The Housing Bubble

The SF Chron has a story up that breaks down housing price changes by zip code. It’s interesting but not unexpected that less desirable zips went down more than exclusive zips: truly rich people have enough money to ride things out. Struggling FBs in cheaper areas thought they were buying a piece of the action: too bad the “action” they got was not pleasant.

– Prices fell by the biggest percentages in lower-cost, outlying areas. ZIP codes that were affordable by Bay Area standards, in areas like Richmond, Vallejo, Vacaville and Antioch, sold for around $300 a square foot at the peak. Many of those areas are now going for about $120 a square foot. …

– Prices fell the least in higher-cost coastal areas. ZIPs where prices were over $600 a square foot at the peak generally have fallen about 10 percent to 20 percent since then - which makes them success stories compared with the rest of the region and the country. Affluent areas such as San Francisco, Millbrae, Cupertino and Lafayette still had foreclosures, but they accounted for less than 10 percent of properties on the market now, and perhaps 15 percent a year ago. Despite the tightening credit market, especially for higher-cost mortgages, these areas still trade for more than $500 a square foot.

States Seeking Cash Hope to Expand Taxes to Services
The New York Times

In the scramble to find something, anything, to generate more revenue, states are considering new taxes on virtually everything: garbage pickup, dating services, bowling night, haircuts, even clowns.

A Michigan proposal would lower the sales tax but make it broader, levying it on over 100 additional types of services like haircuts.

“It’s hard enough doing what we do,” grumbled John Luke, a plumber in the Philadelphia suburbs. His services would, for the first time, come with an added tax if the governor has his way.

Opponents of imposing taxes on services like funerals, legal advice, helicopter rides and dry cleaning argue that this push comes as businesses are barely clinging to life and can ill afford to see customers further put off by new taxes. This is especially true, they say, in states like Michigan and Pennsylvania, where some of the most sweeping proposals are being considered this spring.

But this is also a period of economic gloom for states. Pension funds are in the red, federal stimulus help will soon vanish, and revenues from traditional sources like income and property taxes are slumping ever lower, with few elected officials willing to risk voter wrath by raising them.

“This is born out of necessity,” said Gov. Edward G. Rendell of Pennsylvania, a Democrat. His proposed budget, being debated in Harrisburg, would tax services including accounting, advertising and data processing.

Mr. Rendell argues that the state’s current sales tax system makes no sense. (Why, he asks, is the popcorn in his state’s movie theaters taxed, but the candy is not?)

“Look, I’m not a crazy tax guy,” Mr. Rendell said, reflecting on recent trims to the budget. “I know what we’ve cut the last two years, and I know how deep and painful the cuts have been. So I know that in the future there’s going to have to be a revenue increase, and this is the best of the alternatives, obviously none of which we’re happy about.”

Contractors cope with new lead rules
The Post and Courier ~ March 29, 2010

Next month, a new set of rules will take effect designed to protect homeowners and others from lead dust stirred up during home remodeling.

But Charleston-area contractors say the rules also will make a lot of renovation work more costly, particularly since the Lowcountry has so many older homes with old paint that contains lead.

Contractors such as Chuck Bennett also fear the public doesn’t know enough about what’s going on.

“My fear is they’re going to think it’s something bogus that Chuck Bennett trumped up for extra work,” he said.

Bennett already has spent about $1,000 to train and certify his firm and train three of its employees.

The new U.S. Environmental Protection Agency rules apply to contractors, including subcontractors, who work on housing, child care facilities or schools built before 1978. They’re required to get new training in lead-safework practices that will reduce exposure.

Lead exposure, particularly among children, has been considered a public health menace. The concern has been acute in Charleston because of its relatively high number of older homes containing at least some lead paint.

Rob Crawford of Renaissance South Construction Co. said most contractors already protect against dust anyway, “but this is just taking it to a whole new level.”

The rule applies whenever at least 6 square feet of interior space or at least 20 square feet of exterior space are affected. The fine is an attention-getting $32,000 per offense.

Phillip Ford, executive vice president of the Charleston Trident Home Builders Association, said he has talked to contractors who won’t work on the older homes so they don’t have to worry about the rules.

Crawford said the rules could double the cost of some smaller jobs, but the relative added expense for larger jobs would be less noticeable.

I guess even the Russians don’t have the guts to fight a religious Jihad. The Taliban had it right destroy religious symbols and churches. Why can’t we just leave the innocent people alone.

————————————————————-
MOSCOW — Female suicide bombers set off huge explosions during rush hour Monday morning in two subway stations in central Moscow, officials said, killing at least 35 people and raising fears that the Muslim insurgency in southern Russia was once again being brought to the country’s heart.

Hey HBB’ers,
I found this on Reuters. I would have never guessed this was the actual case. The housing values are dropping, and it is now relatively easier to get a loan. FBs are now walking away - again.

I would have never guessed.

Roidy
P.S. My son has coined a new category: DIYFB. Do-It-Yourself-Frigged-Buyer.

Report shows strategic defaults increasing
Mar 26, 2010 09:01 EDT
Rolfe Winkler

strategic default

How widespread are strategic defaults? Laurie Goodman and her team at Amherst Mortgage Insight yesterday released a report that shows they are indeed on the rise and for reasons we might suspect: negative equity and a more borrower-friendly environment.

The second reason should be kept in mind as we consider President Obama’s soon-to-be-announced plan to encourage principal reduction. If the plan is structured so that it gives incentives to default in order to secure principal forgiveness, well, expect defaults to spike.

“A ‘budget crisis’ is not some minor accounting exercise. It’s a wrenching political, social and economic upheaval. Large deficits and rising debt — the accumulation of past deficits — spook investors, leading to higher interest rates on government loans. The higher rates expand the budget deficit and further unnerve investors. To reverse this calamitous cycle, the government has to cut spending deeply or raise taxes sharply. Lower spending and higher taxes in turn depress the economy and lead to higher unemployment. Not pretty.”

~ Robert Samuelson ~ Washington Post

The New level , of income a lot of folks aspire to is this .. Get on disability and get a few kids as dependents. One of my former tenents got on it with ”Back” trouble , then adopted his own grandsons , to boost the payout to about 3K a month . Then he built his own 2 car garage by himself . Did I turn him in ? No , we don’t stoop that low , though I do have access to the needed data . It’s like that all over , like winning the sweepstakes , to get on it . I doubt a third of those on disability are are for real , they just tired of working .

