The Housing Bubble

Broward county (FL) get’s ready to raise the mill rates to “recovery” lost revenue. What a crock; home prices go up 2-3X, mill rates stay constant. Home prices fall, mill rates go up to “recapture” the revenue that was lost. Great system…

http://www.sun-sentinel.com/news/elections/fl-broward-tax-plans-20100216,0,1910987.story

Looks like Goldman Sachs was doing God’s work in Greece. Of course the god in question was Ares.

http://www.bloomberg.com/apps/news?pid=20601087&sid=asBNXSLtlN9E&pos=3

“Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit. No mention was made of the swap in sales documents for the securities in at least six of the 10 sales the bank arranged for Greece since the transaction, according to a review of the prospectuses by Bloomberg. The New York-based firm helped Greece raise $1 billion of off-balance-sheet funding in 2002 through the swap, which European Union regulators said they knew nothing about until recent days.”

By the way, how many are aware of the United States of America’s off balance sheet situation?

I’ve seen a lot of new names in the past few weeks. If you’re new, welcome to HBB! If you’re a long time lurker, thanks for joining in, with local data and anecdotes. All opinions are welcome, and needed!

Suburban homeless: Rising tide of women, families. (AP)

ROOSEVELT, N.Y. – Homelessness in rural and suburban America is straining shelters this winter as the economy founders and joblessness hovers near double digits — a “perfect storm of foreclosures, unemployment and a shortage of affordable housing,” in one official’s eyes.

“We are seeing many families that never before sought government help,” said Greg Blass, commissioner of Social Services in Suffolk County on eastern Long Island.

“We see a spiral in food stamps, heating assistance applications; Medicaid is skyrocketing,” Blass added. “It is truly reaching a stage of being alarming.”

Lone voice warns of debt threat to Fed.
Washington ~ FT

“Without pre-emptive action, the US risks its next crisis,” Mr Hoenig said in a speech at the Pew-Peterson Commission on Budget Reform.

Mr Hoenig said that rising debt was infringing on the central bank’s ability to fulfil its goals of maintaining price stability and long-term economic growth. “Stunning” deficit projections were putting political pressure on the Fed to keep interest rates low, infringing on its independence at the risk of inflation, he said.

He was the only Fed member who dissented at last month’s meeting against language indicating that interest rates should remain near zero for an “extended period”.

Stimulus funds going to slashed programs ~ USA TODAY

WASHINGTON — More than $3.5 billion in economic stimulus funds are going to programs that President Obama wants to eliminate or trim in his new budget.

The president’s budget released this month recommends getting rid of Army Corps of Engineers’ drinking-water projects, which got $200 million in stimulus funds, and a U.S. Department of Agriculture flood-prevention program, which received $290 million from the stimulus, a USA TODAY review of stimulus spending reports show.

The administration’s budget plan says the corps and USDA programs are inefficient and duplicate similar, more effective work by other agencies. The proposed cuts indicate the programs shouldn’t have gotten money from the $862 billion stimulus package, said Tom Schatz of the non-partisan budget watchdog Citizens Against Government Waste.

The Greeks Have A Word For It: “Enough!”

Reacting to austerity measure proposals by the government to rein it Greece’s budget deficit, some civil service workers there go on strike.

Austerity measures announced so far include a freezing of civil servants’ salaries, cuts in stipends and bonuses, a two-year increase in the average retirement age and higher taxes.

Finance Ministry employees went on a four-day strike Tuesday, and customs workers walked off the job for three days on Tuesday to protest the measures that they say will slash their incomes.

“Enough. The crisis wasn’t caused by civil servants. The bill should go to the wealthy,” read a banner carried by striking workers, about 500 of whom marched from the Finance Ministry to the nearby Parliament building.

Last week, striking civil servants shut down schools, grounded flights and walked out of hospitals in a 24-hour protest. A broader, general strike is planned for Feb. 24.

The customs workers’ strike was affecting imports and exports, while gas station owners issued appeals through the media to keep drivers from rushing to fill up their cars with fuel because it could cause a run on supplies until the end of the strike on Friday.

BB and bankers wet dream

When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.

It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.

New vehicle sales in south central Wisconsin in January were down 7.4 percent from January of 2009, a reversal of double-digit sales gains in December.

Reg-Trak, a Waterloo-based auto research firm, said new car and truck sales in the nine-county region totaled 1,817 vehicles in January compared to 1,962 sold in January of 2009.

In December, 2,180 new cars and trucks were sold in the nine-county region, a 19 percent increase over December of 2008.

In Dane County, new vehicle sales were down 14.2 percent in January of 2010 compared to January of 2009, with 911 vehicles sold this January and 1,062 sold last January.

New twist in Palm Beach County Fl. Looking at houses for sale and chcking the previous sales on the property appraiser site, what I know to be houses being forclosed show up - Sales Information Unavailable and Exemptions Applicant/Owner Year 2010. I guess they figured out if they are not getting any payments they might as well take advantage of the $50,000.00 property tax exemption. This is the case with the house I sold in Sep. 05, the place I have been renting since and several others I have looked at. The place I have been renting dropped the exemption a year after I moved in. The rest all used to show complete sales info and current exemptions. Now they show Exemptions Applicant/Owner Year 2010 and Sales Information Unavailable.

Extend and pretend?

U.S. MBA Mortgage Applications Index Decreased 2.1% Last Week

Feb. 17 (Bloomberg) — Mortgage applications in the U.S. fell last week as demand for loans to purchase homes and refinance declined.

The Mortgage Bankers Association’s index dropped 2.1 percent in the week ended Feb. 12. The group’s purchase gauge decreased 4 percent, while the refinancing measure fell 1.2 percent.

Blizzards along the East Coast and winter storms in the South last week may have discouraged home buying and refinancing. While government incentives have helped stabilize housing, a lack of job growth and limited access to credit are hurdles for the real estate market.

The market is “going to be gradually recovering but it’s not going to be a straight-line trajectory over the next two or three years or so,” Derek Holt, an economist with Scotia Capital Inc. in Toronto, said before the report.

Housing Starts Post Sharp Rebound- Reuters

Housing starts rebounded more strongly than expected to their highest level in six months in January, while permits fell slightly less than forecast, a government report showed on Wednesday.

This news must be a fluke, as everyone knows that San Diego real estate always goes up.

Business
Home prices roll backward
County’s 7.6 percent drop seen as seasonal fluke

By Roger Showley, UNION-TRIBUNE STAFF WRITER

Wednesday, February 17, 2010 at 12:02 a.m.

