama’s one-two punch misses its target
By Francesco Guerrera

Published: January 29 2010 18:15 | Last updated: January 29 2010 18:15

Had I been asked to write the speech Barack Obama delivered this week on the state of the union, I would have kept it short. “Not so good,” I would have advised the US president to say, and leave it at that.
…
The news here is that the administration and Congress have decided to respond to their problems by picking a fight with America’s largest banks.

In principle, there is nothing wrong with that. Financial groups can easily be portrayed as leeches, especially after a crisis in which they sucked up billions of dollars in taxpayers’ money and regurgitated billions in bonuses for their staff. The arrogance and aloofness of bank executives (more on that later) have only exacerbated the popular perception of a parasitic class looking after its own interests.

As fast-acting political gimmicks go, bashing bankers is a winner. But the one-two punch delivered by Mr Obama in recent weeks – a levy on banks’ short-term funding and a plan to make large financial groups smaller by making them curb non-client businesses – missed the mark.

Other commentators have expounded on the technical merits (or lack thereof) of the measures. My view is straightforward: the tax levy is too heavy-handed while the get-small idea is not heavy-handed enough.
…
Here is a novel idea for banking chiefs: get down from your ivory towers and propose (not lobby for, propose) a plan to reduce reckless risk-taking without harming the financial system or the economy. A nation awaits.

The Financial Times
Can money set you free?

By John Lanchester
Published: January 29 2010 16:50 | Last updated: January 29 2010 16:50

In 1982, partway through my first year at Oxford university, my father asked me a question that took me by surprise. He said, “Do you have enough money?”

It took me by surprise partly because it is somehow, in and of itself, a surprising question – not one that people often ask. What’s enough? We don’t ask ourselves that very often. I thought about what he’d asked for a moment and then said, truthfully, “I never think about money.” He laughed and said, “Then you’re rich.”

I remember this conversation so vividly partly because that seemed to me to be a profound truth: the definition of being rich is never thinking about money. But I also remember it because my father never talked about money. This was just about the only time we ever discussed it in a personal way. He could discuss it in the abstract, in terms of general issues or politics, but to talk about the effects of money made him unhappy. The issues it raised went too deep.

What was odd about that was that my father worked for a bank, the Hongkong and Shanghai Banking Corporation, for 30 years until he retired in 1979. That time was spent in Asia, except for a two-year spell in Hamburg where I was born. So Dad was a banker but he couldn’t bear talking about money. That was why the idea of never having to think about money struck him as the very definition of being rich.
…

It is quite interesting to note that monetary policy measures to offset the forces of deflation are apparently not sufficient to quell populist uprisings in the American populace: No “cross of gold” is necessary to resurrect the populist spirit from the fading collective memory — tight money with limited discriminatory exceptions for Wall Street bankers and other specially favored political constituents will do.

Populists and bankers
Strange meeting
The populist left meets the populist right to hammer the Fed

Jan 28th 2010 | ORLANDO, FLORIDA | From The Economist print edition
…
Populism in recent years has been mostly a phenomenon of the right, arrayed against big government, taxes and social permissiveness. But the current wave bears similarities to the strains of the 1890s and 1930s. Back then, populists drew strength from anger with bankers and their government enablers for impoverishing workers, farmers and businessmen.

In the 1890s America’s adherence to the gold standard brought on deflation that crushed debt-laden farmers. William Jennings Bryan, the Democratic nominee in 1896, campaigned against the “cross of gold” and “the few financial magnates who, in a back room, corner the money of the world.” In the 1930s Father Charles Coughlin, a fiery populist priest, inveighed against “debt merchants”, the “ventriloquists of Wall Street” and the Fed, “a system owned by a group of your masters and not by the American people”. Huey Long, a governor and senator from Louisiana, attacked “imperialistic banking control” but, like many populists, made an exception for small banks, on whose behalf he forced changes to both Franklin Roosevelt’s banking reforms and the Fed.

Populism’s standard-bearers today also thrive on the anger fed by financial chaos: bail-outs, bankers’ big bonuses and record budget deficits. Mr Grayson hardly has a radical background. He holds three degrees from Harvard University (something he plays down, since it makes people less likely to vote for him) and worked as an economist before earning a fortune in telecoms and law. The Fed, however, is an effective way to grab voters’ attention. “There are very few issues”, he says, “that bring you into contact with numbers with 13 digits in them.”

Comment to an article from The Economist (”Populists and bankers: Strange Meeting) which I posted last night and reposted just a moment ago:

Jan 30th 2010 6:43 GMT

The Environmentalist wrote:

The Federal Reserve cannot create capital - It can only socialize the losses.

Perhaps bank losses socialized in return for inflation destroying college savings funds is what Americans are irate about. Perhaps Americans are irate about a topsy-turvy business cycle, which is exacerbated by false interest rate signals generated by the Federal Reserve (a collection of BANKERS). And just perhaps having a central institution hand over FIFTY BILLION DOLLARS TO FOREIGN GROUPS LIKE CREDIT SUISSE just makes Americans mad in general.

Or perhaps we’re just all moronic ‘populists’ as The (poorly educated) Economist would have you believe.

