The Housing Bubble

An early good morning to y’all.

I hope in my heart of hearts that America’s leaders take a hint and ensure that our bankers’ future pay is commensurate with the performance of the loans they make (or securitize).

By staff reporters Feng Zhe and Wen Xiu
03.24.2010 21:58
Bank of China Executive Salaries Halved
New rules released by the government have reduced some banker salaries by nearly 50 percent

[Click for Chinese Version]

(Caixin Oonline) The total salaries of senior management at the Bank of China shrank by nearly 50 percent in 2009 although the bank’s assets and profits expanded last year.
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On March 10, China Banking Regulatory Commission released a new pay regulation, which stipulates that bankers are required to return the part of their salary related to bad loans.

Over the past several years, the scale of Chinese banking assets has consistently expanded with impressive results. At the same time, listed banks gradually moved toward market-oriented executive incentive mechanisms, implementing across-the-board salary increases.

This appears to me like just the latest of myriad subtle thefts by Megabank, Inc from the American people.

* MARCH 24, 2010

Tax-Break Battle Flares
J.P. Morgan in Talks for $1.4 Billion; Stimulus Gives $12 Billion to 250 Firms

By SCOTT THURM And DAN FITZPATRICK

J.P. Morgan Chase & Co. is nearing a deal that would allow it to benefit from a tax refund of as much as $1.4 billion, becoming the latest company to tap a little-noticed plank in an economic stimulus bill.

That law let companies apply losses from 2008 or ’09 against taxes paid in the previous five years, instead of the previous two years. Failed Seattle thrift Washington Mutual is eligible for about $2.6 billion in tax refunds, thanks to big losses in 2008. Now J.P. Morgan, which took over WaMu’s banking operations in September 2008, is in discussions with the Federal Deposit Insurance Corp. and bondholders about the refund.

According to people familiar with the talks, an agreement under discussion would let J.P. Morgan claim more than half of the total, to be held in an FDIC receivership as part of a larger settlement with bondholders. J.P. Morgan could dip into that pot to satisfy certain claims related to WaMu’s collapse.

Many other companies have benefited from the 2009 tax-refund law already. According to an analysis of securities filings by The Wall Street Journal, more than 250 companies have so far said they expect to get about $12 billion in federal tax refunds under the law.

That remains a partial list. The Joint Committee on Taxation, a congressional committee, estimated the provision would cost $33 billion in its first year.

Some critics have found the corporate-tax-refund technique wanting as a stimulus or job-creation move. Prior to Congress’s passage of the $787 billion stimulus law in early 2009, the Congressional Budget Office looked at six possible stimulus approaches and ranked this one least effective, saying each corporate tax dollar refunded would generate at most 40 cents of boost to gross domestic product. The corporate-tax-refund approach wasn’t included in the big stimulus bill early in the year, but was part of legislation in November that extended jobless benefits.

Douglas Shackelford, a tax professor at the University of North Carolina at Chapel Hill, said using federal tax receipts to shore up corporate balance sheets amounts to “public borrowing to pay off private debt…. It’s not clear to me that’s a good use of money at all.”
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Bad sign for Mr Stock Market: The MSM is catching on to the possibility that governmental manipulation is propping it up. Could be really good for T-bonds but not so good for Mr Stock Market if this idea takes hold among the bovine herds (sheeple, bulls, etc).

There was a time on this blog not long ago when posts resembling the following American Public Media Marketplace story would have resulted in the accusation that the poster was wearing a tinfoil hat.

Thursday, March 25, 2010

A new normal for the stock market

The S&P 500’s just a couple percentage points shy of where it was back in July 2006. So is the stock market now back to where it was during more “normal times?” Bob Moon reports.

Kai Ryssdal: For those who’re trying to add to their expected Social Security payouts with some gains in the markets, this has been a pretty good year or so. Today, granted, wasn’t so great. We’ll get to that. But the S&P 500 is just a couple of percentage points shy of where it was back in July of 2006. That was just about the beginning of a yearlong bubble on Wall Street. So if we subtract the S&P’s huge jump during that year before the crash, could you safely say the stock market is now back to where it was in more normal times?
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Stock market veteran Michael Panzner writes the blog Financial Armageddon. He argues the market is being propped up by something highly abnormal — the ongoing hand-out from Uncle Sam.

MICHAEL PANZNER: There is some question, particularly in an environment where the government is heavily involved, whether the markets are really reflecting reality in the same way that they once did.

And what might happen when reality bites?

Richard Sparks is chief equities analyst at Schaeffer’s Investment Research. He says lingering worries are keeping trading volumes and investor confidence abnormally low.

RICHARD SPARKS: We don’t know what will happen once we take the patient off life support, so to speak, to see if the economy can grow by itself.

Sparks says the reason stocks are up is that investors are predicting all will be well once that happens.

SPARKS: I think what the market is suggesting is that we’re on the downside of all of those problems, that over time that those problems will be worked through the system, and we’ll be back to a sense of normalcy at some point.

But as S&P’s David Wyss points out, normalcy depends on your perspective.

WYSS: Things are OK only to the extent that we’re not in freefall anymore. Up is better than down, but we’ve got a long way to go before we get back to where you were — certainly my portfolio has a long way to go to get back to where it was.

Unfortunately, a lot of Americans are finding that’s the new normal.

I’m Bob Moon for Marketplace.

Another milestone day today with Obama announcing principle writedowns being required by banks. I hoped this day would never come.