San Diego County home prices fell last month, erasing all of the gains achieved in the second half of 2009, MDA DataQuick reported yesterday. But analysts said the figures represented a statistical and seasonal fluke, and predicted the market is likely to see little fluctuation in values all year.

The overall median fell $25,000 or 7.6 percent, to $305,000, the single biggest month-to-month decline in 22 years of record-keeping and half the gain registered in the past 12 months. It stands about where it was in the spring.

But it was still $25,000 higher than in January 2009, when the median was $280,000, the lowest since prices began falling in late 2005.

Sales last month were down 36.4 percent to 2,322, a typical pullback from year-end closings in December, and off 5.6 percent from year-ago levels.

With most buyers taking a breather from buying over the holidays, the closings in January reflected continued interest by investors, hoping to purchase foreclosed properties at below-market levels, often with all-cash offers. The percentage of resales that had been foreclosed on in the previous 12 months rose to 38.2 percent, the highest since June. Last year, investor interest peaked in January at a record 55 percent.

Market watchers said the median could keep falling and test the $280,000 level, but it also could rise above December’s post-slump peak of $330,000.

The unknown factor is the pace of foreclosures. As foreclosures waned in 2009, the median rose. But analysts said that even if foreclosures grow again, the median could still rise, if more high-priced homes are among the distressed properties.
…

Im sure one of the goldman insiders prepared the report.

5 lessons from the housing-bubble bust

Look beyond the plummeting prices and mounting foreclosures to learn a few lessons that can help us avoid making the same mistakes in the future.
By Tamara E. Holmes of Bankrate.com

The pop heard ’round the world when the housing bubble burst brought a lot of bad news — from plummeting home prices to mounting foreclosures.

But with all bad times comes a slew of good lessons to be learned, says Shari Olefson, author of “Foreclosure Nation: Mortgaging the American Dream.”

Depressed home prices and low interest rates may have you wondering if the real-estate market has reached its bottom. Even if the worst is behind us, it makes sense to take in the lessons of the past few years so we can avoid making the same mistakes again.

Lesson No. 1: Adjust your expectations. Years ago, people purchased a home, lived in it all or most of their lives, passed it down to their children and enjoyed a gradual increase in wealth as the home gained value. But in the last decade, people bought a house expecting it to increase in value about 5 or 10 percent in a couple of years, and they’d move on to something bigger, says Brendon DeSimone, a real-estate agent with Paragon Real Estate Group in San Francisco.

If the housing-bubble nightmare has shown us anything, it’s that you can’t count on a home to be worth more than you paid for it when you’re ready to sell. “It’s back to basics,” DeSimone says. “You have to be in it for the long haul and you can’t be looking at your home value every month to see how much it’s gone up.”

Lesson No. 2: You can’t time the market. When home prices were skyrocketing, many people bought homes they could barely afford — or couldn’t afford — thinking they’d ride the wave of rising equity since the market was on the upswing. Likewise, today, many potential homebuyers are sitting on the sidelines waiting for the market to reach its ultimate low.

“You will never sell at the all-time high and you’ll never buy at the all-time low by planning it,” says Tim Burrell, a real-estate agent for Re/Max United in Raleigh, N.C. “The market will time you. You will sell, and on occasion you may happen to hit the all-time high or happen to hit the all-time low, but to study it and plan it and figure out and actually do it — it doesn’t happen.”

Instead, take a long-term approach to real estate and look for a home that enhances your life and will increase in value over time.

Lesson No. 3: Don’t treat your home like a piggybank. At the height of the real-estate market boom, “We had a whole bunch of people refinancing high-interest credit cards with a low-interest second mortgage on their homes,” Olefson says. Today, some of those people have lost their homes or are in danger of doing so because they were unable to handle the mortgage debt.

“As a country, we’ve all gotten way too comfortable with credit and having debt in our lives,” Olefson says. “But the problem really came when that morphed into our homes.”

As the market rebounds, “We need to promote the value of owning your home free and clear again, because residential real estate really is the backbone of our country. It’s the biggest asset for most people,” Olefson says. Likewise, instead of depending on your home for all of your wealth, continue to build up your cash reserves, Burrell suggests.

Lesson No. 4: Do your own research. Some people ran into trouble before the real-estate market crash when they took the advice of mortgage professionals without doing their due diligence and making sure the advice was in their best interest. The wisdom of speaking to a financial adviser, calling a nonprofit housing agency or even reading books on real-estate transactions before signing on the dotted line became apparent as homeowners struggled with changing terms on mortgages that they didn’t understand. It also makes sense to check the credentials of anyone advising you. “Be careful who you trust, take time to educate yourself, and first and foremost, if it sounds too good to be true, it probably is,” Olefson says.

Lesson No. 5: Think long-term financing. Adjustable-rate mortgages appealed to those who wanted the lowest possible interest rates and expected to be able to either sell their homes or refinance them before the mortgages reset. However, after the real-estate market crash, many didn’t have enough equity to refinance and houses began to sit on the market as prices went into a free fall. When it comes to financing, “you can’t just look at the next six weeks or two months or next year,” DeSimone says. “You have to say, ‘What happens to me in five years?’”

Ultimately, the real-estate market collapse was a lesson in learning to adapt, experts say. “When you see overexuberance, expect that it’s going to change,” Burrell says. “The only thing constant is change.”

John Stossel pointed out this quote from a union official in New York. It really highlights the essence of union mentality, particularly the ever-growing government union mentality.

Albany Police Officers Union President Chris Mesley says that, regardless of the faltering economy, a no-raise new contract is unacceptable.

And to hell with the public.

“I’m not running a popularity contest here,” Mesley said. “If I’m the bad guy to the average citizen . . . and their taxes have go up to cover my raise, I’m very sorry about that, but I have to look out for myself and my membership.”

Mesley added: “As the president of the local, I will not accept ‘zeroes.’ If that means . . . ticking off some taxpayers, then so be it.”

Casino MonteLago at Lake Las Vegas will close at midnight March 14, the casino owner announced today ~ Vegas Sun

The closure is a direct result of last week’s announcement that the Ritz-Carlton would be closing on May 2.

The casino is owned by CIRI Lakeside Gaming Investors LLC and is leased through Village Hospitality LLC, which is an arm of Deutsche Bank and owner of the Ritz-Carlton at Lake Las Vegas.

More than 170 people will be out of work as a result of the closure. Employees were informed by management today.

Fellow HBBer comment spotted on the MarketWatch web site:

Reader Response »

Record High Defaults=CHECK
Record High Foreclosures=CHECK
Record Low Sales=CHECK
Record Price Declines=CHECK

Folks, DO NOT buy any housing right now. There is no stabilization in housing until we get back to early 1990’s prices, possibly even early 1980’s. Let housing prices and rents collapse and don’t get in the way. ”

- RealtorsAreLiars | 7:25 a.m. Today

Keep up the good work!