Watchdog: Bailouts created more risk in system.

From AP story this morning:
The government’s response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.

The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.
Over the past year, the federal government has spent hundreds of billions propping up the housing market. About 90 percent of home loans are backed by government controlled entities, mainly Fannie Mae, Freddie Mac and the Federal Housing Administration.

The Federal Reserve is spending $1.25 trillion to hold down mortgage rates, and millions of homeowners have refinanced at lower rates.

“The government has stepped in where the private players have gone away,” Barofsky said in an interview. “If we take government resources and replace that market without addressing the serious (underlying) concerns, there really is a risk of” artificially pushing up home prices in the coming years.

The report warned that these supports mean the government “has done more than simply support the mortgage market, in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor.”

Barofsky’s report echoed concerns raised by housing experts in recent months, as home sales and prices rebounded. They warn that the primary reason for the turnaround last year has been billions of dollars in federal spending to lower mortgage rates and prop up demand.

Once that spigot of cash is turned off, they caution, the market will be vulnerable to a dramatic turn for the worse.

Here is the link to the entire Article:
http://finance.yahoo.com/news/Watchdog-Bailouts-created-apf-64186481.html?x=0&sec=topStories&pos=main&asset=&ccode=

I saw in in Yahoo finance.
It’s a government official finally saying the things a number of us have been saying here for the past 2 years. If it’s too big to fail, it’s too big.
The takeover by the Federal government of every aspect of the financial system to support the continued parasitism of a few large, quasi-government companies is absurd. It’s like living in the twilight zone.
Who would have thought that the government would own 90% of home loans with plans to try and make more, all in the hope of propping up prices until it can unwind itself from these ridiculous positions??

It’s like i said: Ben Bernanke is an idiot, whose only goal is to take bad loans on the “government” books until he can get enough inflation created going forward to sell the crap back into the market at previous bubble valuations. That is the entire plan of the FED.
The FED basically owns every toxic asset that Wallstreet produced and gave all the playerz free money for the worthless paper. IF they can’t get a boost in the prices of the “assets”, then the taxpayer (U and Me) gets stuck with the losses. That is the inevitable outcome. We are stuck while Traders (traitors?) bathe themselves in the bonus money they got from the FED and swapped on the exchange for even bigger gains, all while producing absolutely nothing.
It may be time to look at the revolutionary history books again.
The events of the past 2 years by the FED make King Louis look like a philanthropist.

I sincerely appreciate this guy’s efforts to protect the interests of all Americans (not just Wall Street banking interests), but to say “has increased the risk of” seems like a rather feeble substitute for an honest acknowledgment of the all-out deliberate effort by the government currently underway to reflate the housing bubble.

Unless it truly is different this time, I still don’t think it will ultimately succeed.

Watchdog: Bailouts created more risk in system

By DANIEL WAGNER and ALAN ZIBEL, AP Business Writers

Saturday, January 30, 2010 at 8:59 p.m.
Neil Barofsky, special inspector for the Troubled Asset Relief Program (TARP), testifies on Capitol Hill in Washington, Wednesday, Jan. 27, 2010, before the House Oversight Committee and Government Reform Committee hearing on AIG. (AP Photo/Pablo Martinez Monsivais)

WASHINGTON — The government’s response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.

The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.
…
Much of Barofsky’s report focused on the government’s growing role in the housing market, which he said has increased the risk of another housing bubble.

“The government has stepped in where the private players have gone away,” Barofsky said in an interview. “If we take government resources and replace that market without addressing the serious (underlying) concerns, there really is a risk of” artificially pushing up home prices in the coming years.

The report warned that these supports mean the government “has done more than simply support the mortgage market, in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor.”

Barofsky’s report echoed concerns raised by housing experts in recent months, as home sales and prices rebounded. They warn that the primary reason for the turnaround last year has been billions of dollars in federal spending to lower mortgage rates and prop up demand.

Once that spigot of cash is turned off, they caution, the market will be vulnerable to a dramatic turn for the worse. Daniel Alpert, managing partner of investment bank Westwood Capital, wrote in a report that national home prices are bound to fall 8 to 10 percent below the lows of last spring.

“The lion’s share of the remaining decline will occur in markets that saw sizable bubbles but have not yet retrenched,” he wrote.

Officials from the Obama administration counter that massive federal intervention has helped the housing market stabilize and prevented more dire consequences.

Barofsky’s report also disclosed that, while the Obama administration has pledged to spend $75 billion to prevent foreclosures, only a tiny fraction - just over $15 million - has been spent so far. Under the Making Home Affordable program, only about 66,500 borrowers, or 7 percent of those who signed up, had completed the process as of December.

He said the key to preventing future crises is to reform Fannie Mae and Freddie Mac, create and improve loan underwriting and supervision of banks. He stopped short of endorsing specific proposals for overhauling financial regulation, but said many of the proposals would go far to improving the system.

The Associated Press

Lesson for Wall Street Megabank credit card service providers:

When plankton dies, whales die, too. Enjoy the debtbeat customer base that you so carefully cultivated through the years!