Hypothetical questions (not suggesting anything of the sort ever has, could, or will happen):

1) Is the Fed and/or the Treasury legally allowed to deliberately prop up price levels of U.S. asset markets through directly targeted interventions (e.g., support the level of the headline U.S. stock market indexes or U.S. home prices)?

2) Would it be possible for them to contract with private money center banks to execute such interventions?

3) If so, what grants them the legal authority?

4) If not, what would be the consequences if it ever came to light they were engaged in such activities?

Again, these are strictly hypothetical questions; not suggesting such activities ever have, could or will occur.

The Financial Times
Fed exit looms over US mortgages
By Nicole Bullock, Michael Mackenzie and Aline van Duyn in New York
Published: March 25 2010 20:23 | Last updated: March 25 2010 20:23

Fortunes on Wall Street have risen and fallen over the years thanks to an esoteric part of the capital markets, which is also one of the world’s biggest: mortgage-backed securities.

The financial crisis of 2008 thrust this market into the spotlight, as trillions of dollars were lost across the globe. It was far from the first time – losses on mortgage-backed debt played a big role in bond market blow-ups resulting from big interest rate shifts in 1994, 1998 and 2003.

Now, less than 18 months after the mortgage markets went into a tailspin, a sense of calm has returned to a key part of the $14,000bn market of outstanding US home loans: the more than $5,000bn of mortgage-backed securities sold by government-backed mortgage corporations Fannie Mae and Freddie Mac.

This so-called “agency MBS” market has been supported for more than a year by the presence of a huge buyer in the form of the Federal Reserve. By the end of this month it will own $1,250bn in bonds, or slightly less than a quarter of the market.

But the Fed’s buying will end next week, on March 31, meaning this vital cog in the US housing system is entering a period of uncertainty.

The purchases – part of the Fed’s “quantitative easing” programme – have played a vital role in stemming the effects of the financial crisis on the US economy.

“Borrowing costs for consumers have fallen, MBS spreads have narrowed and risk assets have rallied – all of which have been, arguably, intended or welcome consequences of the programme,” says Larry Hatheway, an economist at UBS.

The Fed’s buying also tried to stem the collapse of the US housing market by helping home owners refinance their loans at lower rates. But the impact of lower rates has been counterbalanced by other factors such as a glut of unsold homes, record foreclosure rates, tighter credit standards and rising unemployment. These have curbed the scale of the “refi” boom that has often boosted consumer spending in the past.

“For homeowners, [the Fed programme] promoted perhaps the best refinancing opportunity in about 50 years in terms of rates,” says Keith Gumbinger, vice-president at HSH Associates, a mortgage analyst. “But underwriting conditions remain tight. You need to have a fairly deep equity position, good documentation and good credit.”
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Guten Nacht Morgen.

Distress in San Diego’s Overleveraged Hotels Grows:

http://voiceofsandiego.org/housing/article_498dbe76-388a-11df-af5b-001cc4c002e0.html

“The number of San Diego County hotels in default more than quadrupled last year — from six in January to 29 by December, according to Atlas Hospitality Group, an Irvine-based hotel real estate firm.”

“Groups of owners leveraged and re-leveraged during the boom, taking advantage of some of the loosest years ever for commercial mortgages. Investment firms cobbled together huge collections of hotels, paying extravagant prices. They penciled the deals out counting on the revenues of the heyday to continue.”

“Both the price of rooms and the number of hotel guests dropped significantly last year, thrashing the bottom line for hotel owners. Revenues for San Diego hotels plunged last year, according to PKF Hospitality Research, ending the year down 22 percent, a worse outcome than the stark 17 percent decline nationwide.”

“Even in that case, though, the companies that borrowed too much — at too high a cost — face a huge reckoning, said commercial real estate broker Steve Martini. Though banks have repossessed few hotels in San Diego, he expects that to change.”

They can prop up all the low end mortgages that they want. They don’t have to mark to market and they can try to dribble out foreclosures to control property values, but they can’t stop strategic defaults on quality mortgages. I’ve already talked three people into going for it. Why should people with good jobs no get the freebies too? I think now would be the time to start up seminars on strategic defaults to push things along. As for me I copied the NPR article on them and sent it out to 20 people I know who are underwater.

Half of U.S. Home Loan Modifications Default Again

(Bloomberg) — More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report.

The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report today. The figure, which measures payments at least 30 days late, climbed to 57.9 percent for changes made in the prior 12 months.

U.S. homeowners are struggling to make payments as depressed housing prices leave them owing more than their properties are worth. About 24 percent of properties with a mortgage were underwater in the fourth quarter, First American CoreLogic said last month. The median price of a U.S. home was $165,100 in February, down 28 percent from its peak in July 2006, according to the National Association of Realtors.

Modifications are “clearly not working well and it’s not a surprise,” said Sam Khater, a senior economist at First American CoreLogic in Tysons Corner, Virginia. “It’s pointless to rewrite these loans because they’re underwater.”

Who wants to make $10,0000?
Media failed us again?

Andrew Breitbart Offers $10,000 Prize for Anyone Who Can Document Tea Party Protesters Yelling N-Word at the Congressional Black Caucus Saturday.

Considering that some of the staffers within proximity of the alleged slurs were reportedly pointing cameras toward the crowd, this would seem like easy money if the story is true. As Michael Moynihan pointed out earlier this week, the anecdote has been presented as fact all over the journalism world.

Millions of Americans driving around with those wonderful ‘black’ boxes unbeknown-st to them. I’ll stick with my old ‘87 Mercedes 300-SDL turbo Diesel. Not one thing can go wrong with it that I can’t fix!