ITEM: “World markets rose and the euro strengthened Monday in the wake of the announcement of a eurozone aid plan for Greece, which the debt-ridden country followed up by planning a new bond issue.”
~Yahoo Financial News

~ Follow the reasoning here….Greece’s finances are in terrible shape because of too much debt. So, Greece is going to borrow lots more money by selling 7-year bonds and the world stock markets are rejoicing. Greece is just kicking the can down the road.

Sorry if this was posted already, but I didn’t remember seeing it last week if so.

The CBO’s estimate of Obama’s proposed budget has the public debt 10 years out now as 90% of GDP - up from the CBO estimate of 67% just two months ago.

Keep in mind we’re only talking about the part of the debt held by the public - not the total debt. This report doesn’t project the total debt, but since previously it was projected at 95% of GDP 10 years out, now it presumably would be somewhere around 120%.

Also keep in mind this is against a backdrop of continual 4+% GDP growth - i.e. no double-dip or other recessions.

This will be our downfall - no doubt in my mind now.

If this is true (not saying it will play just like the article suggests), what does the HBB braintrust think about the much discusses ARM reset chart?

WSJ - 3/29/2010

The struggling housing market appears as if it will sustain less damage than expected this year from a spike in the monthly payments on hundreds of thousands of exotic adjustable-rate mortgages.

The number of such loans scheduled to adjust to higher payments this year has shrunk. Lower-than-expected interest rates, coupled with efforts to aggressively modify loans, are likely to mute payment shocks for some borrowers. Many others already have defaulted on their loans even before their payments adjusted upward.

“The peaks of the reset wave are melting very quickly because the delinquency and foreclosure rates on these are loans are already very high,” says Sam Khater, senior economist at First American CoreLogic.

The housing market still faces enormous challenges, and a full recovery is likely to take years. The threat posed by resetting payments, Mr. Khater says, is “a drop in the bucket” compared to problems posed by the sheer volume of borrowers who owe more than their homes are worth, known as being “under water.”

Still, for years, housing analysts have worried about the threat of an aftershock from a big spike in mortgage defaults from so-called option adjustable-rate mortgages, which require low minimum payments before resetting to sharply higher levels, and “interest-only” loans, for which no principal payments are due for several years.

Most option-ARM borrowers made minimal payments, so their loan balances grew. That sparked worries about what would happen when those loans “recast” and begin requiring full payments on larger loan balances, usually five years from when they were originated or when the balance reached a designated cap.

Option ARMs may be among the most likely to benefit from the White House plan, announced on Friday, to force banks to consider writing down loan balances when modifying mortgages. Until now, the administration’s Home Affordable Modification Program, or HAMP, has focused on lowering monthly payments by reducing interest rates and extending loan terms to 40 years.

A separate program could benefit borrowers who are current on their loans but under water by allowing investors to refinance those borrowers into loans backed by the Federal Housing Administration. Investors are most likely to refinance the riskiest loans that qualify.

The majority of option ARMs are set to recast over the next two years. But the volume of outstanding loans has fallen sharply because many borrowers, prior to facing higher payments, received modifications, refinanced or defaulted. Option ARM volume peaked at 1.05 million active loans in March 2006. At the end of last year, there were 580,000 loans outstanding, according to First American CoreLogic.

The Fed appears to be winning its War on Savers, as recent increases in the U.S. household savings rate declining for the second straight month against the backdrop of rising personal consumption, stagnant income growth and a growing mountain of fiscal debt.

* MARCH 29, 2010, 9:08 A.M. ET

Consumer Spending Rises a Bit, but Incomes Stagnant

By JEFF BATER

U.S. consumers in February spent as expected even though their incomes didn’t budge amid high joblessness, while inflation stayed benign.

Personal income was flat compared to the prior month, the Commerce Department said Monday. Private wages and salaries posted a small increase of $2 billion, but proprietors’ income fell.

Personal spending increased by 0.3%. Consumer spending makes up 70% of demand in the U.S. economy.

Economists surveyed by Dow Jones Newswires forecast a 0.1% increase in income and a 0.3% increase in spending for February.

The saving rate slowed, as did a key gauge of inflation. The core price index for personal consumption expenditures, which excludes volatile food and energy, rose 1.3% compared to February 2009. It was 1.5%, year over year, in January 2010. The Fed checks the index for signs of inflationary pressure within the economy.

Monthly, the core index was flat in February compared to the prior month.

The PCE price index including food and energy prices also was unchanged in February compared to January and climbed 1.8% year over year.

With income flat, the saving rate in February was 3.1%, the smallest since October 2008. The rate was 3.4% in January and 4.0% in December.
…

The good news: Like subprime earlier, ARM resets are contained, thanks to owners who were scheduled for ARM resets instead going into foreclosure.

The really bad news: Uncle Sam’s press releases tend to downplay the likely severity of future problems.

* REAL ESTATE
* MARCH 29, 2010

Mortgage Increases Blunted

By NICK TIMIRAOS

The struggling housing market appears as if it will sustain less damage than expected this year from a spike in the monthly payments on hundreds of thousands of exotic adjustable-rate mortgages.

The number of such loans scheduled to adjust to higher payments this year has shrunk. Lower-than-expected interest rates, coupled with efforts to aggressively modify loans, are likely to mute payment shocks for some borrowers. Many others already have defaulted on their loans even before their payments adjusted upward.

“The peaks of the reset wave are melting very quickly because the delinquency and foreclosure rates on these are loans are already very high,” says Sam Khater, senior economist at First American CoreLogic.
…

Mortgage Plan Tries to Mitigate an Unemployment Problem That the Administration Just Worsened ~NRO 3-26-10

An early point about the Obama administration’s new plan to help homeowners by forcing banks and lenders to reduce monthly mortgage payments to 31 percent of income, usually unemployment insurance:

As noted in several places, the new health-care bill has already made the cost of employees more expensive and taken away capital that could otherwise have been used to hire workers.

Farm-equipment manufacturer John Deere “said it expects its expenses to rise by around $150 million on an after-tax basis, mainly in the second quarter, as a result of the legislation.”

Verizon “told employees in an email Tuesday that Verizon’s costs will go up in the near term, pinpointing a tax-subsidy reduction for retiree health benefits.”

Heavy-equipment manufacturer Caterpillar “said that its first-quarter earnings will be hit with a $100 million after-tax charge under tax law changes attached to the new health care reform legislation.”

AK Steele Holding Corp., “the third largest U.S. steelmaker by sales, said it will record a non-cash charge of about $31 million resulting from the health-care overhaul signed into law by President Barack Obama. The charge will be recorded in the first quarter of 2010.”

Valero Energy “will take a $15 million to $20 million charge to second-quarter earnings for the same reason.”