Conoco, BP, Caterpillar Drop Out Of Cap-And-Trade Alliance
Ed Carson ~ Capital Hill

Here’s another sign of the shifting political winds on global warming: ConocoPhillips (COP), BP (BP) and Caterpillar (CAT) have decided not to renew their membership in the U.S. Climate Action Partnership, a broad alliance of corporations and environmentalists supporting cap-and-trade legislation.

“House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing GHG emissions,” Conoco CEO Jim Mulva said in a statement.

When President Obama swept into office with huge Democratic majorities in Congress, many corporations felt they needed to get on board to try to influence the legislation. But cap-and-trade has stalled in the Senate, the Copenhagen climate treaty talks failed and there has been a slew of embarrassing revelations regarding global warming data and forecasts. So sweeping emissions curbs no longer seem inevitable.

Here is a sure sign the real estate crash is not over yet: The MSM has not run out of real estate hand wringers just yet.

And BTW, I note that CRE is (was?) no small part of the San Diego area economy.

Outside the Box

Feb. 17, 2010, 12:01 a.m. EST

The worst is yet to come
Commentary: What to expect from the commercial real estate crisis

Relax, it’s just a correction

Breaking through a nuclear impasse

By Josh Lipton

NEW YORK (MarketWatch) — Over the next few years, a wave of commercial real estate loan failures could threaten America’s already-weakened financial system.

So warns a new report from the Congressional Oversight Panel as part of its oversight of the Troubled Asset Relief Program, highlighting yet one more hurdle for this country’s fragile economy.

The panel, chaired by Harvard law professor Elizabeth Warren, says it remains “deeply concerned” that commercial loan losses could jeopardize the stability of many banks, particularly the nation’s mid-size and smaller banks. Read the 183-page report for yourself here.

Worries about CRE loans — those loans taken out by developers to purchase and maintain shopping malls, offices, hotels, and apartments — have been simmering for months, as we noted in an October article. See “How Banks Will Fare in a Commercial Real Estate Crash.”
…

Ohio hospital system says it won’t hire smokers
Associated Press

AKRON, Ohio — A northeast Ohio hospital system has joined the ranks of companies that will no longer hire smokers.

Akron-based Summa Health Systems launched a nicotine-free hiring policy this year for all new employees.

People applying to work for Summa must agree to a urine test to confirm they don’t use tobacco products.

The policy doesn’t affect current employees at the six-hospital system.

Other hospital and health care systems have also stopped hiring smokers, including the Cleveland Clinic and Medical Mutual of Ohio.

I guess Mr Market likes lower home prices, as that is what will result if more inventory is added to the extant glut of vacant U.S. homes.

Indications

Feb. 17, 2010, 9:15 a.m. EST

U.S. stock futures point higher along with housing starts
Deere & Co., Whole Foods Market set to rise after earnings updates

U.S. stock futures stronger after three-day break

Breaking through a nuclear impasse

By Barbara Kollmeyer & Kate Gibson, MarketWatch

NEW YORK (MarketWatch) — U.S. stock market futures were pointing to another day of gains for Wall Street on Wednesday, buoyed by strong overseas markets, as early economic data on the U.S. housing market offered reason for cheer.

Stock indexes added to early gains after the government reported new home construction rebounded in January. The Commerce Department also revised its December count higher.

“We’re in good shape on housing starts and building permits. We don’t want this number to be too robust, since we don’t want too much inventory,” said Art Hogan, chief market strategist at Jefferies & Co.
…

Just finished reading yesterday’s bits. Damn, you guys are good.

- British savers are getting crushed by the printing presses.

- Fed members are trying to head-off the coming inflation revolt.

Tomorrow President Obama will give us the brand new National Commission on Fiscal Responsibility and Reform. He will create it by executive order and it will study the myriad debt problems the federal government has created and offer solutions to Congress.

~ Just what we need. Another study commission! Its recommendations will be merely suggestions to Congress, with no force of law, and they will not be made until after the November elections.

What the federal government must do is stop spending money it doesn’t have. Who needs an expensive commission to figure that?

Didn’t Pension funds dive into MBS and CDS in late 2000??

MOSCOW (Reuters) - Pension funds have started investing actively in gold last year viewing the metal as a safe long-term investment, the head of the World Gold Council told Reuters on Wednesday.

“Last year we saw a very notable switch of pension funds to holding gold for the first time,” Aram Shishmanian, the CEO of the council, told Reuters Financial Television on the sidelines of a forum organized by the Adam Smith Institute in Moscow.

He said China and South Africa were the top producers last year and added Russia’s weak mining legislation was the main constraint for the sector development in the country.

The WGC does not forecast gold prices for 2010.

Shishmanian said he believed the market will be “robust.”

Global gold demand dropped 11 percent in 2009 on weaker industrial and jewellery demand, but investors appetite for bullion is likely to remain strong this year, the World Gold Council said earlier on Wednesday

Lawyers see bankruptcy boom ahead
SF Business Times - February 17, 2010

Bankruptcies, foreclosures and litigation are likely to keep providing booming business to law firms, according to a survey by Robert Half Legal.

When asked which area of the law would grow fastest over the next three months, the 300 lawyers in the survey put bankruptcy and foreclosure at the top of the list. Litigation and labor and employment followed.

Charles Volkert, executive director of Robert Half Legal, said, not surprisingly, that “Economic conditions continue to fuel demand for specialists in bankruptcy and litigation.”

Try not to get haunted by a falling knife real estate investment.

Friday, February 12, 2010

The haunting debt of mortgages

People whose homes are worth less than the mortgage may be tempted to walk away. Or sell the house for less than they owe. But as Marketplace’s Jeff Tyler reports, the debt could haunt you for years to come.

Mannequin holding red word Debt (iStockPhoto)

TESS VIGELAND: Better than last month, but worse than last year. That’s the latest word on foreclosure rates from RealtyTrac. There were fewer foreclosures in January than in December, but they were still far higher than the same time last year. And the company estimates as many as 3.5 million more are on the way. Many home owners are tempted to walk away, or sell the house for less than they owe, and be done with it.

But as Marketplace’s Jeff Tyler reports, that debt could haunt you for years to come.

Jeff Tyler: In Fort Collins, Colo., retired Navy lieutenant commander James Poole is going through his second foreclosure. This time, as a renter.

James Poole: The house has been sold in foreclosure, and we were waiting for the bank to tell us when they want us to leave.