Recalls Triple as Electronics Run Cars, Swamp U.S. Regulators

March 26 (Bloomberg) — U.S. vehicle recalls related to electronic systems have tripled and investigations quadrupled in the past 30 years following a surge in the use of computers to control functions such as acceleration.

Lawmakers and safety advocates probing Toyota Motor Corp.’s handling of sudden-acceleration complaints say the National Highway Traffic Safety Administration has failed to keep pace with the technology. At least 27 individual lawsuits assert that electronics systems are responsible for deaths or injuries in crashes of Toyota vehicles.

“The proliferation of features in cars has really passed NHTSA by and caught them somewhat unprepared,” said David Champion, director of testing at Consumer Reports magazine. “I don’t think anyone thought too deeply before the Toyota issue came along about how to turn off the electronic ignition for a car, for example.”

Overview 2009: Income, Population, Jobs and Home Prices by State
WSJ ~ 3-26-10

Things were bad all over the U.S. in 2009, but some areas got hit harder than others.

Overall U.S. per capita income dropped 2.6% to about $31,000. Connecticut, home to many of the titans of finance, continued to be the state with the highest per capita income in the nation at $54,000, but it was in the top 10 in terms of declines from 2008 with a 3.3% drop. Wyoming had the largest personal income drop in the country at 5.9%. Only four states posted gains in per capita personal income with West Virginia coming out on top with a 1.8% increase, though it has seventh lowest level in the nation.

Every state experienced a decline in employment last year. Unsurprisingly, California, the most populous state, lost the most jobs, but its average unemployment rate of 11.4%, fourth highest in the nation, showed that the decline was disproportionate compared to other states. North Dakota, the nation’s third least populous state, had the smallest drop in jobs, but it also had the lowest average unemployment rate.

Home prices, as measured by Federal Housing Finance Agency which only tracks mortgages backed by Fannie Mae and Freddie Mac, posted large declines in bubble areas such as Nevada, Arizona and Florida. But 18 states posted year-to-year gains, according to FHFA whose index may understate declines since it doesn’t track jumbo or subprime loans.

Florida locales dominate FHA default list
March 26, 2010
What the hell happened to the FHA’s loans in Florida?

The state dominates the list of troubled metro areas for Federal Housing Administration-insured mortgages. In fact, 16 of the top 25 locales with the highest default rates are in Florida, as of December, with tiny Punta Gorda on the Gulf Coast leading at 22.7%.

The poor performance of Florida’s FHA loans has helped drag the agency down to its lowest point in decades, raising concerns that taxpayers will have to bail it out. The agency is in the midst of overhauling its operations to shore up reserves, which have fallen well below the level required by Congress.

Much of the blame lies in Florida’s famous condo market, which collapsed during the housing bust. The controversial practice of seller-assisted downpayments is also contributing, as is the scarcity of jobs and the severe decline in home values.

Florida homebuyers have long gravitated to FHA loans, which are aimed at first-time and low- to moderate-income purchasers. The state’s relatively cheap home prices fueled the market for these government-backed mortgages.

“The FHA got sucked into Florida because they loan in the price range where a lot of the vulnerability was,” said Wayne Archer, executive director of the Kelley A. Bergstrom Center for Real Estate Studies at the University of Florida.

Condo crash

FHA loans have been particularly popular among Florida’s condo buyers. The agency has backed more of these mortgages in the Sunshine State than anywhere else in the country, insuring more than 11,000 loans valued at nearly $1.7 billion over the past five years.

“Florida is ground zero for condos and for losses for condos,” said Guy Cecela, publisher of Inside Mortgage Finance, a trade publication. “South Florida condos are the worst of the worst.”

Sounds like the FHA will funnel your tax dollars towards foreclosure relief. For those with no insurance background, the suggestion you can insure against something that has already happened (e.g. mortgage default) is patently absurd.

* MARCH 25, 2010

New Plan to Cut Some Mortgage Balances

By NICK TIMIRAOS and JAMES R. HAGERTY

The White House will announce Friday an expansion of its foreclosure-prevention efforts to include reducing mortgage loan balances for some borrowers, a controversial step that policy makers have long resisted, people familiar with the plans said.

The revisions, which will also include temporary help for unemployed borrowers, serve as a recognition that the administration ’s foreclosure rescue plan hasn’t kept pace with the rising number of souring loans.

Under the plan, the Federal Housing Administration will take on a much bigger role in government efforts to avert foreclosures by allowing some homeowners who owe more than their homes are worth to refinance into government-backed loans, according to people familiar with the plans. The FHA, which doesn’t make loans but insures lenders against losses, already faces rising losses on loans it has backed.
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Another group of booger picking, window lickers looking for uncle sugar to bail their sorry asses out…

Unions want Washington’s help with pension funds.
Washington Times 3-25-10

Nonunion workers and private companies could be forced into absorbing the financial liabilities of underfunded union pension plans, thanks to pending health care mandates and an executive order that could be finalized this year, policy analysts and trade group representatives have concluded.

Even as unions continue to market themselves to new members on the basis of generous pension programs, government figures show these plans are performing poorly in comparison with retirement packages that operate beyond the orbit of organized labor.

In addition, unions are pushing the Obama administration on project labor agreements (PLAs), which, among other things, will give their pension plans new sources of outside funding - nonunion workers on government contracts worth more than $25 million.

The average union pension has resources to cover only 62 percent of what is owed to participants, according to the Pension Benefit Guarantee Corp. Pensions with less than 80 percent of the assets needed to cover present and projected liabilities are considered “endangered,” while those that fall below a 65 percent threshold are classified as “critical” under the Pension Protection Act of 2006.