Medical-device maker Medtronic “warned that new taxes on its products could force it to lay off a thousand workers.”

If you want to reduce unemployment, stop passing legislation that kicks the snot out of employers.

Where Did The Income Go?
It appears that the Federal Tit Pump is running out of power…

Personal income increased $1.2 billion, or less than 0.1 percent, and disposable personal income (DPI) increased $1.6 billion, or less than 0.1 percent, in February, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $34.7 billion, or 0.3 percent.

Oh boy, now the $1.3 trillion in additional deficit spending is no longer contributing to personal income! That’s not so positive - indeed, it’s not positive at all.

Private wage and salary disbursements increased $2.0 billion in February, compared with an increase of $16.6 billion in January. Goods-producing industries’ payrolls decreased $3.5 billion, in contrast to an increase of $5.2 billion; manufacturing payrolls decreased $1.4 billion, in contrast to an increase of $5.0 billion. Services-producing industries’ payrolls increased $5.5 billion, compared with an increase of $11.4 billion.

Goods down…. uh, where’s our so-called economic recovery?

Proprietors’ income decreased $6.1 billion in February, the same decrease as in January. Farm proprietors’ income decreased $7.1 billion, the same decrease as in January. Nonfarm proprietors’ income increased $1.0 billion, the same increase as in January.

Very little change in proprietor’s income ex farming, but farmer income is down significantly.

Rental income of persons increased $2.2 billion in February, compared with an increase of $1.9 billion in January. Personal income receipts on assets (personal interest income plus personal dividend income) decreased $16.5 billion, the same decrease as in January.

Rents up a bit, but dividends are down huge, continuing a trend. This is not positive at all, and implies that assets are being sold to continue lifestyle choices. This leads to a question that has begun to gnaw at me: Have we begun to cross into where boomers start pulling funds out of asset classes to live on?

Personal current transfer receipts increased $16.6 billion in February, compared with an increase of $29.8 billion in January. The January change reflected the Making Work Pay Credit provision of the American Recovery and Reinvestment Act of 2009, which boosted January receipts by $19.8 billion. The Act provides for a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers. When an individual’s tax credit exceeds the taxes owed, the refundable tax credit payment is classified as “other” government social benefits to persons.

Government to the rescue! $45 billion worth in the last two months, to be specific. That’s a direct $270 billion in handouts, or 2% of GDP - and that’s only the direct handouts! So subtract that off GDP and….. (oh, and don’t forget the rest of the $1.3 trillion too.)

Nothing to see here folks, as in “no evidence of sustainability in the recovery.” We have a government that continues to “prime the pump” but there’s no water at the bottom of the well to generate self-sustaining economic growth.

(From K. Denninger)

What I want to know is, where did all the people come from, and what do they DO?

I’m referring to my neck of the woods, South Hillsborough County, outside of Tampa, Florida. As I mentioned in yesterday’s Florida thread, the development was explosive and massive, due to the fact that there was so much empty land in this formerly rural, semi-rural area. Along with the houses, seems like the poplulation increased dramatically as well, along with the traffic, which used to be non-existent and which sucks profusely now.

But where the hell did all the people come from? Why did they come? What for? They can’t all be commuting to Tampa. I know what the Section 8ers do and how they do it, but they couldn’t possibly account for all the population increase. I don’t get what the attraction is around here. I get it even less now that it has been made so ugly.

Quick — get in line for Shitti stock sales. They are sure to sell like hot cakes when the Treasury unloads their gobzillion shares.

March 29, 2010, 9:39 a.m. EDT

Treasury plans to sell 7.7 billion Citigroup shares in 2010
U.S. government plans to sell shares based on a “pre-arranged’ trading plan

By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) - The Treasury Department plans to sell 7.7 billion shares of Citigroup Inc. (C 4.34, +0.03, +0.64%) common stock throughout 2010 based on a “pre-arranged” plan, according to a statement from the agency Monday.

The Treasury Department received the shares as part of a U.S. government investment in Citigroup that took place near the peak of the financial crisis that shook the economy to the brink in 2008. The U.S. government injected billions into Citigroup and other financial institutions as part of a $700 billion bank bailout.

According to the release, the Treasury department intends to begin its sale of the shares based on a pre-arranged written trading plan, but did not indicate what that plan might be except to say that the sales will be dependent on “a number of factors.”
…

TaxWatch
March 26, 2010, 2:47 p.m. EDT
Mind the pitfalls in claiming home-buyer tax break

By Eva Rosenberg, MarketWatch

LOS ANGELES (MarketWatch) — The federal government is doling out as much as $8,000 to people who bought a home recently. Sounds simple, right? But collecting on that money isn’t proving to be all that straightforward for some taxpayers.

You already know there are two different credits, right? They’re both worth 10% of the purchase price of the home, up to $8,000 for first-time home buyers who have not owned a home for the last three years and up to $6,500 for people who’ve owned before, as long as they owned a home and lived in it for at least five years out eight, consecutively.

Here are some of the common problems cropping up.

Owners in name only

A young couple doesn’t qualify for a mortgage, or for a decent interest rate, because they’re too young to have a credit history. So Mom and Dad qualify for the mortgage and buy the home. That’s a dilemma encountered by some clients of Marlene DeBoisblanc, an enrolled agent in Westlake Village, Calif.

The couple lives in the home and makes all the mortgage payments. Mom and Dad own a home and don’t plan to move, so the parents don’t qualify for either credit. Does the couple qualify?

Yes. They may claim the full $8,000, according to Melvin Kreger, a tax attorney and enrolled agent in North Hollywood, Calif. The young couple is considered an equitable owner. Clearly, the intention has always been for this to be their home. This situation crops up all the time when someone has bad credit or no credit.
…

OTB halts pay for executives, consultants in wake of massive layoffs
Off-Track Betting pink slips 1,300 workers
DAILY NEWS

Off-Track Betting Corp. officials pulled the reins on consultant and executive compensation Saturday after fielding questions from the Daily News about the payments.

The announcement that the higher-ups won’t be paid until the organization is stabilized came one day after the bankrupt OTB sent pink slips to 1,350 workers.

“Until a compromise is forged that saves these jobs, we will suspend our pay,” the city’s OTB President Raymond Casey said in a statement.

But a budget document obtained by the News shows that OTB at one point planned to dole out hefty pay to consultants trying to save the organization, which is threatening to shutter 66 parlors.

Four consultants - two with ties to Chairman Meyer (Sandy) Frucher - and two law firms stood to make an estimated $4.5 million through June, the budget document shows.