Poole lost his own home to foreclosure years earlier. When the auction didn’t cover the amount owed on the mortgage, the lender came after him for the difference. That’s what’s known as the “deficiency.” In his case, about $40,000. He says it ruined his credit and discouraged future lenders.

Poole: The lender will look into that, they’ll see this big deficiency judgment of tens of thousands of dollars on the record and decide maybe they don’t want to take second place behind that big a judgment.

Some people get caught by surprise. They assume that by giving up the title to the property, they will be released from their financial responsibilities.

Donya Monroe is executive director of the nonprofit Neighborhood Housing Services of Southern Nevada.

Donya Monroe: Unequivocally, absolutely not. It does not automatically release you from your deficiency or your obligation to pay that loan.

Some borrowers try a short sale. That’s where, before the property goes to foreclosure, it’s sold for less than is owed on the loan. Again, lenders won’t necessarily let you off the hook.

Bob Jacobs is a California real estate lawyer.

Bob Jacobs: I’ve had more than one client come in my office after they had completed a short sale and received a letter from a collections agency.

Laws differ from state to state. About 20 states have what are known as non-recourse loans. They protect the borrower, so the bank can’t seize your assets if you default. In other states, borrowers are more vulnerable.
…

Put aside for a moment the political pressure to regulate banking and trading. Ask the elder statesmen of these industries - giants like George Soros, Nicholas F. Brady, John S. Reed, William H. Donaldson and John C. Bogle - where they stand on regulation, and they will bowl you over.

They certainly don’t think of themselves as angry Main Streeters. They grew quite wealthy in finance, typically making their fortunes in the ’70s and ’80s when banks and securities firms were considerably more regulated. And now, parting company with the current chieftains, they want more rules, Louis Uchitelle writes in The New York Times.

While the younger generation, very visibly led by Lloyd C. Blankfein, chief executive of Goldman Sachs, lobbies Congress against such regulation, their spiritual elders support the reform proposed by Paul A. Volcker and, surprisingly, even more restrictions. “I am a believer that the system has gone badly awry and needs massive reform,” said Mr. Bogle, the 80-year-old founder and for many years chief executive of the Vanguard Group, the huge mutual fund company.

Mr. Volcker, 82, signed up the support of nearly a dozen peers whose average age is north of 70 and whose pedigrees on Wall Street and in banking are impeccable. But while Mr. Volcker focuses on a rule that would henceforth prohibit a bank that takes deposits from also buying and selling securities for its own account - risking losses in the process - most of his prominent supporters see that as a starting point in a broader return to regulation. And most do not hesitate to speak up in interviews with The New York Times.

Listen to Nicholas Brady, a Treasury secretary in the late 1980s and early 1990s and before that chairman of Dillon Read & Company, now extinct, but in its day a prestigious Wall Street house. “If you are a commercial bank,” he said, “and you wish the government to guarantee your deposits and bail you out if necessary, then you can’t be involved in speculative activity.”

Does that mean Mr. Brady, now 79, would tell commercial banks they could no longer trade securities for their customers? Mr. Volcker, who gained fame in the 1980s as chairman of the Federal Reserve, would permit this and so would President Obama, who has endorsed the Volcker restriction on proprietary trading, but not the broader ban on trading for customers. Mr. Brady just might take that extra step.

Imagine that lloyd doesn’t think there should be any regulation on his gambling, but he should still get the bailouts.

Bill Bonner chimes in with - “Congress is supposed to confront the problems of the nation…and solve them. But with more people getting something from the government than supporting it, Congress is not likely to change course. It responds to the perverse will of the people…and to its own corrupt predilections. We are all victims of democracy now.”

The majority of voters, eager to get what they can from the national treasury installed representatives in Washington that have run the country into un-payable debt in order to enrich everybody who demanded help. We’re getting what’s coming to us - and there’s not much we can do except throw a scare into the politicos in November.

Do you think any of this debt fueled the bubble?

http://finance.yahoo.com/college-education/article/108846/the-555000-student-loan-burden?mod=edu-continuing_education

I am thinking this is typical more than anyone knows. Makes Greece look like the high school in Grease.

The news wasn’t as bad as it could have been, especially considering the economic challenges posed during the summer of 2009.

During August, for example, sales tax revenue was down by more than 30 percent over the prior year. March 2009 presented its own challenges, with tax receipts off by more than 26 percent over the year before.

So when the town last week released its sales tax figures for the year just ended, a drop of 14.75 percent seemed pretty good, all things considered. That’s about on track with the city of Aspen, which also recorded tax declines of about 14 percent for the year.

County sales tax collections in Snowmass Village were off by 18.86 percent over the prior year.

A strong December, where collections were down by 3.30 percent over 2008, helped bring up the average. Still, this was the weakest December in terms of sales tax collections in more than five years.

There were two other months during 2009, February and May, when collections were off by single digits as well.

Reflecting the state of the real estate industry, real estate transfer tax collections for the year were down by a whopping 70.53 percent, with three months, January, April and December recording declines of 90 percent off or more over the prior year. That meant only about $1 million was earned from RETT, a huge contrast to the prior year, when the tax earned about $3.65 million.

Retail was hard hit – general retail was off by 18 percent and the “miscellaneous” category down by 30 percent. Grocery sales, sports equipment, liquor and drug categories were all down by percentages in the teens while lodging was off by 20 percent and restaurants down by about 5 percentage points over those recorded in 2008.

US banks take hit to clear home loan books
~FT New York February 17 2010

Big US banks including Bank of America, Wells Fargo, JPMorgan Chase and Citigroup are moving to clear their books of troubled mortgages by embracing “short sales”, in which homeowners settle debts by selling their properties for less than the mortgage value.

Short sales are expected to climb sharply this year as home values continue to fall in some parts of the US, leaving many borrowers owing more on their mortgages than their homes are worth.

heard a virginia politicain on the radio discussing an internet sales tax. his conclusion…”hey…we gotta build roads”.

everytime one of these wasteful spending politcians talks about a tax increase it’s either about the children or the effin roads.

makes my blood boil. i am to the point now where i say screw the damn roads.

U.K. Unemployment Claims Jump to Highest Since 1997.

Feb. 17 (Bloomberg) — U.K. jobless claims unexpectedly jumped in January to the highest level since Tony Blair led the ruling Labour Party to power almost 13 years ago as the recession destroyed work at businesses from carmakers to banks.

A local realtor called me today following up an inquiry on an airplane hanger a few months ago. Apparently one just sold for what she thought was a good price. I told her to call me when one goes for a mid-nineties price and she laughed. She stopped laughing when I asked her how business was and we proceded to have a conversation about the current state of the economy. She thinks this is a depression to which I replied we havent seen the depression yet but stay tuned, you will know when it comes. She called me a pessimist. A depression is the only cure for the sickness the world has contracted. We need to stop with the denial and welcome the next phase.