Didn’t the T-secretary tell Congress a couple of days ago there would be no changes to the mortgage mod plan for at least a year?

Obama Team To Unveil New Foreclosure-Fight Plan
11:04 pm

March 25, 2010

By Frank James

The White House is expected on Friday to unveil a new effort to help homeowners facing foreclosure because of unemployment or whose homes have dropped so much in value that they owe more than their homes are worth.

According to reports, the administration will lay out a plan meant to encourage banks to reduce the principal on mortgage loans. Before now, the administration focused on interest-rate deductions.

It’s an attempt by the Obama Administration to take another whack at dealing with a problem it has so far been little able to budge with its Home Affordable Modification Program which has helped relatively few homeowners.
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I have a 30 year mortgage and pay it, and do I ask for help. No!!. I goto work everyday so my family can have the simple stuff in life, but do I ask for help. No!! I have family member willing to help each other out when other family members need it. Do we ask for government help. No!! I am getting tired of people skating on loans, but people who does research and play by the rules gets screwed without even a kiss. Just once I would like the ball bounces our way!!

What’s cookin’? Just the GDP numbers…

http://www.marketwatch.com/story/us-gdp-revised-slightly-lower-in-fourth-quarter-2010-03-26?dist=beforebell

Barry’s new ‘plan’ will come up short also, but that won’t stop the fiscal moron from trying…

Foreclosure relief plan still coming up short
Treasury making more changes to speed mortgage modifications
MSNBC ~ 3-25-10

The government’s foreclosure relief program just isn’t working.

That was the assessment Thursday of two reports from government watchdogs and a panel of witnesses at a congressional hearing trying to find out why the Obama administration is falling far short of its goal of preventing millions of Americans from losing their homes.

Treasury officials at the hearing acknowledged problems in the year-old mortgage-modification program and announced changes designed to address issues that have limited its effectiveness. Only 170,000 homeowners have completed the process to get their monthly payments reduced out of 1.1 million who began it over the past year.

A failure of the government’s latest effort to stem the tide of foreclosures would threaten more than the roughly 8 million homeowners at risk of losing their homes in the next two years, according to John Taylor, president of the National Community Reinvestment Coalition.

“If we have another 8 million homes to go into foreclosure it will have a devastating effect on our economy, and job losses will continue to rise,” Taylor told the House Committee of Government Oversight and Reform.

Washington to run student loans ~ March 26, 2010

WASHINGTON (CNNMoney.com) — Congress passed a bill Thursday to make Washington the one-stop shop for cheap student loans and to boost need-based scholarships.

Starting July 1 nearly all federally backed student loans, like Stafford loans, will come directly from the federal government. The measure prevents private student lenders, including Sallie Mae (SLM, Fortune 500) and Nelnet (NNI), from making federally backed loans, although both have federal contracts to service government loans to students.

The bill passed 56-43 in the Senate and 220-207 in the House. It was a part of a budgetary “reconciliation” package that also included changes to the health care overhaul bill President Obama signed into law on Tuesday.

The student loan legislation has been a major priority for President Obama, especially since loans backed by the federal government are the single most common way students finance higher education.

The good news: San Diego’s USD Index of Leading Economic indicators was up in February for the 11th straight month.

The dismal news: The only two out of six categories to see gains were building permits issued and the employment situation — that against the obvious fact that reflation of the construction boom will not get San Diego out of its economic morass, plus the recent “unexpectedly-large” spike in San Diego unemployment from 10.3 pct to 11 pct.

County’s economy sees smaller gains
2 of 6 factors tracked were down in February

By Thomas Kupper, UNION-TRIBUNE STAFF WRITER

Thursday, March 25, 2010 at 6:13 p.m.

An index of leading economic indicators for San Diego County rose in February for the 11th straight month, though the gains have gotten smaller recently.

The University of San Diego reported Thursday that the index was up just 0.1 percent from January, driven largely by improvements in building permits issued and the employment situation. But two of the six index components showed declines — consumer confidence and local stock prices.

“The outlook remains for positive but slow growth for the local economy for the year ahead,” said USD professor Alan Gin, who compiles the index. “The growth may be uneven, with occasional setbacks.”
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Marlin to close North Haven plant; 265 jobs going
Thursday, March 25, 2010 ~ Metro Editor

NORTH HAVEN — Longtime gun manufacturer Marlin Firearms Co. will shut its doors in June 2011, leaving 265 people without jobs.

A phase-out of operations will begin in May, First Selectman Michael J. Freda said tonight.

“The situation appears to be compounded by the fact that Connecticut is a difficult state for any manufacturer to sustain its business model,” Freda said.

He added that wage differentials, the cost of doing business and other higher costs seem to be several of the driving factors connected to the closing.

Marlin officials couldn’t immediately be reached for comment.

The company started in New Haven in 1880 and was purchased by Frank Kenna and later moved to 100 Kenna Drive in North Haven.

“As an economist, I am astonished that the American economics profession has no awareness whatsoever that the U.S. economy has been destroyed by the offshoring of U.S. GDP to overseas countries. U.S. corporations, in pursuit of absolute advantage or lowest labor costs and maximum CEO “performance bonuses,” have moved the production of goods and services marketed to Americans to China, India, and elsewhere abroad. When I read economists describe offshoring as free trade based on comparative advantage, I realize that there is no intelligence or integrity in the American economics profession”.

~ Paul Craig Roberts

From the money chat in the Washington Post yesterday. Read it. You will love it:

Arlington, Va.: Thank you for taking my question.