So I continue to be a renter for now. Inspection turned up item after item after item. The short list includes termites, questionable issues with the sewer line, need new heater and AC, need new windows sooner rather than later (~20 total), deck bolts are insufficient and need replaced, retaining wall in backyard will need replaced within a year or two, draining issues on property - need regraded and gutters cleaned/repaired/possibly diverted underground via trench, driveway shot and needs replacing, insulation hanging/tattered/needs replacing, and other things here and there and there and there. Essentially, you have a 60 year old house that the current owner lived in for 26 years and did little to no maintenance on.

After all that, we get into the cosmetics (which is what I knew going in needed to be done). That list is substantial. That list plus all the things found in inspection no longer make the house worth what I offered. Seller has no room to go lower, so deal is off.

I didn’t disclose the $$ on here before, but here it is. House was originally listed at $260K. Dropped almost immediately to $255K. I offered $235K, they countered at $249K. I upped to $240K, they countered 3 more times (247, 245, 243), I stayed put. We agreed to $240K. At that price, I felt I was probably overpaying 10-15% by the time the whole housing debacle shakes out, but was ok with it thinking the house didn’t need much more than cosmetic work.

They asked me to submit, in writing, a revised offer based on the inspection findings (even though they said seller has absolutely no room to budge price-wise), but I decided not to do that because I was considering going down to $220K, even though in my head I was thinking this house is worth no more than $200K. Decided to walk. In addition to all the work needing to be done, I wouldn’t even be able to get in to do anything until they move out at the end of June (they want to rent back from buyer) and I would probably not be moving in until late July or August.

So I’m out $625 for inspection (including termite and radon). I haven’t even gotten the radon report yet! But better to lose that than get trapped in a money pit.

What kills me is there was a house a few doors up from there that I was just about to go look at before she accepted my offer. Same kind of house, but had newer windows and heater plus a garage and was sitting empty. Was listed for $255K. Not sure what it sold for, but it’s under contract and they settle in April. I could have possibly been living there in a month. Crap.

Moth forces wine country’s secret into the open ~ Associated Press

FRESNO, California — One of the dirty secrets of California’s wine country is now on everyone’s lips.

Somehow a voracious grape-eating moth has found its way nonstop from Europe to the heart of the Napa Valley, the land of three-figure cabernet. With valuable fruit at risk, the region’s fast and loose play with federal agriculture quarantine laws is getting new scrutiny from investigators and researchers.

Suitcase smuggling is the winked-at act of sneaking in cane cuttings to clone vines from France’s premier vineyards, hoping to replicate success. Vintners say it helped build a handful of exceptional vineyards in the 1980s when U.S. plant choices were limited and import testing took seven years.

As California clamps a quarantine across the heart of Napa Valley and farmers ready their pesticides, nobody is winking anymore. A new Napa reality is setting in_ that lax attitudes invite costly invasions of new pests that can threaten the country’s most expensive and economically productive farmland.

“There are people who continue to spin their tales of smuggled plant material. People like a story with a glass of wine, and what that tends to do is legitimize behavior that not only threatens the industry, it’s illegal,” said Greg Clark, deputy agricultural commissioner for Napa County. “Knock it off.”

Mob Museum’ to open in Las Vegas

LAS VEGAS, March 26 (UPI) — Several exhibits for a planned Las Vegas “Mob Museum” scheduled to open in 2011 were unveiled Thursday amid controversy, observers say.

City leaders have been criticized for dedicating public resources to a museum, officially known as the Las Vegas Museum of Organized Crime and Law Enforcement, which celebrates organized crime, the Las Vegas Review-Journal reported.

City officials hope it will be an economic boon for downtown Las Vegas and anticipate it pulling in from 250,000 to 600,000 visitors a year, the newspaper said.

“This is one of the most anticipated museum projects in the world,” Dennis Barrie, the museum’s creative director, said. “It is really a topic that evokes true interest with the American public, with museum people, with all sorts of people.”

Renderings of three planned exhibits, “Mob Mayhem,” “The Skim” and “Bringing Down the Mob,” were unveiled.

Barrie acknowledged the displays and subject matter would create debate, the Review-Journal said.

“There’ll be controversy in this museum,” Barrie said. “If there’s not, we’re not doing our job.”

Hampton Roads Bankshares misses 10-K filing deadline
Triangle Business Journal - b

Hampton Roads Bankshares (Nasdaq: HMPR), owner of the five-branch Gateway franchise in the Triangle, has notified the U.S. Securities & Exchange Commission that it was unable to meet a March deadline for filing the company’s annual report, or 10-K, for 2009.

“The deterioration of the economy in general, as well the real estate markets in which the company conducts its business specifically, have resulted in additional accounting complexities and disclosures …” the bank says it told the SEC in explaining for the delay.

The bank’s deadline for the filing was March 16.

In the notice to regulators, bank managers also explained that they were performing a detailed review of their loan portfolio to determine whether adjustments were needed in loan loss provisions, were analyzing possible goodwill impairments and were undertaking various actions designed to improve the bank’s capital position.

eastcoaster.
Why owners think they can get top dollar for a house they didn’t maintain is beyond me ,even if it’s in a good area . At the same time sales people like to downplay the cost of repairs . Whats funny is that show on TV where some sales person or designer attempts to state what you will get back in return if you invest in this or that improvement (My House Is Worth What ).

Really ,it’s kind of insulting when they tell you that you will get 70% back on the dollar spent or 90% (before the crash the idea was that you would make 500% on improvements being a flipper ).There are so many factors that come into play on what you will get that it’s not a simple analysis . Why anyone would be motivated to make a improvement based on getting 60 % back on the dollar is another strange byproduct of these strange hype shows and these strange times .
Funny seeing the homeowners nod on these programs like wow
that a good deal .Unless your staying very long term and the improvement is for your own specific needs ,improvements can end up being a costly mistake in terms of what you net out ,contrary to what you could net out in a mania market .

Thanks Sheila, I’m sure we have plenty more “innovation” heading our way…

FDIC Getting Innovative in Sales of Failed Banks: Bair
29 Mar 2010 By: Reuters

The Federal Deposit Insurance Corp is experimenting with different structures for its sales of failed banks, as the economy recovers and commercial real estate is increasingly a driver of collapses, the head of the agency said Monday.

FDIC Chairman Sheila Bair said the agency is exploring securitizing failed bank assets and other techniques to drum up interest in troubled banks and to ensure the FDIC gets the maximum return.

“We want to get a little more innovative,” Bair said at a Women in Finance Symposium at the Treasury Department.