Va. Senate OKs sales tax bill for online retailers
By BOB LEWIS (AP) – 20 hours ago

RICHMOND, Va. — A bill that would require global online shopping giants such as Amazon to start collecting and paying Virginia sales taxes won easy Senate passage Tuesday.

The Senate voted 28-12 to advance to the House a bill intended to collect millions of dollars in lost revenue at a time when the state faces a $4 billion shortfall.

Sponsor Emmett Hanger argued that struggling owners of so-called “brick-and-mortar” stores are struggling and shouldn’t have to compete with monied multinationals who ignore state taxes.

“They’re being undercut by businesses that don’t pay sales taxes, and that flaunt it,” said Hanger, R-Augusta, noting that their Web sites entice customers to avoid the 5 percent tax.

While sales have been flat or worse for traditional retailers who have to pay the tax, Hanger said, multinational Internet sales behemoths have seen profits soar, Hanger said.

“And that is a significant amount of revenue that Virginia is losing and we should be getting part of that,” Hanger said.

Opponents, however, said the bill would have no effect on the major global online retailers it attempts to target. Instead, it would devastate small, Virginia-based online businesses who form alliances with the major companies, said Sen. Mark Herring, D-Loudoun, whose district includes the Dulles headquarters of AOL.

Faced with the requirement to pay Virginia taxes, Herring said, large online retailers will merely stop doing business in Virginia, severing their partnerships with small businesses in the state that had relied on them.

“Has Virginia’s economy not contracted enough? Do we need it to contract even more,” Herring asked? “This is an issue that needs to be addressed in Congress, not here.

The bill benefited from support by many Republicans who are strident opponents of higher taxes. One was Sen. Steve Martin, R-Chesterfield.

“I do not see this as a tax increase,” said Martin, among the Senate’s most conservative members. “This is an equity issue. This is an issue of trying to ensure that those who comply with existing law can compete with those who do not.”

Obama: Stimulus Bill Saved Troubled Economy- AP

President Barack Obama hailed Wednesday’s one-year-old economic stimulus law as a solid accomplishment that staved off another Great Depression and kept up to 2 million people on the job. Still, with millions still out of work and losing patience, Obama acknowledged that to them, “It doesn’t yet feel like much of a recovery.”

SCUM!!!! Thanks for needlessly killing an Olympic athlete.

* The Wall Street Journal
* VANCOUVER OLYMPICS
* FEBRUARY 16, 2010

Speed and Commerce Skewed Track’s Design

By DAVID CRAWFORD in Leipzig, Germany, and REED ALBERGOTTI and IAN JOHNSON in Vancouver

Years before a young luge racer from the Republic of Georgia flew to his death at the Olympics last week, officials made a series of decisions designed to make the icy track a commercial success after the Games but that left it faster, and ultimately more dangerous, than any competitive track before.

Driven in part by the desire to locate the luge and bobsled track for the 2010 Vancouver Games in a high-traffic tourist area with cold temperatures, planners chose a valley at Whistler resort that was steeper and narrower than sites of previous Olympic tracks, according to press reports and interviews with those involved.

The result was a track whose speeds marked a quantum leap in a sport where even small increases require big adjustments from the athletes. After trials of the track in 2008, the course’s German designer says he told the Vancouver Games’ organizers and the international luge and bobsledding governing bodies that he was revising the track’s projected luge speed upward by 5.5%—to 96 miles an hour—nearly nine miles an hour faster than the standing 2000 world speed record.

According to 2008 engineering documents and letters reviewed by The Wall Street Journal, officials signed off on the course’s speeds. By last year, some of these officials said such speeds are unsafe and recommended that courses built in the future be slower.
…

Zsa Zsa’s husband says he’s ready to lead Calif.
(AP) Feb. 17, 2010

SACRAMENTO, Calif. — What the world already knows of Prince Frederic von Anhalt reads like a tabloid writer’s dream: eighth husband of Zsa Zsa Gabor, lover (never confirmed) of Anna Nicole Smith, self-proclaimed member of European royalty.

The 65-year-old flamboyant socialite says he’ll add a new title on Wednesday: California gubernatorial candidate.

Von Anhalt and his attorney said they will file his candidate papers in late morning at the secretary of state’s office in Sacramento.

If he follows through, von Anhalt would be the only independent in a field that includes Republicans Meg Whitman and Steve Poizner and the presumed Democratic candidate, Attorney General Jerry Brown.

Some of y’all might remember my post from two weeks back, when a FSBO that paid to be on a listing service called my flat-rate representative on a house the night before we were scheduled to look at it and said, “tell your clients to bring their checkbook and be prepared to make an offer as there are already two offers.”

To which we replied, “Cancel the showing, we’re not interested in playing games.”

We got an update yesterday, the asking price of the house in the listing dropped 5%. Obviously, didn’t have two offers, or if they did, they weren’t high enough. Told Mrs. Chile if our representative calls us mentioning that it is still on the market and had a price drop to tell the seller the same thing we did before “No - we don’t play games.”

[It helps that I'm not interested in the house at all, even at half the price currently being asked.]

U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion. ~February 16, 2010
~Onion News Network~

WASHINGTON—The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct.

Calling it “basically no more than five rectangular strips of paper,” Fed chairman Ben Bernanke illustrates how much “$200″ is actually worth.

What began as a routine report before the Senate Finance Committee Tuesday ended with Bernanke passionately disavowing the entire concept of currency, and negating in an instant the very foundation of the world’s largest economy.

“Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we…if we…” said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. “You know what? It doesn’t matter. None of this—this so-called ‘money’—really matters at all.”

“It’s just an illusion,” a wide-eyed Bernanke added as he removed bills from his wallet and slowly spread them out before him. “Just look at it: Meaningless pieces of paper with numbers printed on them. Worthless.”

Rich Flee New Jersey, Snookie Remains
By Sean Higgins

New Jersey’s leaders had a great idea for balancing the budget a few years back. Tap the state’s wealthy through hikes in income taxes, property taxes and even a “wealth tax”. So, how’s that working out? Not so well, reports the Newark Star-Ledger:

More than $70 billion in wealth left New Jersey between 2004 and 2008 as affluent residents moved elsewhere, according to a report released Wednesday that marks a swift reversal of fortune for a state once considered the nation’s wealthiest.

Conducted by the Center on Wealth and Philanthropy at Boston College, the report found wealthy households in New Jersey were leaving for other states — mainly Florida, Pennsylvania and New York — at a faster rate than they were being replaced.