My husband and I are looking for our first house. We have no debt (no credit cards, no car payments, no student loans), earn about $160,000 a year in government jobs, and have $200,000 in savings. No kids yet. We’re thinking that our housing budget is about $550-$575K, putting 20% down. Our current rent is $1,950, we contribute a lot to retirement, and save about $2,000 a month on top of that. Does that housing budget sound reasonable? The main thing I’m wondering about is child care once we have kids. Thanks so much!

Elisabeth Leamy: Congrats on being in such great shape! One way to figure out the price house you can TRULY afford is to make your monthly mortgage equal to your monthly rent. (You KNOW you can afford your rent, right? In this case $1,950.) I created a neat calculator on my website, http://www.elisabethleamy.com, that shows you how much house your current rent will buy you. I ran it for you and it says you can afford a house that costs $353,130. If you put 20% down, ($70,626), you’d be taking out a mortgage of $282,504. I believe in buying below your means. And I don’t believe in letting the mortgage or real estate industry tell you what you can afford because they have skin in the game! The more expensive house you buy, the more money they make! Plus they base their calculations of what you can afford on vague, theoretical formulas that may not apply to you. Good luck!

The old botox moonbat hit’s 70 today…

News media have not said much about it, but today is Speaker Nancy Pelosi’s 70th birthday!

Hi from Phoenix

This is just too good not to share. I posted a couple of years ago about visiting one of the model homes at the Chateaux on Central. The one I looked at was 3,400 sq ft and was for sale for around 3 million as I recall. The entire project just sold for 7 million or less than 350K per unit. Wow!

Luxury Phoenix homes “Chateaux on Central” sell for bargain price
Phoenix’s cluster of brick mini-mansions called Chateaux on Central has a new owner. Wisconsin-based MSI West Investments paid $7 million for the 21 homes with elevators and rooftop terraces.
The high-profile project was started during the housing boom. Then plans called for the homes, some with turrets and wine cellars, to sell for $2.8 million and higher. The current deal breaks down to less than $350,000 a home.
Chateaux on Central, at Central Avenue and Palm Lane, has been tied up in Mortgages Ltd.’s financial problems for the past few years. When the original lender Desert Hills Bank filed to foreclose in 2007, Mortgages Ltd. took over with a $65 million financing deal. But then Mortgages Ltd. was forced into bankruptcy by its creditors and investors in June 2008, and Chateaux on Central has been stalled since then.

Good Lord, the media just needs to stop printing this crap. Anyone an IQ greater than their shoe size knows the benefits will be extended to eternity…

Jobless Aid Could Halt after Congress Fails to Act
26 Mar 2010 ~ Reuters

Hundreds of thousands of jobless Americans could once again face a disruption in their unemployment benefits after Congress failed to extend them on Thursday.

Unemployment
Amid the deepest recession in 70 years, Congress prepared to adjourn for a two-week break without extending jobless programs that are due to expire in coming days.

That could lead to bureaucratic disarray and further hardship for those who depend on the payments to help cover their bills while they look for work.

Up to 750,000 people could lose their benefits by the end of April if Congress does not act, Democratic Senator Jack Reed said.

Democrats had hoped to extend the program for a month, but Republican Senator Tom Coburn argued that the $9.2 billion cost should be covered by redirecting money from last year’s economic stimulus package rather than adding to the record budget deficit.

“We are now like the person who gets in trouble on their credit card,” said Coburn, who prevented the Senate from voting on either approach.

School groups: Education layoffs may top 20,000
March 26, 2010

SPRINGFIELD, Ill. (AP) - A coalition of Illinois education groups says more than 20,000 teachers and staff could be laid off in the next school year.

Schools must tell employees now whether their jobs will be cut next year.

The coalition says it has heard from three-quarters of Illinois school districts and they plan 17,000 layoffs.

The coalition says it expects the total to reach 20,000 when complete information is available.

Those layoffs could be canceled if schools get additional money. Education advocates want state officials to raise taxes.

The groups include the Association of School Administrators, the Illinois Federation of Teachers, the Illinois Education Association and more.

Unemployment Line Stays Long: Up to 26.4 Million Seek Full-Time Jobs
(Washington)

The unemployment line is likely to remain long for the next few years as 26.4 million workers seek full-time jobs.
If you’re looking for a full-time job, the good news is you’re not alone. That’s also the bad news. The 9.7% unemployment rate isn’t likely to fall anytime soon, economists say, and the actual number of workers seeking full-time jobs could be poised to grow. In the worst-case scenario, more than 26 million people could be battling each other for a few available jobs.

As it is, more than 40% of the nation’s 14.9 million unemployed workers have been out of a job for 27 weeks or more, according to the latest U.S. Bureau of Labor Statistics employment report. The average member of this group has been unemployed for 29.7 weeks — nearly seven months, with no end in sight. And with each passing week, finding a new job has become harder and harder.

Unemployment is expected to remain above 9% for at least the next two years, according to Christopher Woock, research associate for The Conference Board, and other economists. That’s because many of the estimated 4 million jobs lost in the construction and manufacturing industries during the recession may never come back.

Spring Outlook: Housing Sales Are Looking as Bleak as Ever
CNBC ~ March 26, 2010

It’s going to be another bad spring for the US housing market-unless you’re a buyer.

With prices still falling and more distressed homes hitting the market, many experts are expecting the market to get even worse before it gets better.

“There’s been some increase in inventory lately, mostly from distressed sales,” says Walter Malony, spokesman for the National Association of Realtors. “Buyer’s are pretty much in the driver’s seat.”