NEW YORK (AP) — Stocks rose Monday after an increase in consumer spending boosted confidence in the economy.

The Dow Jones industrial average rose 45 points in morning trading. Broader indexes also climbed.

The Commerce Department said consumer spending rose for the fifth consecutive month in February, matching economists’ expectations.

Job creation and healthy consumer spending are considered keys to a sustained recovery. At the end of the week, investors will get the Labor Department’s monthly employment report, which is expected to show employers added jobs this month for only the second time since the recession began in December 2007.

well what do you know ? will it last with higher taxes next year ?

Get this! I just spoke to my realtor (gave him the signed form to get out of the agreement) and he said the sellers refused to accept my inspection report. Thus, they don’t have to disclose any of it. Unreal. My realtor said he’s going to insist they at least take the termite inspector’s report.

People cannot be trusted. Hope the next potential buyer has a good inspector.

Bears Are Dead Wrong: S&P Will Reach 1,300 by Year’s End, Altucher Says
Mar 29, 2010 by Heesun Wee in Investing, Recession

As the market continues its climb of 70 percent-plus off the lows, and the gap widens between the housing and stock markets, the bears are convinced of a downturn — any day now. But our guest James Altucher, managing partner of Formula Capital, disagrees.

“The bears have been consistently wrong throughout this whole rally,” Altucher tells Aaron in the accompanying clip. “If you followed the bears’ advice at the bottom you’d be dead broke right now.” For full disclosure, Altucher did not call the market crash in 2008. “Better to be consistently bullish than consistently bearish.”

Altucher points to the common arguments the bears make — and why they’re wrong:

Lots of homes are in foreclosure or under water: That’s true but there are bright spots in housing data including the Case-Shiller reports, Altucher notes. That housing index has been up the past six months, suggesting prices are stabilizing, he adds.

All the growth we’re seeing is just inventory rebuild. Businesses cleared their inventory in anticipation of the 2010 Great Depression that never happened. Now businesses are scrambling to restock, spurring growth in the economy that’s likely to last for one to two years at least. “People are going to be surprised how fast and furious this inventory rebuild is going to happen,” Altucher says.

Unemployment is 9.7%.Yes but other jobs data show a rise in part-time hours, hourly pay, hours per week, and number of temporary workers. And these are all precursors to gains in fulltime jobs, Altucher explains.

“Before this is fully over we’re going to see new all-time highs again. And I do think that we’re going to see 1,300 by the end of the year on the S&P,” Altucher says.

These Days (Mon.-Thurs. 9-11 a.m. on 89.5 FM)
Sorting Out Prop 13’s Impact On Education

An audio recording of this interview will be posted here within a few hours of the live broadcast. A transcript will also be added within 24 hours. Thank you for your patience.

By Maureen Cavanaugh, Natalie Walsh

March 29, 2010

Maureen Cavanaugh: Prop 13 has had a profound impact on California. We’ll examine the huge savings to property owners and the negative impacts to governments services.

Guest

Joanne Faryon, KPBS reporter.

Downtown Albany condo project receives AG approval
The Business Review (Albany)

The New York State Attorney General’s office approved the sales offering plan for 24 condominiums in downtown Albany, N.Y., a step that clears another hurdle in the project.

Rosenblum Development Corp. can now take deposits and advertise the condominiums, which would be built inside a converted warehouse at Chapel and Monroe streets next to the Hampton Inn & Suites.

The Guilderland-based developer already has reservations and deposits on four units, less than a week after the offering plan was approved, said Seth Rosenblum, president.

“They will have to go to a binding contract soon,” Rosenblum said.

Most of the sale prices are in the mid-$300,000 to $400,000 range. The largest penthouse unit–2,165 square feet with two bedrooms, two baths and two terraces–costs $780,000.

A sales showroom with sample furnishings and a model unit is now open on the first floor.

A virtual model can also be seen at http://www.17chapel.com.

Ritchie Bros. sees big demand for heavy equipment
Houston Business Journal

A major sale of industrial equipment and real estate conducted last week in Houston by Ritchie Bros. Auctioneers Inc. showed a strong demand for such items across the country.

Ritchie sold more than $42 million worth of equipment on March 24 and 25 at the company’s auction site in Houston.

A total of 3,000 bidders registered for the unreserved auction. Bidders hailed from 53 countries, including 48 U.S. states.

U.S. buyers purchased 74 percent of the items based on gross auction proceeds. Bidders from outside of Texas acquired 57 percent of the inventory. Thirty percent of the items were snapped up by online bidders.

Alan McVicker, Ritchie’s regional manager, said the auction demonstrated the demand for equipment is still holding strong in 2010.

Ritchie Bros. (NYSE and TSX: RBA), based in Vancouver, Canada, has more than 110 locations in 25 countries selling industrial assets used in the construction, transportation, agricultural, material handling, mining, forestry, petroleum and marine industries.

Ford Motor Co. just sold off it’s Volvo stake to China for $1.8 Billion. I wonder how they made or lost on that deal? Ford still has a ton of debt and some big chunks are coming due in the next few years.

Paying for the past

Although Ford has turned the corner on profits, its debt remains worrisomely high.

Ford was the only U.S. automaker not to declare bankruptcy. Still, it hasn’t been a smooth ride. From 2001 to 2008, Ford lost $31 billion. And the firm’s automotive division still sits on more than $34 billion in debt.
Quote:

About $8 billion of that comes due in 2013, and Ford is in a race to grow its way out of trouble. “We recognize we have too much debt on our balance sheet, but we think the best way to fix that is by rebuilding our business,” says Booth.

Ford posted a $2.7 billion profit in 2009, following a $14.8 billion loss the prior year. Analysts predict profits will continue to grow, to $3.6 billion in 2010. But if earnings hit a speed bump, Ford could be right back in the hot seat, worrying about its debt burden.

>>I noticed the UAW is cashing in some of their shares and the company is issuing shares to cover them.

“Ford Motor Co. announced Monday that it will begin a secondary public offering of about 362.4 million warrants to raise money for the UAW Retiree Medical Benefits Trust.

Each warrant represents the right to buy one share of Ford’s common stock at an exercise price of $9.20. Ford (NYSE: F) shares opened Monday trading at $13.70 each. The warrants expire Jan. 1, 2013.

The United Auto Workers’ Retiree Medical Benefits Trust, also known as the UAW VEBA, received the warrants from Ford on Dec. 31 as part of a settlement agreement in which the UAW VEBA assumed the obligation to provide eligible active and retired Ford hourly union employees and their families with health care benefits.”