The story notes that this is a reversal from the five years prior to 2004, when wealthy people were moving into the state. All of that stopped abruptly with the tax hikes. That’s a big problem for the Garden State because the top 1% of taxpayers pay about 40% of the state income tax. As one expert quoted in the story dryly notes, the loss of those residents may explain state budget shortfalls.

Wow, who knew the wealthy actually had the resources to relocate themselves if they decided taxes were too high?

An alternate theory — that they are fleeing the state in embarrassment over the “Jersey Shore” reality TV show — doesn’t hold up since the exodus predates the show’s premiere. It probably isn’t helping though.

Keene Construction shutting down
Orlando Business Journal -

Keene Construction Co., a 28-year-old commercial builder responsible for more than $1 billion of mostly retail projects, is shutting down.

Sources told Orlando Business Journal the company will close its doors Friday, but company officials would not confirm that.

A lack of business and cash to keep the company going through a downturn in commercial building prompted David A. Whitehill, president of the company, to pull the plug on the company, said Gary L. Keene, who co-founded Keene Construction with Whitehill in 1982.

“He tried to keep it going, but ran out of money,” Keene said Whitehill told him.

Whitehill did not respond to calls seeking comment.

Keene sold his stake in the company to Whitehill in June 2005, but still has an employment contract with the company and receives financial records from the Maitland-based builder.

U.S. runs $43 billion budget deficit in January

WASHINGTON (MarketWatch) — The U.S. government ran a budget deficit of $43 billion in January, the Treasury Department reported Wednesday. It was the 16th straight month in which the government posted a deficit, but the number was down from the year-ago number of $63 billion. January’s outlays of $248 billion were the second-largest January total on record. Receipts were $205 billion in January.

We Need a Second Stimulus Now, Says Nobel Laureate Stiglitz, or Americans Will Be Unemployed for Years.
Feb 17, 2010 by Henry Blodget

One year after the launch of an $800 billion emergency stimulus package to jolt the country out of a deep recession, the White House is touting the plan’s success. But while most observers agree that the country’s huge unemployment problem and sluggish economy would be much worse if not for the stimulus, many experts are calling for round two.

One expert in favor of a second stimulus, professor Joseph Stiglitz of Columbia University, argues that the first stimulus was far too small and that the government should launch a second one immediately. Without a second stimulus, Stiglitz says, we may be headed for a “double-dip” recession and our 10% unemployment rate is likely to remain too high for years.

Great Orators of the Democrat Party!

‘One man with courage makes a majority.’
- Andrew Jackson

‘The only thing we have to fear is fear itself.’
- Franklin D. Roosevelt

‘The buck stops here.’
- Harry S. Truman

‘Ask not what your country can do for you; ask what you can do for your country.’
- John F. Kennedy

Arlington plans tax increase, layoffs
Washington Examiner: February 17, 2010

Arlington County is planning to beat its $32.5 million budget gap for next fiscal year with a property tax increase, a $16.2 million cut in expenditures, and 87 fewer employees.

The increase in property taxes would amount to an average of $235 more for an average household in fiscal 2011.

Public safety would be hard hit under the proposed cuts. Community policing would be sliced in half, and one of the county’s Heavy Rescue Units would be terminated.

The budget, proposed to the County Board on Tuesday by Acting County Manager Barbara Donnellan, would increase the funding for Metro and for health care by $1.5 million each.

CLICK!

HOUSING MARKET
Fed’s mortgage farewell

Central bank is helping to keep rates low and fund loans for refinancers and home buyers, but will end its support in March. Greg McBride at Bankrate.com says if you’re eager to refinance, get going.

The Fed

Feb. 17, 2010, 1:29 p.m. EST

Fed should sell mortgage-backed bonds, Plosser says

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) — The Federal Reserve should begin to sell off its stockpile of mortgage-backed securities as the recovery gains strength, Philadelphia Fed President Charles Plosser said Wednesday in a speech on the Fed’s independence.

Last week, Fed Chairman Ben Bernanke said the Fed would probably not sell its assets anytime soon. But the apparent disagreement between Bernanke and Plosser could be more a matter of emphasis than actual disagreement about policy.

“As the economic recovery gains strength and monetary policy begins to normalize, I would favor our beginning to sell some of the agency mortgage-backed securities from our portfolio rather than relying only on redemptions of these assets,” Plosser said.

In his comments last week, Bernanke emphasized reducing the Fed’s portfolio slowly through redemptions of maturing securities, but he too said asset sales could be contemplated “when the economic recovery is sufficiently advanced.”

Filed under: “I have more digital toys than you do!”

By: Nick Mokey February 17, 2010 digitaltrends

PleaseRobMe Wakes Up Overzealous Twitter Users:

A new site twists around playful social networking tools to point out how they could be used for less innocent purposes.

Sharing every detail of your life with the Internet isn’t always the best idea. Besides getting you into hot water with your parents, in-laws, boss and all other matters of people you wish weren’t following your every move – see Lamebook – location-aware tweets have their own drawbacks: Wherever you are, we know you’re not home.

Ha, Got give ‘em “credit” the “guru’s” never give up on “Financial Innovation”

What Citigroup Knows That You Don’t
by David Weidner Tuesday, February 16, 2010 Marketwatch

Where’s the Regulation?

The point is, when push comes to shove, will there be a market for the CLX? Won’t most of the institutions buying them be in trouble if they need to cash out? And who cashes them out, Citi? How much is Citi going to set aside to cover potential losses?

Citigroup, denies that it’s putting taxpayers at risk. Rather, it might have the opposite effect: for example strengthening an insurer when borrowing costs soar.

But a lot of finance pros have looked at this and they say the way CLX is laid out, there doesn’t seem to be any specific party responsible for paying on the contracts. If it’s Citi, what happens if Citi can’t pay? Under proposed reforms, Citi would be too big to fail and get a bailout if it ran into CLX trouble.

You, dear taxpayer, may be the ultimate counterparty to this “innovation.”

CLX raises a lot of questions, but let’s add one more. Where are the regulators?

For months, we’ve been hearing how there’s been a regulatory crackdown on Wall Street. Agents from the Securities and Exchange Commission, the Commodities Futures Trading Commission and Federal Reserve allegedly are swarming institutions such as Citigroup. They’re pushing banks to build up capital, reduce leverage and cut the risk-taking.

Testifying before the Financial Inquiry Commission, Lloyd Blankfein, chief executive of Goldman Sachs Group Inc. (GS), told lawmakers that his firm was under more scrutiny than ever, especially from the Fed.

Oly’s very first post.