Fitch: Late credit card payments rise to record
By The Associated Press
Tuesday, January 5, 2010 at 11:11 a.m.

NEW YORK — Consumers still struggle with debt and it’s likely to be a persistent problem this year as unemployment remains high, analysts with Fitch Ratings said in a report released Tuesday.

Delinquent balances on credit cards reached record levels and defaults surged higher in December, Fitch said.

The rate for payments more than 60 days delinquent reached an all time high of 4.54 percent for the December index, which is based on performance data through the end of November. The rate surpassed the previous high of 4.45 percent set in June.

Charge offs - loans that won’t be repaid - crept up to 10.68 percent from 10.09 percent in the prior month but remained inside of the record high of 11.52 percent set in September 2009.

Charge offs are poised to trend even higher in the coming months as consumers struggle with debt burdens in the still challenging employment environment, said Fitch Managing Director Michael Dean.

Fitch analysts expect unemployment to peak at 10.4 percent in the second quarter of this year and remain above 10 percent throughout the year.

Charge offs peaked in the third quarter of 2009 with Fitch’s index reaching 11.52 percent in September 2009 before receding in recent months. While recent trends point to higher charge offs, future deterioration is not anticipated to be as severe given that unemployment is expected to plateau, the analysts said.
…

AP: 2009 bankruptcies total 1.4 million, up 32 pct
By MIKE BAKER, Associated Press Writer

Monday, January 4, 2010 at 11:08 a.m.

Graphic shows percent increase of bankruptcy filings in each state last year compared to 2008.

RALEIGH, N.C. — U.S. consumers and businesses are filing for bankruptcy at a pace that made 2009 the seventh-worst year on record, with more than 1.4 million petitions submitted, an Associated Press tally showed Monday.

The AP gathered data from the nation’s 90 bankruptcy districts and found 1.43 million filings, an increase of 32 percent from 2008. There were 116,000 recorded bankruptcies in December, up 22 percent from the same month a year before.

While experts believe some of the increase is due to a natural recovery as consumers and attorneys become accustomed to a recent overhaul of bankruptcy laws, the numbers indicate clear correlations to recession-weary regions. Arizona saw the fastest increase, a jump of 77 percent from the year before, followed by Wyoming (60 percent), Nevada (59 percent) and California (58 percent).

Emile Harmon, who owns a law firm in Tempe, Ariz., said the firm has doubled its staff to handle the surge in bankruptcy filings. The lawyers have been steadily shifting away from their other areas of business, civil lawsuits and divorce cases.

“Bankruptcy is kind of swallowing the whole practice.” Harmon said. “There’s little time to do other stuff.”
…

Comment: If the Fed has PR staffers working to quell the wave of populism that is sweeping America, then let me be the first to point out that they are failing miserably.

My hunch is that a simple rule to ban anyone who worked for Goldman Sachs, JP Morgan-Chase, Bank of America, Morgan Stanley or Chase Manhattan from a top government post for, say, one-decade after separation of service would just about fix the systemic risk problem, once and for all. Think of it as a separation of powers between Wall Street and K Street.

What do y’all think about this idea?

From a NY Times article today on “How the reform the Nations Financial System”:

The phrase “too big to fail” has entered into our everyday vocabulary. It carries the implication that really large, complex and highly interconnected financial institutions can count on public support at critical times. The sense of public outrage over seemingly unfair treatment is palpable. Beyond the emotion, the result is to provide those institutions with a competitive advantage in their financing, in their size and in their ability to take and absorb risks.

As things stand, the consequence will be to enhance incentives to risk-taking and leverage, with the implication of an even more fragile financial system. We need to find more effective fail-safe arrangements.

Here’s an arrangement. I think it works just fine.
Go after Goldman Sachs, CitiGroup, JPMorgan, et. al and LIQUIDATE their Assets. If the companies are insolvent, then go after the executives and CLAW BACK All the bonus money from the last 5 years.
Go after ALL their personal assets to recover the money they have STOLEN from their shareholders and the taxpayers.
Then, you set up NEW banks, with the money the FED created going to NEW banks, with NEW executive officers, while the others are waiting in prison cells awaiting trial.
That will fix America’s financial system. Instead, the inside traders from Goldman got the “fix” in at the FED and we wrang our hands and figured out how to transfer all the losses to US, while they pigs on Wallstreet ate their caviar, drank their champagne and boarded their jets to fly down to the Caribbean for a pleasant yachting venture in the sun. Oh, they did stop by CONgress for a visit to say that “mistakes were made”, but there was “really nothing they could have done to prevent the collapse of the positions they took.”
They were doing “God’s work.”
“We just need more money to cover our expenses. Jet fuel prices went up, too.”

Count on our fast thinking gubmint agencies to come up with great ideas such as this one! Hey, we need to dump them somewhere.

Haiti earthquake: Push to send FEMA trailers to Haiti stirs backlash
News from Latin America and the Caribbean

The trailer industry and lawmakers are pressing the government to send Haiti thousands of potentially formaldehyde-laced trailers left over from Hurricane Katrina — an idea denounced by some as a crass and self-serving attempt to dump inferior American products on the poor.