Even the Obama administration’s new plan to help troubled homeowners, while praised by some economists, won’t help the market much right away.

The $14 billion program, announced Friday, will try to stem a rising tide of home foreclosures by giving lenders incentives to erase some mortgage debt and slash mortgage payments for the unemployed. But it will take months before there is any impact, experts say.

“This change by the Obama administration is good news,” says Mark Zandi, chief economist at Moodys. “It will help homeowners in a meaningful way. We should see the impact of this by the fall with fewer foreclosures. Housing needs this.”

In the meantime, home values are continuing to drop and the amount of distressed property on the market is growing.

“There are still a lot of foreclosures in the pipe line,” says Greg McBride, chief economist at Bankrate.com. “They’re backed up because of paper work at the banks or moratoriums at the state level. But they are the elephant in room. And who knows what will happen when that inventory hits the market. It will more than likely hurt housing prices even more.”

Gotta get those fed bucks…

Struggling Georgia school firing entire staff
03.26.10~ Associated Press

ATLANTA — A failing Savannah high school is firing its entire staff in an effort to avoid further sanctions from the state and to make the school eligible for up to $6 million in federal money, officials said Thursday.

The 200 employees at Beach High School - including the principal - will work there through the end of the year but will not be rehired for that school, said Karla Redditte, spokeswoman for the Savannah-Chatham County school district.

The teachers can reapply for their jobs but only half can be rehired under federal education law, she said. Staff can also apply for other jobs in the school district.

“It is a sad day for us,” Redditte said by phone as she stood outside the 950-student school in south Georgia.

The little potbellied kook, Kim Jong Mentally-ill may have fired off a torpedo. Must be bored and looking for attention…

South Korean Navy Reportedly Shoots at Unidentified Ships Near North Korea ~ FOXNews.com 3-26-10

The South Korean navy has reportedly fired shots at unidentified ships in the direction of North Korea as it investigates whether a sinking vessel in its fleet was struck by a torpedo Friday.

Military officials said the 1,200-ton ship Cheonan was patrolling in waters south of the maritime border with North Korea when an explosion occurred at the stern of the ship, which carries a crew of 104 sailors, KBS World Radio reported.

If now is the time to sell Treasurys, why is Gross trumpeting it? Wouldn’t that work against PimpCo’s ability to profit from movements in bond prices?

* March 26, 2010, 9:29 AM EDT

Short-Treasury ETFs and Bill Gross

Everyone is talking about how investors pouring money into bond funds could get burned when interest rates rise.

Couple things caught my eye this week on this story.

Big swings in leveraged ETFs designed to short Treasury bonds are not uncommon. But the recent rally in ProShares UltraShort Treasury 20+ Year Treasury (TBT) and Direxion Daily 30-Year Treasury Bear 3x Shares (TMV) has unfolded during some lackluster Treasury auctions this week. TMV has jumped about 10% over the past three days.

Separately, whenever Pimco’s Bill Gross is out with bearish comments on bonds, investors want to listen up. Gross told Bloomberg that bonds have seen their best days, and that investors may want to cut back with the prospect of a strengthening U.S. economy and higher interest rates.

Not that anyone in D.C. gives a sh!t…

CBO report: Debt will rise to 90% of GDP
March 26, 2010

President Obama’s fiscal 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years, $1.2 trillion more than the administration projected, and raise the federal debt to 90 percent of the nation’s economic output by 2020, the Congressional Budget Office reported Thursday.

In its 2011 budget, which the White House Office of Management and Budget (OMB) released Feb. 1, the administration projected a 10-year deficit total of $8.53 trillion. After looking it over, CBO said in its final analysis, released Thursday, that the president’s budget would generate a combined $9.75 trillion in deficits over the next decade.

“An additional $1.2 trillion in debt dumped on [GDP] to our children makes a huge difference,” said Brian Riedl, a budget analyst at the conservative Heritage Foundation. “That represents an additional debt of $10,000 per household above and beyond the federal debt they are already carrying.”

The federal public debt, which was $6.3 trillion ($56,000 per household) when Mr. Obama entered office amid an economic crisis, totals $8.2 trillion ($72,000 per household) today, and it’s headed toward $20.3 trillion (more than $170,000 per household) in 2020, according to CBO’s deficit estimates.

Whispering Harry has a brain fart…

Washington (CNN) — Senate Majority Leader Harry Reid mistakenly called out “no” Thursday when asked for his vote on the health care reconciliation bill, setting the chamber howling with laughter.

Reid voted the wrong way when the clerk called for his vote, realized his error and quickly changed his vote to “yes.”

“He did it again,” someone said amid laughter.

Reid, who spent months persuading fellow senators to vote “yes” on President Obama’s top domestic priority, made the same mistake December 24 when voting on the original health care bill.

His office said Reid made the gaffe because he was so focused on getting health care passed.

Well, the DOW won’t hit the 11,000 target this week it appears. Gonna have to reload the coffers at the PPT for next week.

Futile Attempts To Reflate The Housing Bubble & The Deadly Cost
Daniel R. Amerman, CFA, DanielAmerman.com

When a financial bubble bursts – can it be reflated? And what are the risks for all of us the reflation attempt fails?

http://danielamerman.com/articles/Reflatep.htm

Greenspan Calls Treasury Yields ‘Canary in the Mine’ (Update2)

March 26 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates.

Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television’s “Political Capital With Al Hunt.”

“I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.”

The yield on 10-year Treasury notes was 3.86 percent at 12:19 p.m. in New York, little changed from late yesterday and up from 3.69 percent at the end of last week.