Aaron’s opens 1,700th store
Atlanta Business Chronicle

The Atlanta-based furniture, appliances and electronics rentals retailer said the new store in Covington, La., shows the strength of the company’s business model.

“The Aaron’s business model has proven to succeed in both up and down economies,” said Robin Loudermilk, Aaron’s president and CEO, in a news release. “The 1,700th store opening in Covington, Louisiana, demonstrates the success the company has experienced in spite of the faltering economy we’ve seen over the past few years. We plan to maintain this trend, increasing our store count by approximately five percent to nine percent during 2010.”

In 2009, Aaron’s profit spiked 25 percent to $112.6 million.

I just saw on CNBC that there is a prize contest for guessing the correct closing of the DOW or something like that. You get a new car!

Now, I can go on and on about the idiocy of this kind of thing, but I really don’t need to.

Actually, I kind of like the idea. It shows how desperate the markets and CNBC are. The honesty it conveys is actually refreshing.

Roidy

Small banks say they can’t win in small-business lending
USA TODAY -3-29-10

David Harmer didn’t think he’d have a problem getting a $50,000 line of credit for his 33-year-old air-conditioning business.

First Class of Cape Coral, Fla., was profitable. Harmer’s net worth was $2 million, and he’d never been late with a loan payment.

But Florida Gulf Bank denied his application last summer, saying First Class’ balance sheet didn’t show a profit. Harmer explained he reclassifies company earnings as his wages at year’s end to lower his taxes, a technicality that hadn’t posed a problem for his previous credit lines at other banks.

As Harmer tells it, a bank executive was eager to approve the loan, but he said he simply couldn’t. “He said, ‘Our hands are tied because the government says you have to follow these guidelines,’ ” Harmer says.

Florida Gulf CEO Bill Valenti confirms regulatory scrutiny in such cases has gotten stricter, though he wouldn’t discuss Harmer’s loan request specifically.

Across the USA, banks say there’s a big reason they aren’t lending more: Regulators won’t let them. Even as the White House exhorts banks to open the lending spigots, particularly for small-business borrowers who are key to job growth, banks say government field examiners are toughening their reviews in ways that discourage sound loans.

Rep. Blaine Luetkemeyer, R-Mo., a former bank examiner, recently laced into top banking regulators. “We have this huge disconnect between what’s going on here in D.C. (and) what’s actually been going on out in the field,” he told them at a joint hearing of the House Financial Services and Small Business committees. “Quite frankly, you guys are part of the problem.”

I visited my aunt and my two first-cousins yesterday. Both of them–neither of whom have high incomes–expressed regret that the didn’t have a house, and are still thinking of buying one.

One cousin–a schoolteacher–said that an agent told him he can “afford” $350,000 and that he should buy now before the tax incentives go away (!)

I tried to reason with them that house prices will almost certainly drop some more, and that the amount of rent he’s paying compared to the cost of ownership _proves_ that it’s cheaper/better to rent vs. buy. (An explanation that the end of any tax incentives will just cause house prices to fall even more went right over his head.)

I’m amazed that even after bubbles, crashes, and mania, people still think that it’s better to “own” some tiny condo in a marginal neighborhood than to rent….

St. Louis Newspaper Guild Accepts 6% Wage Cut
March 29, 2010

The St. Louis Newspaper Guild unit at the St. Louis Post-Dispatch agreed to a new five-and-a-half year contract with an initial wage cut, but future salary increases.

“By a vote of 132 to 54, the St. Louis Newspaper Guild approved on Saturday a 5½-year contract with the Post-Dispatch,” the story stated. “About 74 percent of the Guild’s members cast votes. The Guild represents employees in the newsroom, advertising and building service at the Post.”

The story added: “The contract calls for a 6 percent wage cut, along with three unpaid, one-week furloughs over the next 2½ years. Wages would bounce back by 2.5 percent in each of the last three years of the contract if company revenue increases by at least 2 percent a year.”

Happy Passover / חג פסח שמח

Next year in Jerusalem!

Sweet…Just 6 months, that will show the thieving bastards who’s boss.

Former IBM exec Moffat pleads guilty to insider trading
Triangle Business Journal -

Former IBM executive Robert Moffat, who played a key role in the sale of the company’s Triangle-based PC Division to Lenovo Ltd. in 2006, pleaded guilty Monday to conspiracy and securities fraud charges in connection with an insider-trading ring.

Moffat admitted to providing insider information about IBM (NYSE: IBM), Lenovo and Advanced Micro Devices Inc. (NYSE: AMD) to Danielle Chiesi, who was associated with a one-time Bear Stearns (NYSE: BSC) hedge fund called New Castle Funds LLC. Saying he knew what he was doing was wrong and would help Chiesi in her job, Moffat nevertheless gave her tips about poor server sales at IBM; weak earnings at Lenovo, where he served on the company’s advisory board; and a pending restructuring at AMD.

With his plea agreement, Moffat faces no more than six months in prison. A sentence of as many as 20 to 25 years is possible for the securities fraud charges.

Moffat is the 11th person to plead guilty in the probe of an insider-trading ring related to the Galleon Group that prosecutors said ranked up more than $20 million in profits. Moffat said that he provided the information to Chiesi because she was a friend.

I know next to nothing about IT programs, however one may be inclined to believe this group as had a sh!t load of time (a decade) to work out the bugs…

IT Problems Put Accuracy of Census at Risk, Say Government Auditors
Monday, March 29, 2010

Washington D.C. (CNSNews.com) – Information technology problems at the U.S. Census Bureau could cause inaccuracies in this year’s constitutionally mandated count of the U.S. population, according to government auditors.

“IT problems place the efficiency and accuracy of Non-Response Follow-Up at risk and final decennial costs remain uncertain,” said Judith Gordon, the principal assistant inspector general for Audit and Evaluation at the Department of Commerce, in testimony before Congress last week.

Non-Response Follow-Up (NRFU) is the Census Bureau’s program for sending people into the field to count people who have not returned mailed Census forms. The NRFU is the Census Bureau’s largest operation and involves personally interviewing millions of people nationwide.

Robert Goldenkoff, the director of strategic issues for the Government Accountability Office (GAO), told CNSNews.com that “an estimated “50 million housing units out of a mail-out universe of about 120 million” will be non-respondents that will require an in-person follow-up to count.

No mail on Saturdays: The first step.
The U.S. Postal Service wants to end Saturday delivery in an effort to save $3 billion a year.March 29, 2010

NEW YORK (CNNMoney.com) — Saturday mail could be one step closer to cancellation when the United States Postal Service submits an official proposal to a government regulatory board on Tuesday to eliminate 6-day delivery.