“Just go ahead and sign their death certificate,” said Paul Nelson of Coden, Ala., who contends his mother died because of formaldehyde fumes in a FEMA trailer.

The 100,000 trailers became a symbol of the Federal Emergency Management Agency’s response to Katrina. The government had bought the trailers to house victims of the 2005 storm, but after people began falling ill, high levels of formaldehyde, a chemical that is used in building materials and can cause breathing problems and perhaps cancer, were found inside. Many of the trailers have sat idle for years, and many are damaged.

Question: Where has drumminj been lately? I haven’t seen a post by him/her since I was recently excoriated for my cruel and inhumane ad hominem attacks on “certain posters.”

I am curious whether he/she thinks the average quality of the discussion on this blog has subsequently improved or declined?

BTW Combo, thank for your message a few weeks ago about a lot of people learning that real estate doesn’t always up and that this was a new idea to a whole generation of people. You put it in a way that my wife understood.

Nasa mission to unravel sun’s threat to Earth.
A new probe could help scientists predict the solar storms that cause chaos for us. January 31, 2010

NASA is to embark on one of its most ambitious missions in an attempt to unlock the secrets of the sun.

Following its launch in nine days’ time, the US space agency’s Solar Dynamics Observatory (SDO) will spend five years in orbit trying to discover the causes of extreme solar activity, such as sun spots and solar winds and flares.

Scientists have long been aware that disturbances on the sun can trigger dangerous x-rays, charged particles and magnetic fields that can disrupt power supplies, communication signals and aircraft navigation systems on Earth.

By understanding how such solar phenomena are created, they hope to be able to produce reliable forecasts of “space weather” and provide advance warnings of any threat.

Orbiting the Earth at a distance of 22,300 miles, the observatory will measure fluctuations in the sun’s ultraviolet output, map magnetic fields and photograph its surface and atmosphere.

Experts have likened the mission to a “giant microscope” that will capture for the first time every nuance of the sun’s exterior. The images relayed to Earth will be 10 times clearer than high-definition television.

Great maybe they can explain those large objects seen recently in the sun’s corona. Or not!!

Spoke with a RE developer last evening, I told him that I had noticed he has yet to reduce prices on any of his projects. He said, I am not going to, just renegociated his terms with his bank, and will be paying 2.3% IO for 24 months on all of his property.

He can swing it and like the rest of the RE crowd around here looks for 2010 to be slow but increasing and a nice turn around inside 24 months.

I asked how many properties he had closed since the first of the year? His answer was none. He has about 300. Mixed… lots and around 80 houses.

His stuff ranges from low 3’s to low 5’s (houses) and low 1’s to low 2’s (lots).

Spoke with a fellow last week that sent in his chase card payment in Dec. His Jan. statement had a $35.00 late charge on it. Stated his Dec. payment was late, by one day. So what stops these card groups from holding or dating a mailed payment, as received a day late. How would you know? You wouldn’t.

Which is why I haven’t mailed in a payment since the 1990s. If your card doesn’t allow online payments then get rid of it. Alternatively, drive through the drive-through of the bank and deposit the payment that way. At least you get a receipt.

It may not even be deliberate. The guy who runs their mail processing facility might just be out sick the day your check arrives, or their machines might break down. I never mail a payment for which there is a penalty for late payment.

A reality check from Peter Schiff, who is running for Chris Dodd’s Senate seat.

The Precarious State of Our Union

Peter Schiff
Jan 31, 2010

In this week’s much anticipated State of the Union address, President Obama again demonstrated his poor understanding of the fundamental problems that confront our nation. By following the advice of the same people who helped guide our economy to the precipice of total collapse, Obama now threatens to push it over the edge.

Notwithstanding his well crafted lip service regarding future spending restraint, the essence of his current program is for more government spending and larger deficits. For all his talk about job creation, his policies will further burden those who might otherwise create those jobs with higher taxes and more regulation. While he did call for tax cuts for the middle class and offered what amounts to bailouts for those struggling to repay student loans, such cuts do nothing to promote growth in the near term and will add to the deficits in the long term.

The President spoke optimistically about the future, but in reality there is little evidence to support such an upbeat outlook. He began his speech by assuring us that the worst of the storm had passed. General Custer may have said something similar when the first wave of Indian attacks ebbed at Little Big Horn.

While Obama did have some harsh words for Wall Street (not exactly a courageous political stance), he leveled no criticism at the Federal Reserve or other government agencies that had financed and guaranteed all the ridiculous real estate speculation that precipitated the crash. And while he at least conceded that the prosperity of the last decade was based on illusions, he continued to endorse the very policies that produced the mirage in the first place.

To lead us back to brighter days, he articulated a vision of a centrally planned recovery, where clean energy and a Soviet style five-year plan to double our exports would make our economy preeminent once more. He fails to understand that the only reason our economy rose to the top in the first place is that the government left it alone.

In the words of the Spanish philosopher George Santayana, “Those who cannot learn from history are doomed to repeat it.” Since our President cannot even learn from the mistakes of his immediate predecessor, to say nothing of those he made himself while in the Senate or during his first year as president, we are surely doomed to repeat them, perhaps more quickly than Santayana could have imagined.