Dang, I miss her humor, her teasing of us, and the stories. Oh, the stories she could tell.

Unable to get jobs, freed inmates return to jail.
Recidivism rate likely to rise as jobless rate for ex-cons may be 60 percent. MSNBC 2-17-10

A growing number of states are pushing inmates out of prison in early release programs designed to reduce overcrowding and save money. But faced with a tight job market and few employers willing to hire someone with a criminal record, many former inmates are likely to end up right back behind bars.

Last month, California began releasing prisoners deemed at low risk for re-offending. Colorado, Oregon, Kentucky and Connecticut, all wracked with budgetary issues, have instituted similar moves as a way to cut costs, while others, including Michigan and Mississippi, are considering similar initiatives.

Federal Times ~ 2-17-10

The U.S. Postal Service could become insolvent if Congress doesn’t approve five-day mail delivery and change the way the agency funds its retiree health benefits, according to the agency’s top financial official.

“We will need [some assistance from Congress] or we will have difficulty paying all of our obligations this year,” said Joe Corbett, the Postal Service’s chief financial officer. “And going into next year, we might not have enough cash to operate. … We are dangerously close to running out of cash.”

The Postal Service posted a $297 million loss for the first quarter of fiscal 2010, which ended Dec. 31, 2009. Mail volume for that period fell by 8.9 percent. But that was an improvement over the previous quarter, when volume fell by 12.4 percent; and over the first quarter of 2009, when volume dropped 9.3 percent.

But the bigger financial picture for the Postal Service remains grim: mail volume has dropped from a peak of 212 billion pieces in 2006 to just 167 billion pieces today. And Corbett said the agency, which has faced multibillion-dollar deficits in the last few years, is running out of ways to cut costs.

Managers have already slashed 28 million work hours in fiscal 2010, and they’re on pace to cut 93 million in total this year — the equivalent of roughly 52,000 full-time employees. Those cuts come on top of the 115 million work hours that were cut in 2009.

The Postal Service doesn’t plan any layoffs; Corbett said those cuts will come through attrition.

South Carolina Lawmaker Seeks to Ban Federal Currency
Political Hotsheet ~ Brian Montopoli

South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state.

As the Palmetto Scoop first reported, Pitts introduced legislation this month banning “the unconstitutional substitution of Federal Reserve Notes for silver and gold coin” in South Carolina.

In an interview, Pitts told Hotsheet that he believes that “if the federal government continues to spend money at the rate it’s spending money, and if it continues to print money at the rate it’s printing money, our economic system is going to collapse.”

“The Germans felt their system wouldn’t collapse, but it took a wheelbarrow of money to buy a loaf of bread in the 1930s,” he said. “The Soviet Union didn’t think their system would collapse, but it did. Ours is capable of collapsing also.”

The lawmaker believes that a shift to an economy based on gold and silver coins would give the state a “base of currency” should that collapse come. As one expert told the Scoop, however, his bill would likely be ruled unconstitutional because it “violates a perfectly legal and Constitutional federal law, enacted pursuant to the Commerce Clause of the U.S. Constitution, that federal reserve notes are legal tender for all debts public and private.”

In addition, since gold and silver regularly fluctuate in value, they could not easily function as stable currency.

But Pitts maintains that his state is better off with something he can hold in his hand and barter with as opposed to federal currency, which he described to the Scoop as “paper with ink on it.” He says he resents what he considers the federal government’s intrusions on states’ rights.

Though he did not offer a timeframe, Pitts told Hotsheet that he anticipates a nationwide economic collapse “if our federal government continues the course it’s been traveling under the previous administration and this administration.”

Angela it ‘is’ a disgrace, please try and do something about it. Our U.S. administration will not. Period! They are owned by the banksters.

Merkel hits out at banks over Greek deals
Athens~ February 17 2010 20:22

The German chancellor has sharply criticised global investment banks that may have helped a number of Greek governments to disguise mounting budgetary problems over the years.

“It would be a disgrace if it turned out to be true that banks that already pushed us to the edge of the abyss were also party to falsifying Greek statistics,” Angela Merkel said during a speech in north-eastern Germany.

Her remarks came as George Papandreou, the Greek prime minister, said a special parliamentary commission would be set up to investigate possible mishandling of the public finances under the previous conservative government between 2004 and 2009.

“The principle is that we have to shine light everywhere it’s needed,” said Mr Papandreou.

A new Washington Post-ABC News poll finds that the vast majority of Americans are vehemently opposed to a recent Supreme Court ruling that opens the door for corporations, labor unions, and other organizations to spend money directly from their general funds to influence campaigns.

As noted by the Post’s Dan Eggen, the poll’s findings show “remarkably strong agreement” across the board, with roughly 80% of Americans saying that they’re against the Court’s 5-4 decision. Even more remarkable may be that opposition by Republicans, Democrats, and Independents were all near the same 80% opposition range. Specifically, 85% of Democrats, 81% of Independents, and 76% of Republicans opposed it. In short, “everyone hates” the ruling.

http://www.signonsandiego.com/news/2010/feb/17/housing-affordability-index-drops-back-below-50/

“For the fourth quarter, San Diego’s median price was listed at $319,000 and median income at $74,900. San Diego ranked as the nation’s most unaffordable market in the second quarter of 1996, when the median price was $165,000 and median household income was $46,600.”

Interesting is that San Diego housing prices would have to fall around 17 percent just to fall to the same multiples of income needed to buy a house in 1996 when San Diego was the least affordable housing market in the nation.

Feb. 17 (Bloomberg) — The International Monetary Fund, which set out in September to sell about 13 percent of its gold reserves, said it will “shortly” expand sales to the open market after central banks bought 212 metric tons in private deals.

“In accordance with the priority of avoiding disruption of the gold market, the on-market sales will be conducted in a phased manner over time,” the Washington-based IMF said in an e-mailed statement today.

The institution has 191.3 tons left to sell after purchases by the central banks of India, Mauritius and Sri Lanka. Central banks still have the option to buy more of the metal, which would reduce the amount available on the market, the IMF said.

The lender’s executive board on Sept. 18 approved the sale of 403.3 tons of bullion as part of a plan to shore up its finances and lend at reduced rates to low-income countries. With the gold price surge last year, the fund pocketed $7.15 billion from its sales to central banks.

After the IMF’s announcement, gold futures in New York fell as much as 1.3 percent in after-hours trading. Gold for April delivery traded at $1,107 an ounce as of 4:53 p.m. on the Comex unit of the New York Mercantile Exchange, after dropping as low as $1,105.50. Earlier, the contract settled at $1,120.10

Recap - Pensions are buying, IMF is selling gold.
I pointed out earlier that I thought that the selling of gold to other central banks, might be part of a plan to finance the IMF without pissing off the citizens of the purchasing countries. ie drive up gold prices and sell it to central banks at the peak. Then allow it to fall and buy it all back. Time will tell.