A new 5-day delivery schedule could save the cash-strapped Post Office $3 billion annually, the agency said. Earlier this month, USPS said it plans to incur about $238 billion in losses in the next 10 years if it doesn’t revamp its outdated business model.

“Every day, every month, every year this gets delayed, we end up further in the hole,” said USPS Deputy Postmaster Patrick Donahoe at a Monday briefing in New York.

Donahoe said a service cut would result in the loss of about 40,000 full-time jobs. About 600,000 workers currently work for the Post Office.

The Post Office hopes to drop Saturday mail in its next fiscal year, which starts Oct. 1. But first, it has to jump through a series of regulatory hoops that could take much longer.

Superman Comic Sells for $1.5 Million, Setting Record
Monday, 29 Mar 2010 : AP

The record price for a comic book, already broken twice this year, has fallen again.

June 1938 issue of “Action Comics” that first featured Superman

A copy of the 1938 edition of Action Comics No. 1 sold Monday for $1.5 million on the auction Web site ComicConnect.com. The issue features Superman’s debut and is widely considered the Holy Grail of comic books.

The same issue sold in February for $1 million. That number was quickly bested when a 1939 comic book featuring Batman’s debut sold for $1 million and change.

The issue that sold Monday was bought from a private collector and then sold by Stephen Fishler and Vincent Zurzolo, the co-owners of ComicConnect.com.

Fishler declined to name the buyer but said he was “a hardcore comic book fan.”

Wee bee coming back to the City!

-or-

Big Apple abuzz with hive talkin’!

New York is about to hum to a new sound – the gentle buzzing of bees – following a decision to end a ban on beekeeping in the city.

Apiarists who have long had to cloak their activities with camouflaged hives and furtive forays on to sky scraper roofs were celebrating this week and predicting a beekeeping boom among New Yorkers anxious to connect with nature.

Following a campaign led by locally-produced food campaigners, the city’s health board voted to overturn the ban.

Apiarists will now only need to register their hives and guarantee that they can control swarms and ensure their bees do not interfere with other people.

Perhaps the unlikeliest of outlaws, beekeepers have risked fines of up to $2000 if involved in the “possession, keeping, harbouring and selling” of bees.

Other US cities such as San Francisco and Chicago have thriving – and legal – beekeeping communities but, in 1999, the New York administration of Mayor Rudy Giuliani responded to a growing problem of exotic pets by drawing up a list of 100 types of wild animal considered too dangerous to be kept in the city.

They included grizzly bears, cheetahs, scorpions, elephants, ferrets and honey bees.

However, hundreds – the exact number is unclear due to the secrecy of some practitioners – defied the ban, covertly keeping bees on top of apartment buildings, in communal gardens and in their own backyards.

Hives were frequently camouflaged – painted grey to look like air conditioning units or red, like chimneys.

Inflation Is Going To Get Worse
29 March 2010 By Greg Hunter

One of my consistent views on this site is “real” inflation is much higher than what the government is telling us. For example, recently the Bureau of Labor Statistics announced February’s inflation number (CPI) was “unchanged” at a 2.1% annual rate. Over the years, the BLS has changed the way it calculates inflation by using accounting gimmicks that understate what most people would consider the true cost of living. So, the government inflation numbers of today make inflation look much lower than it really is for main street America.

One of my readers, David from Salem Alabama, is under no illusion the inflation genie is captured in the bottle. David admits he is a “Dollar store junkie”, and shops at places such as “Dollar General and Big Lots, etc.” Here is an excerpt from a recent email to me from David on what he is seeing first hand:
“. . .There IS inflation big time!!

1) Cat food: was 5 cans for a dollar NOW are 3 cans

2) Dog food: 5 oz was $.33 per can NOW $.55 to $.65

BIG cans was $.65 to $.75 NOW a buck or more…
3) Boxes of flavored rice: was 2 boxes for a $1.00 NOW ONE box for
$1.00 or $1.15 ??

4) A basic candy bar: was 3 for a $1.00 NOW is 2 for a dollar or
$.65 ea 5) Sam’s flavored water – was $.50 now $.65 6) The ‘Family pac’ ( ??? ) of potato chips, ‘Ruffles’ – at Wal-Mart
at ( $4.38 ) reg price is $4.99 BUT the bag is VERY small now and
price was, a few months ago, about $3 some thing !! ??
7) AND: have you ’seen’ the shrinking rolls of toilet paper too??

You get my drift?? AND: That CPI basket of 30 items is full of
BS!! WHAT is the real cost of things!! . . .”

What David has documented is the real cost of living or inflation. According to John Williams of shadowstats.com, the inflation rate in February is running at 9.4% annually. That is the “real cost of things!” (Williams calculates the inflation rate the way BLS did it in 1980.) In a recent report, Williams said, “. . . evidence continues to mount of higher prices across a much broader spectrum of products and services. . . . eventually — within six-to-nine months — the broader inflation issues also should surface in official reporting.”

http://usawatchdog.com/inflation-is-going-to-get-worse/

Fannie maybe
Monday, March 29, 2010

BY NOW, the Obama administration was supposed to have a plan to reform Fannie Mae and Freddie Mac, the “government-sponsored” mortgage finance enterprises (GSEs) that have been under federal control — and absorbing $126 billion in federal cash — for the past 19 months.

But last week Treasury Secretary Timothy F. Geithner told the House Financial Services Committee that all he can promise is a “public comment” period starting April 15, in which the various housing interest groups — and there are a lot of them — can submit their ideas. Thereafter, at an unspecified “time of greater market stability,” legislation can be drafted, introduced and passed.

In short, after a year of discussion, Mr. Geithner promises more discussion.

To be sure, there are reasons for this delay. The political system, already overtaxed by the health-care debate and a looming battle over regulatory reform, might not be able to handle another partisan war. Housing remains fragile, with a huge “shadow inventory” of soon-to-be foreclosed properties poised to flood the market and not nearly enough private capital available to take the place of Fannie and Freddie’s limitless credit line with the Treasury.

Still, there is no shortage of good ideas for restructuring Fannie and Freddie, and it’s not clear that a few more months of debate will produce any brilliant discoveries. Presumably, everyone now recognizes that the old “government-sponsored” model encouraged excessive risk-taking, with private parties reaping the gains and taxpayers stuck with the losses.