Rather than tightening the reins on the reckless monetary policy that undermined our savings, diminished our industrial output, inflated asset bubbles, and led to reckless speculation on Wall Street and excess consumption on Main Street, we are loosening them further.

Rather than repealing regulations that distort markets and create moral hazards, we are adding new ones that do more of the same.

Rather than cutting government spending to reduce the burden it places on our economy, we are increasing both the amount of the spending and the size of the burden.

Rather than making government smaller so that the private sector can grow, we are making government bigger and forcing the private sector to shrink.

Rather than paying off our debts we are taking on even more.

Rather than encouraging people to save we are enticing them to spend.

Rather than creating jobs, we are merely creating unemployment benefits.

As a result, instead of seeding the soil for a real recovery we are setting the stage for a prolonged depression.

Jim Bunning grilling Bernanke on monetary policy, housing bubble, derivates, bank supervision and illegal purchases from GSEs.

http://www.youtube.com/watch?v=rka9VbPPMys

Charles Biderman of TrimTabs Claims US Government Supporting Stock Market.

http://watch.bnn.ca/trading-day/january-2010/trading-day-january-8-2010#clip253604

Get this: My GF’s sister and husband are planning a strategic default to escape an underwater IO about-to-explode loan at the advice of a family friend loan officer for a mega-bank. The couple figure they can buy a bigger house first (for which the loan-officer friend assures them they will qualify) and get a better fixed-rate loan for the same payment as the current crappy one. They are looking to upgrade! Incidentally, the loan-officer guy has told them that he will not handle any part of the deal but will advise them throughout. This couple happens to be very mainstream-type, and would always be doing the popular thing. Look out below.

http://www.survivalblog.com/2010/01/an_insiders_view_of_the_real_e.html

An insiders view of the real estate train wreck - warns that the de facto government nationalization of the housing market through FHA loans and other interventions, will make the coming housing and banking crash exponentially worse.

PORT-AU-PRINCE (Reuters) - Haitian police have arrested 10 U.S. citizens caught trying to take 33 children out of the earthquake-stricken country in a suspected illicit adoption scheme, authorities said on Saturday. ~ World | Natural Disasters ~ 1-30-10

The five men and five women were in custody in the capital, Port-au-Prince after their arrests on Friday night. There are fears that traffickers could try to exploit the chaos and turmoil following Haiti’s January 12 earthquake quake to engage in illegal adoptions.

One of the suspects, who says she is leader of an Idaho-based charity called New Life Children’s Refuge, denied they had done anything wrong.

The suspects were detained at Malpasse, Haiti’s main border crossing with the Dominican Republic, after Haitian police conducted a routine search of their vehicle.

Authorities said the Americans had no documents to prove they had cleared the adoption of the 33 children — aged 2 months to 12 years — through any embassy and no papers showing they were made orphans by the quake in the impoverished Caribbean country.

“This is totally illegal,” said Yves Cristalin, Haiti’s social affairs minister. “No children can leave Haiti without proper authorization and these people did not have that authorization.”

Police say ‘Men in Black’ actor Rip Torn, 78, broke into bank with loaded gun ~ Associated Press ~ 01/31/2010

Actor Elmore “Rip” Torn has been charged with breaking into a Connecticut bank and carrying a loaded handgun while intoxicated.

State police say the 78-year-old Salisbury resident was arrested Friday night after police found him inside the Litchfield Bancorp with a loaded revolver.

The “Men in Black” actor has been taken into custody and booked on charges including burglary and possession of firearm without a permit. He is being held on $100,000 bond and is scheduled for a Monday appearance in Bantam Superior Court.

Last year, Torn was given probation in a Connecticut drunken driving case and granted permission to enter an alcohol education program. He also has two previous drunken driving arrests in New York.

JAL INC. Problems taint the Once TBTF Giant.

What went wrong with the economic giant that arose from the ashes of World War II?

The problems that confront Toyota, Sony and JAL differ, but experts say their struggles have some common themes: the perils of global expansion, a tendency to embrace the status quo, and smugness bred from success or a too-big-to-fail mentality.

“Arrogance and some complacency came into play, driven by the idea that their ranking as No. 1 producer of quality goods wasn’t at risk,” said Kirby Daley, a veteran Tokyo trader who is now chief strategist at Newedge Group, a financial services firm in Hong Kong.

The global economic crisis helped to expose weaknesses, he said. “There was nowhere to hide.”

Added to the mix for Toyota and Sony is intense competition from upstarts in South Korea, China and elsewhere in Asia.

http://news.yahoo.com/s/ap/20100131/ap_on_bi_ge/as_battered_japan_inc

awaiting wipeout: I just read a post you made a few days ago regarding missing your piano in storage. I feel the same way. I was given my parents’ piano when they moved in July, only I don’t have room for it right now so it’s sitting in a friend’s dining room at the moment. Sucks because I’d like to take lessons again (haven’t had them since I was a kid) and would love to get my son playing.

Close it down, close them all (bases) down, come home, let the rest of the world fend for themselves. The U.S. is the country so many love to hate. We should stop contributing, we can’t afford it anyway.