Ambac Regulator Takes Over to Avoid Asset ‘Scramble’ (Update1)

March 26 (Bloomberg) — Ambac Financial Group Inc.’s regulator said he seized $35 billion in risky mortgage insurance to keep the company afloat and forestall an “uncontrollable scramble for assets” among policyholders and counterparties.

“You’re not triggering any defaults,” Wisconsin Insurance Commissioner Sean Dilweg said yesterday in an interview. “All this is, from our perspective, is a timeout so we can create a more orderly runoff.”

Dilweg is taking over policies on residential mortgage- backed securities and halting some payments to protect municipal bondholders who count on the company’s guarantees. Claims paid now to mortgage investors are threatening to deplete Ambac’s reserves and leave a thinner cushion for municipal-bond clients whose coverage extends decades into the future, Dilweg said.

Ambac, created in 1971 to insure debt sold by states and municipalities, lost its top credit ratings and 99 percent of its stock-market value after expanding from its main business into guaranteeing bonds backed by riskier assets. The company guarantees $256 billion of the $1.4 trillion in insured municipal issuance, according to Bloomberg data. The muni market totals $2.8 trillion, according to the Federal Reserve.

New York Helicopter Commute for $200 a Day Signals Revival

March 26 (Bloomberg) — Liberty Helicopters Inc. is offering to fly weary commuters from New Jersey to Manhattan for about $200 a day, saving them 14 hours in traffic a week and signaling that Wall Street may have seen the worst of the recession.

As many as six people at a time will travel above the Statue of Liberty, Governors Island and the Verrazano-Narrows Bridge during the trip of about 20 miles (32 kilometers) from Port Monmouth, New Jersey, to landing pads at West 30th Street and Pier 6 near Wall Street. Weekend service starts tonight and weekday runs begin next month.

Liberty has already been approached by 150 potential clients after about a month of advertising, Patrick Day, a pilot and vice president of charter marketing, said in an interview in the cabin of a twin-engine Dauphin at the carrier’s base in Linden, New Jersey. The interest may reflect how far Wall Street has bounced back, said Robert Grotell, an independent transportation consultant in Port Jefferson, New York.

Says Walter Malony, spokesman for the National Association of Realtors, “Buyer’s are pretty much in the driver’s seat.”

Had the government stood aside and let the real estate crash occur without interference, prices would have fallen much lower much more quickly thereby allowing prudent buyers to acquire properties at realistic costs.

These government interventions only postpone the inevitable correction. The endless fixes by the federal government in the 1930s prolonged the Great Depression, and damned if they’re not going to do it with this one!

Bank of America, Wells Fargo probably won’t pay income tax for 2009
Annual reports suggest BofA and Wells Fargo won’t have to pay federal income taxes for 2009. charlotteobserver.com ~ Mar. 26, 2010

This tax season will be kind to Bank of America and Wells Fargo: It appears that neither bank will have to pay federal income taxes for 2009.

Bank of America probably won’t pay federal taxes because it lost money in the U.S. for the year. Wells Fargo was profitable, but can write down its tax bill because of losses at Wachovia, which it rescued from a near collapse.

The idea of the country’s No. 1 and No. 4 banks not paying federal income taxes may be anathema to millions of Americans who are grumbling as they fill out their own tax forms this month. But tax experts say the banks’ situation is hardly unique.

“Oh, yeah, this happens all the time,” said Robert Willens, an expert on tax accounting who runs a New York firm with the same name. “Especially now, with companies suffering such severe losses.”

Bob McIntyre, at Citizens for Tax Justice, said he opposes the government giving corporations such a break.

“If you go out and try to make money and you don’t do it, why should the government pay you for your losses?” McIntyre said. “It’s as simple as that.”

LOL!!!

Possible fraud, lies, cheats, bribes… I just can’t believe it! I thought these professionals were managing all that dough fair and square.

Report: Criminal investigators probe CalPERS
Sacramento Business Journal - 3-26-10

Sacramento-based CalPERS is the nation’s largest public pension fund with about $200 billion in assets.

The investigations into allegations of wrongdoing in public pension funds might be setting its sights on the California Public Employees’ Retirement System, the Wall Street Journal reported Friday.

The investigation of using placement agents has been going on for months, but the new twist is that criminal investigators are now involved, the paper reported.

Citing anonymous sources, the Journal reported federal investigators in Los Angeles are probing payments that might have been used to influence the fund’s investment decisions.

“We are not aware of an investigation,” said Brad Pacheco, spokesman with CalPERS in Sacramento.

The pension fund is in the midst of its own investigation of investment activities, he said. The system hired an outside attorney to investigate its investment activities, its use of placement agents and its fee structures.

These West Coast actions evolved after a pay-to-play scandal came to light in New York pension funds, which led to six persons pleading guilty to schemes to influence investment decisions.

The long slow bleed… Get’n while the get’n is good, the tax man cometh…

BP Solar laying off 320 from Frederick facility

BP Solar announced Friday it is laying off 320 manufacturing workers at its Frederick facility. There are approximately 430 total workers at the facility.

BP Solar, a subsidiary of British energy giant BP, is discontinuing its silicon casting, wafering and cell manufacturing at the Frederick plant, company officials said in a statement. Workers in the technology, sales and marketing, human resources and other departments will not be affected, said spokesman Peter Resler.

“This was a difficult decision and we deeply regret the impact it will have on our employees and the community,” CEO Reyad Fezzani said in the statement.

BP Solar also has plants in China and India. The company laid off 140 assembly line workers at the Frederick facility last year.