BREAKTHROUGH REVELATION:

Anyone who says private markets always do it best had better pay close attention to the unfolding story of that dead luger.

Wednesday, February 17, 2010

A foreclosure of Olympic proportions
Atheletes and spectators at Whistler Olympic Park

The owners of Whistler Blackcomb ski resort, which is hosting many Olympic events, are behind in their debt payments. Creditors say they’re going to foreclose. Nancy Marshall Genzer reports.

Athletes, spectators and officials on the course during the men’s Nordic Cross Country individual sprint qualification at Whistler Olympic Park during the Vancouver Winter Olympics. (Franck Fife/AFP/Getty Images)

Kai Ryssdal: And because I am such a good guy I am not going to tell you what I know about who won what in Olympic ski racing today. Even though I read it on the newswires earlier, I am firmly in the camp of not wrecking anybody else’s tape-delayed viewing pleasure. But on the very hill that the downhill events are being run, there is a new Olympic event making its debut this week: It’s called foreclosure.

The group that owns the Whistler Blackcomb ski resort has fallen behind on its payments. And creditors say they are going to foreclose smack dab in the middle of the games. Marketplace’s Nancy Marshall Genzer reports.
…
If they don’t get there, could Whistler Blackcomb be on the auction block on Friday? Would the Olympics be disrupted?

Jonathan Basile doesn’t think so. He’s an economist at Credit Suisse.

JONATHAN BASILE: If it’s going into foreclosure, maybe it’s in the pre-foreclosure process, and not necessarily further along where they’re going to take the keys from everybody and lock them out.

Why is Fortress Investment so close to losing the keys? Karen Petrou is with Federal Financial Analytics. She says Fortress built a bunch of swanky slope-side condos at Whistler, just before the bottom fell out of the housing market. People who had planned to take out a home equity loan to buy a second home at Whistler had to change their plans.

Leaving Fortress Investment with a mountain of debt.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

True confession:

There is just too much real estate crash news to keep up any more. We must be approaching peak tsunami crest, or we are headed into uncharted territory, or both.

Bloomberg

Beijing Seen Vacant for 50% as Chanos Predicts Crash (Update1)
February 12, 2010, 04:24 PM EST

More From Businessweek

* China’s January Loans Surge as Property Prices Climb (Update3)
* China Bank Measure Won’t Slow Inflation, Xie Says (Update1)
* China January Loans Surge, Property Prices Climb at Faster Pace

Feb. 12 (Bloomberg) — Jack Rodman, who has made a career of selling soured property loans from Los Angeles to Tokyo, sees a crash looming in China. He keeps a slide show on his computer of empty office buildings in Beijing, his home since 2002. The tally: 55, with another dozen candidates.

“I took these pictures to try to impress upon these people the massive amount of oversupply,” said Rodman, 63, president of Global Distressed Solutions LLC, which advises private equity and hedge funds on Chinese property and banking. Rodman figures about half of the city’s commercial space is vacant, more than was leased in Germany’s five biggest office markets in 2009.

Beijing’s office vacancy rate of 22.4 percent in the third quarter of last year was the ninth-highest of 103 markets tracked by CB Richard Ellis Group Inc., a real estate broker. Those figures don’t include many buildings about to open, such as the city’s tallest, the 6.6-billion yuan ($966 million) 74- story China World Tower 3.

Empty buildings are sprouting across China as companies with access to some of the $1.4 trillion in new loans last year build skyscrapers. Former Morgan Stanley chief Asia economist Andy Xie and hedge fund manager James Chanos say the country’s property market is in a bubble.

“There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” Chanos said in a Jan. 25 Bloomberg Television interview. “And deflating that gently will be difficult at best.”
…

Technically speaking, were all of the Fed’s bailout maneuvers “legal”? And doesn’t a crisis situation pretty much obviate any rules that normally apply, anyway?

* The Wall Street Journal
* OPINION EUROPE
* FEBRUARY 17, 2010, 3:46 P.M. ET

An Unlawful Bailout
Only the IMF, not the EU, can rescue Greece.

By SANDEEP GOPALAN

The details might still be uncertain, but the European Union appears determined to bail out Greece. The problem, though, is that such a move would be illegal.

To be sure, Greece needs help to prevent the contagion of sovereign-default risk to the other euro-zone countries with special borrowing needs—commonly referred to as PIIGS (Portugal, Ireland, Italy, Greece, and Spain). But the EU should not and cannot be the knight in shining armor. That role belongs to the IMF.

The Treaty of the European Union makes it illegal for the EU as a whole and for individual member states to come to the rescue of EU countries in financial trouble. Article 125 clearly says that the “Union shall not be liable for or assume the commitments of central governments . . . or public undertakings of any member state.” Likewise, “a member state shall not be liable for or assume the commitments of central governments . . . of another member state” In order to prevent moral hazard, the treaty unequivocally rejects any wealth transfers to reward the spendthrifts.
…

* The Wall Street Journal
* FEBRUARY 18, 2010

States Sink in Benefits Hole

By AMY MERRICK

State governments face a trillion-dollar gap between the pension, health-care and other retirement benefits promised to public employees and the money set aside to pay for them, according to a new report from the Pew Center on the States.

States promised current and retired workers a total of $3.35 trillion in benefits through June 30, 2008, said the report from the nonprofit research group, a division of Pew Charitable Trusts. But state governments had contributed only $2.35 trillion to their benefit plans to pay current and future bills, the report said.

The Pew report said its estimate of the funding gap would likely prove conservative, because it didn’t account for the massive investment losses pension funds suffered during the second half of 2008. Although there was a slight rebound last year, it wasn’t nearly enough to cover the previous losses, Pew said.

Researchers compiled the data by reviewing each state’s comprehensive annual financial report for fiscal year 2008, which for most states ended June 30, 2008. They also looked at pension-plan annual reports.

The pension problems started well before the recession. Even in good times, states were skipping pension payments, leaving larger holes to fill in future years. State legislatures also increased benefit levels without setting aside extra money to pay for them.

As a result, annual pension costs for states and participating local governments more than doubled, to more than $64 billion, from fiscal 2000 to fiscal 2008, said Susan Urahn, the research group’s managing director.

“We have a significant problem now, but it’s a problem that can be solved,” Ms. Urahn said. “If states wait, eventually they will have an unmanageable crisis on their hands.”

Investment returns won’t be enough to make up the shortfall, she said.
…