Thousands protest in Tokyo against U.S. military presence in Japan
Daily Mail Reporter ~ 30th January 2010

Thousands of protesters from across Japan marched today in Tokyo to protest against U.S. military presence on Okinawa, while a Cabinet minister said she would fight to get rid of a marine base Washington considers crucial.

Some 47,000 U.S. troops are stationed in Japan, with more than half on the southern island of Okinawa.

Residents have complained for years about noise, pollution and crime around the bases.

Japan and the U.S. signed a pact in 2006 that called for the realignment of American troops in the country and for a Marine base on the island to be moved to a less populated area.
Enlarge Tokyo protest

Protest: Some 6,000 people gathered at a rally in Tokyo calling for the withdrawal of U.S. Marine base stationed on the Japanese island of Okinawa

But the new Tokyo government is re-examining the deal, caught between public opposition to American troops and its crucial military alliance with Washington.

On Saturday, labor unionists, pacifists, environmentalists and students marched through central Tokyo, yelling slogans and calling for an end to the U.S. troop presence.

They gathered for a rally at a park - under a banner that read ‘Change! Japan-U.S. Relations’ - for speeches by civil leaders and politicians

“There is no recovery. The only real economic question facing the world is: Will the economic bottom fall out all at once or will it be a chain reaction? The guillotine, or death by a thousand cuts?

The Trends Research Institute cannot predict what undreamed-of schemes central banks and governments will dream up this time to bail out the toobig-to-fail financial fraudsters, and artificially prop up sagging economies, thereby taking on more debt.

What we can predict is that the commercial real estate collapse, which we forecast for 2009, will intensify in 2010. Though briefly forestalled by government intervention (in the US, TARP, TALF, American Recovery and Reinvestment Act, etc.), the Dubai World debacle is a resounding signal that commercial is crashing. Neither “contained” nor isolated, as alleged, the world is awash in Dubai World clones: overbuilt developments with no possibility of renting and therefore no possibility of paying off highly-leveraged loans. ($3.1 trillion of debt finances the estimated $6.5 trillion of commercial real estate in the US alone.)

” When commercial real estate collapses, the props will be pulled out from under the banks holding the loans. Absent governments coming to the rescue with more prop trillions, the shock from the free-falling commercial sector will irreparably damage the equity markets and reverse modest gains made possible by central bank interventions.”

http://www.larouchepub.com/other/2010/3704summers_go_now.html

Why Larry Summers Must Go Now!

by Scott Thompson and Paul Gallagher

If the rising movement of American patriots is going to clean out the London/Wall Street swamp of the Obama Administration, not only must Treasury Secretary Tim Geithner go immediately; but Larry Summers, Obama’s chief economic liar and cheat, must get the boot, as fast, or faster.

In a national condition of economic collapse, financial speculation, and swindling, brought on since the 70-year-old Glass-Steagall principle of sound national banking was thrown away a decade ago: This is the government official who repealed it. In the national misery of mass unemployment topping 30 million Americans: This is the “theorist” of doing away with unemployment insurance to “make people find a job.” With the Obama “stimulus” act having clearly failed to reverse that mass unemployment: This is the head of Obama’s economic team who, a year ago, ruled out any program of large-scale credits for infrastructure public works, such as was proposed by economist Lyndon LaRouche, and sought by Democratic constituencies and some Congressional Democratic leaders. With more millions of homes being repossessed, nearly 40 million Americans depending on food stamps to eat, and real unemployment rising over 20% of our national workforce, this is the economics chief who loudly repeats, “The economy is recovering,” even drowning out members of his White House team who know the opposite is true.

As we will show below, Larry Summers’ economic blunders and crimes are many, and some of them have had devastating consequences for this nation and others. (See link for remainder of article).

http://larouchepub.com/other/2010/3703aig_must_answer.html

The Case of AIG: We the People Demand Answers.

If a already discussed please disregard.

Anyone see NAR’s latest desperatation campaign? Lots of fraudulent TV ads, Radio ads pumping a cheesy propaganda site, “houselogic”.

The tv commercials are sickening.

Hey PB you missed this one

Verizon to layoff 13,000!!

Mogambo is back from his hiatus….

http://dailyreckoning.com/false-hope-in-financial-free-lunch/

Feb. 1 (Bloomberg) — Australian borrowing for home- buying fell to a five-year low last month after house prices climbed and the central bank increased lending rates, according to Australian Finance Group Ltd.

The group, which says it accounts for more than 10 percent of Australia’s mortgage market, arranged A$1.55 billion ($1.37 billion) of mortgages in January, 19 percent less than a year earlier and the lowest for any month since January 2005, Managing Director Brett McKeon said in an e- mailed statement.

The share of loans taken by first-time buyers slumped to 13 percent, half the rate of a year earlier, as a government support program for new purchases ended.

Feb. 1 (Bloomberg) — HSBC Holdings Plc Chief Executive Officer Michael Geoghegan said more countries will adopt the mortgage lending caps that protected Asia during the collapse in the U.S. and U.K. housing markets.