Consequences Of Health Care: Valuations

Yeah, I know, Obama has said that there would be no “material” impact to finances until 2014.

Liar.

Truth: Caterpillar and John Deere already announced non-cash charges of $100 and $150 million, respectively, for this year based upon the impact of this bill on forward retiree health care costs.

The law says you must account for such changes when you become aware of them, and that would be now.

But today a 100-kiloton device landed on AT&T’s (NYSE: T) balance sheet - they announced a one billion dollar non-cash charge:

On March 23, 2010, the President signed into law comprehensive health care reform legislation under the Patient Protection and Affordable Care Act (HR 3590). Included among the major provisions of the law is a change in the tax treatment of the Medicare Part D subsidy. AT&T Inc. (”AT&T”) intends to take a non-cash charge of approximately $1 billion in the first quarter of 2010 to reflect the impact of this change. As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company.

Oh, there won’t be any material impacts until 2014 eh?

I told you that was BS, and now you’re seeing it. If you’re wondering how this stacks up, AT&T had revenue of $123 billion and a reported profit margin of 10.19%, for a net profit of $12.54 billion.

This represents about 8% - for this quarter.

Caterpillar (NYSE: CAT) reported $32.4 billion in revenue and a 2.76% profit margin, with a net income attributed to common of $895 million. Their $100 million charge amounts to 11% of that income.

John Deere (NYSE: DE) reported $22.8 billion in revenue, a 4% profit margin and $912.80 million in net profit; their $150 million charge amounts to 16% of net income.

Still think this is no big deal eh?

I will note that “EPS”, or Earnings Per Share, is how we value stocks. These valuation “hits”, if they are somewhat representative, imply that stocks instantly became overvalued by somewhere between 10-15% when President Obama’s pen hit the paper.

(From K. Denninger)

Hwy is sendin’ yet another postcard to God:

“Dear MSG Mame”: “If you can please find someway… anyway, to have the GOP win in 2012″ (MSG = Most Significant God)

Hwy’s on record: For America to be SAVED…we need the GOPOFC&CC (“The Grand Old Pimp of Fiscal Conservatives & Compassionate Conservatives”) to have control of every Gov’t entity in 2012. I’m serious, a 4 year inoculation should provide about 120 years of protection! PEACE BABEEEEEEEEEEEEE!

Catholics & the Deaf…Palin & Peace…man, what a long strange trip it’s gonna be…

By BRET HOVELL and TEDDY DAVIS March 26, 2010 ABC News:

Sarah Palin appeared today with Sen. John McCain to urge Arizona voters to re-elect McCain and help lead a peaceful political revolution in the United States.
Sarah Palin joins John McCain on the trail for first public reunion since ‘08.

“There’s something going on out there, my friends, there’s something going on, and it’s a revolution,” said McCain. “It’s a peaceful revolution, but we’re going to take on this Obama Care. “

What kind of insanity incites lenders to make loans to people with a high risk of not paying them back?

It is a system which separates lenders from repayment risk. Basically, securitization and the ability to sell off loans to others.

Any financial reform, if it hopes to return long-term sanity to lending, must inextricably bind lenders to repayment risk.

I had a pretty good laugh this evening. I heard on news radio that many people on talk radio today were decrying the unfairness of the government subsidizing principal reductions, since others have dutifully been paying their mortgages.

I blurted a “HAH!”, and thought, you want unfairness? How about the government manipulating the real estate market to continue the bubble and prevent people like me from buying a house, people who do not accept that house prices increasing by 200-300% over a 5 year period is normal? How about the government using my own tax money to do it?

Unfairness? Mortgage holders are a significant percentage of the population and they have welcomed the manipulations to keep home prices at bubble levels. But now, they too will get to feel the sting as they watch neighbors get principal reduced.

I’m quite looking forward to seeing this program get implemented. The blowback from the outrage of current mortgage holders, and those who try to game the system to get principal reductions should make for an interesting show.

Mr. Bear, it’s your choice, being the custom of yore, choose thy weapon Sir!:

O.C. housing beyond bottom, homebuilders say
March 26th, 2010, by Jeff Collins

A number of speakers told a home-builder’s conference in Costa Mesa that the Orange County housing market has hit bottom and is in the midst of recovery. However, they differed over how long the recovery will take.

Here’s a sampling of comments from today’s O.C. Building Industry Association Development Trends conference:

Kerry Vandell, director of the UC Irvine Center for Real Estate: “The national recovery is real. There’s too many consistent signs to say it’s not real.” When it comes to rising home prices, he added: “I truly think this is not a dead-cat bounce. … We’ll continue to see (them) rise.” He predicted that the U.S. economy will continue to stabilize over the next 18 months, but “California’s recovery will be slower and will lag,” he said.

Emile Haddad, president and CEO of Five Point Communities, manager for Lennar Corp.’s Great Park-El Toro development: “We have definitely hit the bottom on the primary markets such as Orange County. I think it’s a real bottom.” Secondary markets — places that are further from the urban core like eastern Riverside County — will lag two to three years, and “some markets will not even recover this cycle.”

Roger C. Hobbs, president of R.C. Hobbs Company in Orange: “Banking will return. Construction loans will return, but not for 24 months.” The market for buying raw land and preparing it for development is “24 to 36 months out.”

Steve Magee, senior vice president of land management for iStar Financial in Dallas: “We’ve hit the bottom. We’ve started to turn the corner and are heading back up.” Magee added that while more foreclosures are coming, prices have already completed their fall. In fact, “in Southern California, we feel like (prices) over corrected a little bit. It’ll come back. We feel the fundamentals for home building are strong.”