“The fact that Asia does guide you to the sort of loan-to- value ratio you should have has certainly helped Asia through this crisis,” Geoghegan said in an interview with Bloomberg Television today. “Making sure people have their own skin in the game as well as the bank’s skill in the game is important.”

Hong Kong, where Geoghegan is based after transferring from London effective today, limits the percentage of a property’s value a homebuyer can borrow, as do China and South Korea. In countries such as the U.S., Spain, the U.K. and Ireland, the lack of restrictions on mortgage lending helped exacerbate property-market implosions, according to Geoghegan

In 1987, one year after the last major overhaul of the Alternative Minimum Tax system, only one tenth of one percent of all returns had to pay the Alternative Minimum Tax.

Today, the Alternative Minimum Tax is no longer just for high-income individuals. Now, many middle-income Americans are paying the Alternative Minimum Tax or having their tax credits limited by its hidden effects.

The Treasury Department expects that more and more people will be paying the AMT over the next few years.

In fact, in 2010, the percentage of married couples with children paying AMT is projected to be 39 percent.

Home Equity Interest: Home mortgage interest claimed as an itemized deduction is only deductible for the AMT if the loan was used to buy, build or improve your home. For regular tax purposes, interest on home equity mortgages up to $100,000 is deductible, even if the proceeds are used for personal purposes, such as buying a car or paying off credit card debt. So unless the home equity loan proceeds were used to improve your home, the interest is added back for AMT purposes.

Suggestion: If you are subject to the AMT, there is no advantage to using your home equity line of credit to buy a car, because the interest will not be deductible. You may be able to get a lower interest rate from a regular car loan. If the car is used in your business, you may be able to write off some of your auto loan interest as a business expense on Schedule C.

The American Recovery and Reinvestment Tax Act, passed into law earlier this year, repealed the individual and corporate AMT for all tax-exempt bonds issued in 2009 and 2010. Refunding bonds which refund obligations issued after December 31, 2003 are also excluded from the AMT.

Normally, tax-exempt interest from private activity bonds is not tax-exempt for AMT purposes. A private activity bond is a state or local bond issued to provide funds for private, nongovernmental activities such as building a sports stadium, industrial development, student loan financing, or low-income housing. These bonds are often issued by states, counties or cities and are tax-exempt for regular federal tax, but not for the AMT. If you invest in mutual funds, the 1099 you get will list how much interest you received from private activity bonds. This amount is entered on Line 12 to show the income as taxable for AMT purposes.

Suggestion: If you are subject to the AMT, invest in tax-exempt bonds issued before 2009 that are not private activity bonds. Many mutual fund companies have two listings of state bond funds, one that contains private activity bonds, and one that doesn’t. Read the literature carefully.

This is in the “I couldn’t resist file.” It is an email I sent to Bloomberg’s Joeseph Heaven and his response.
Enjoy.
(Here is the link: http://www.bloomberg.com/apps/news?pid=20601109&sid=alrOTKfBPvIs&pos=13)
Roidy

My Email:
You reported:
“He also gave up his $7,000-a- month, 250-square meter house with gardener, located 15 minutes from UBS’s Stamford, Connecticut trading floor, which is the size of two football fields.”

Is the house the size of two football fields, or is the trading floor the size of two football fields?
A 250 square meter house is about 2690 square feet. Two football fields are about 115,200 square feet. The cost of this is $84,000 per year which is a lot of rent for normal folks in a 2700 square foot rental house, gardener or no. For a criminal trader who has bilked the US taxpayer and ran away with the money, it isn’t so much. Now, a 115,200 square foot house is a completely different matter.

Please clarify.

jfanderson57

Reply
JOSEPH HEAVEN, BLOOMBERG/ NEWSROOM:
to bcc: me

show details 12:38 PM (9 hours ago)

The trading floor.

(The house was 250 square meters.)

JH

The AMT reduces the number of high-income filers who pay no income tax. In 2001, an estimated 100 tax filers with income over $1 million avoided all income tax, but at least 700 would have if not for the AMT. Even so, this goal could be accomplished more simply in the regular income tax.

The AMT is notoriously and pointlessly complex. The Internal Revenue Service and the Taxpayer Advocate have flagged the AMT as one of the most complicated tax provisions to comply with and administer. Most people required to fill out the AMT forms end up owing no additional taxes. The AMT also creates complicated interactions with the regular income tax.

The AMT raises marginal tax rates. By 2010, the AMT will impose higher marginal tax rates than the regular income tax does for 93 percent of AMT taxpayers. High marginal tax rates encourage tax avoidance and penalize work and saving.

The AMT is poorly targeted. Although originally intended to curb tax sheltering, the AMT raises less than 5 percent of its revenue from anti-sheltering provisions, such as accelerated deprecation or oil depletion allowances. In 2010, only about 1 percent of AMT taxpayers will be subject to the tax due to anti-sheltering rules. A key reason why the AMT does not target shelters very well is that the preferential treatment for capital gains—the lynchpin of most individual tax shelters—is not curtailed by the AMT.

The AMT imposes penalties on marriage and having children. Couples will be more than 20 times as likely as singles to face the AMT in 2010. Because the AMT prohibits deductions for dependents, 85 percent of married couples with two or more children will face the AMT, 97 percent among such couples with income between $75,000 and $100,000. About 6 million taxpayers will face the AMT in 2010 simply because they have children.

The AMT also ignores some itemized deductions, such as investment expenses and employee business expenses, and some medical and dental expenses. It also counts as income the interest from private-activity bonds, a type of tax-exempt bond issued by governments, usually to finance sports stadiums and the like. Finally, AMT rules force you to pay taxes on the “spread” between the market price and the exercise price of incentive stock options granted by your employer. For example, if you exercised an option to buy 100 shares of stock for $3 a share and the stock was trading at $10, the spread would be $7 a share, or $700. Under the regular rules, you wouldn’t pay current taxes on that amount, but under the AMT, it’s considered income.

Sorry, you’re not finished yet. People get pushed into the AMT zone for different reasons, and some are actually better than others. That’s because you could be eligible for the so-called minimum tax credit, which allows you to claim a credit on your tax return in future years for some of the extra taxes you paid under AMT rules. So you have to fill out another document, Form 8801, to determine if you are eligible. For whatever reason, the tax rules say that exercising incentive stock options is one of the few things that qualifies you for the credit, so if that’s the reason you ended up paying the AMT, pay special attention to this form.

“for whatever reason, the tax rules say that exercising incentive stock ioptions is one of the few things that qualifies you for the credit” Nice of the CEO’s to write them in these credits.

The end of something?

* The Wall Street Journal
* FEBRUARY 1, 2010

investing for income
Mortgage Funds Brace for Major Shift
The end of a U.S. program supporting the home-loan market could reduce returns to investors

By ROB CURRAN

There may be an Arctic front looming for mortgage-focused mutual funds as the Federal Reserve prepares to stop buying securities backed by home loans next month.

The Fed kept mortgage rates low in 2009 by acting as a buyer of securities issued by or backed by three government-controlled entities: the Government National Mortgage Association (known as Ginnie Mae), Fannie Mae and Freddie Mac. These so-called agency securities provide funding for more than half of all U.S. home loans outstanding.

But the planned withdrawal of that government aid may cause mortgage rates to rise and the prices of mortgage securities—which move in the opposite direction—to fall, according to many money managers and analysts, potentially reducing returns for investors in mortgage-focused funds.

“Low underlying yields made even lower by an artificial and temporary market stimulus…just the prescription for bad fun,” John Rekenthaler, vice president of research at Morningstar Inc., wrote in an online post titled “Bad Investment Ideas for 2010.”

Some portfolio managers have cut their agency holdings ahead of the Fed’s planned exit and started looking for returns in a much riskier part of the market: “non-agency” securities backed by “subprime” and other risky mortgages, the area that took such a massive beating in 2007 and 2008. Among those who say they have been selectively buying these securities recently are fund managers at firms including BlackRock Inc. and Goldman Sachs Group Inc.
…

Look on the bright side: At least this money will serve to fund a vital transportation link, rather than getting p!ssed away on some banksters’ bonuses.

* The Wall Street Journal
* REVIEW & OUTLOOK
* FEBRUARY 1, 2010

The Runaway Subsidy Train

By WENDELL COX

On Thursday the Obama administration awarded $8 billion in stimulus funds to plan and build high-speed rail projects in California and Florida, and for other routine passenger-rail projects masquerading as high-speed rail. This is a political plum to the states that will receive the money.

It is also a dream come true for fans of bullet trains in Japan and Europe and the faster, greenhouse gas-belching Mag-Lev (magnetic levitation) lines. But this is not money well spent.

Supporters say high-speed rail is a cost-effective, “green” solution to airport and highway congestion. In reality, it is costly to build and operate and has a negligible impact on highway and airport traffic. High-speed rail is driven by little more than a romantic notion to confer a European ambiance on American cities.

Proponents also claim that high-speed rail is profitable, but this too is off the mark. Internationally, only two segments have ever broken even: Tokyo to Osaka and Paris to Lyon.

Ridership in these markets has been bolstered by high gasoline prices and one-way highway tolls of $40 and $100, respectively. These and other foreign routes have attracted much of their ridership from a strong core of rail passengers that does not exist in the U.S.

The administration is giving California $2.25 billion for trains that are expected to reach 220 miles per hour between Los Angeles and San Francisco. The cost of building this rail line is now estimated by the California High Speed Rail Authority to be more than $40 billion and could be $60 billion or more.
…

Volcker to spell out future of banks

By Martin Webber
Editor BBC World Service business news

Wall Street sign and American flags
How tightly will Wall Street banks be regulated in the future?

Will an 82-year-old veteran central banker be the man who finally stops the music for the bankers of Wall Street?

A Congressional hearing in Washington on Tuesday may well provide the answer.

A week ago, US President Barack Obama, appeared to be telling America that the ideas of Economic Recovery Advisory Board chairman Paul Volcker would be the centrepiece of his plan to make the global financial system safer, announcing that the “Volcker rule” would determine the future of the world’s banks.

But since then, there has been complete confusion as to exactly what the President and Mr Volcker have in mind.
…