The new model must abolish this fatal confusion. The country can probably get away with waiting until 2011 to do that, but not much longer. The worst possible outcome would be that housing lobbies succeed in using Mr. Geithner’s “comment” period to limit the scope of reform.
…

Told ya money was still flowing up here:

http://blog.syracuse.com/cny/2010/03/the_20m_mansion_on_the_lake_its_the_new_king_of_skaneateles_upscale_homes.html

The $20M mansion on the lake: It’s the new king of Skaneateles’ upscale homes

Question:

What on-line, low budget brokerage do you all recommend?

Panel on Whether Obama Pumping up Foreclosure Protection Is Fair to the Rest of Us

Monday, March 29, 2010

This is a rush transcript of “Special Report With Bret Baier” from March 26, 2010. This copy may not be in its final form and may be updated.

JOHN COURSON, MORTGAGE BANKERS ASSOCIATION: It allows borrowers to have a number of months, in this particular case, three to six months of forbearance of their payments while they’re trying and seeking reemployment. And then once they get reemployed, then they can become eligible for a modification of their mortgage.

SYLVIA ALAYON, CONSUMER MORTGAGE AUDIT CENTER: To put a temporary stay on a foreclosure, and that person is unemployed three months or six months down the road, we’re just going to be back at square one.

JAMES FREEMAN, THE WALL STREET JOURNAL: What you are basically doing here is taking the risk, the losses in the future and moving them over to the taxpayer ledger. This is a huge cost.

They are saying — they are only talking about the $50 billion from TARP, but this is going to get bigger because the losses are going to hit the FHA over the years.
…

http://news.goldseek.com/RickAckerman/1269867600.php

Bank of America mortgage “rescue” more like an A-Bomb.

“Too big to fail”

Addressing the question of whether Too Big to Fail is a useful focus for bank regulation, Nobel laureate Paul Krugman wrote:

My basic view is that banking, left to its own devices, inherently poses risks of destabilizing runs; I’m a Diamond-Dybvig guy. To contain banking crises, the government ends up stepping in to protect bank creditors. This in turn means that you have to regulate banks in normal times, both to reduce the need for rescues and to limit the moral hazard posed by the rescues when they happen.

And here’s the key point: it’s not at all clear that the size of individual banks makes much difference to this argument.

And here’s my counter argument: Only the largest banks, which would threaten a collapse of the global economy if they failed, qualify for TBTF bailouts. Get rid of the TBTF Megabanks, get rid of the need for bailouts.

Howdy from Key West

9pm PST tonight on KPBS envision San Diego will be airing “The Legacy Of Prop. 13″

It is also available on their website:

http://www.kpbs.org/news/envision/prop13/

* OPINION
* MARCH 30, 2010

Low Interest Rates Are Squeezing Seniors
The Fed’s help to big banks comes at a big cost to savers.

By CHARLES R. SCHWAB

Today’s historically low interest rates may be feeding banks’ profitability, but they are financially starving our seniors.

In February 2006, when Ben Bernanke was first sworn in as chairman of the Federal Reserve, the federal-funds target rate stood at 4.5%. That same year, the average yield on a one-year certificate of deposit was 5.4%. A retiree who diligently saved for a lifetime and had amassed a nest egg of $100,000 could count on an added $5,400 in retirement income per year. That may not sound like much to the average Wall Street Journal subscriber, but for a senior on fixed incomes that extra money improved the quality of his life.

Today’s average rate for an identical one-year CD is roughly 1.3%. On the same nest egg, that retiree will now get annual payout of just $1,300—a 76% decline in four years.

Some would argue that today’s low inflation rate offsets the decline. But even at an inflation rate of zero, a 76% decline in spending power is painful. And we’re already seeing signs of inflation this year. The first two months of 2010 showed an annualized inflation rate of 2%, further exacerbating the spending power problem for retirees by eroding the value of their principal.

To be sure, the country’s recent financial crisis required unprecedented action by the Fed, including lowering rates to levels not seen in more than 50 years. In particular, the infusion of capital into the banking system through historically low fed-funds target rates pulled many banks from the precipice of collapse. By that measure it has been a resounding success.

Yet these unprecedented low rates have now been in place for almost 18 months. As a result, banks have enjoyed virtually free access to money while retirees have been deprived of any meaningful yield on their fixed-income portfolios. For a large segment of our population—people who worked long and hard, who followed the rules by spending less than they earned and putting the remainder away to keep themselves independent in retirement—the ultra-low interest rate is more than a hardship. It’s a potential disaster striking at core American principles of self–reliance, individual responsibility and fairness.

To put the scale of this problem in context, consider the fact that more than $7.5 trillion in American household wealth is held today in short-term, interest-bearing products such as checking and savings accounts, retail money funds and CDs. At today’s low interest rates, the return on those savings is hundreds of billions less than it would have been at 2006 interest rates. Retirees feel the consequences disproportionately, but because much of that income would have made its way into the economy, spending and job creation also suffer.

I see the pain that low interest rates have caused very directly. My company, Charles Schwab, serves millions of individual investors, many of whom are 65 and older. These people depend on cash savings for their financial well-being.

Many in this age group are being forced to stretch for income one of three ways. One is to take on more risk just as they are progressing through retirement. Another is to go longer in maturity with their fixed income investments, locking them into a situation where inflation will bite further into their principal and purchasing power. And the worst is the slow erosion of principal that is already occurring as people cash out of savings to make up for needed income.

It’s not just retirees on fixed income we should be concerned about. Let’s not forget that savers of all ages—even the young person opening his first savings account—need some incentive of future reward for saving. Today, there is none.

The large banks are well on the mend. Profits are improving and they’re doing just fine. Our seniors are not. Those in Washington should keep their plight in mind as they consider Fed monetary policies going forward.

WSJ Law Blog

WSJ on the cases, trends and personalities of interest to the business community.

* March 29, 2010, 10:54 AM ET

In War Between States and Feds, Utah Strikes Latest Blow

By Ashby Jones

All is not well between the states and the federal government. Across the land, states in recent months have signed sovereignty statements, reminders of sorts that the 9th and 10th Amendments imbue the states with certain powers.

And last week, more than a dozen states sued to strike down the new federal health-care law.

Now this interesting little movement, as reported by the AP: Utah Governor Gary Herbert on Saturday authorized the use of eminent domain to take some of the U.S. government’s most valuable parcels.

Yes, LBers, you’ve read that correctly: a state has invoked eminent domain in order to take back land from the feds.

According to the AP, Herbert signed a pair of bills into law that supporters hope will spark similar legislation throughout the West. Many contend that federal ownership of wide parcels of land restricts economic development in an energy-rich part of the country. Many people in Utah are still angry that President Clinton designated a large area in Utah as a national monument in 1996, a move that stopped development on the land.

More than 60 percent of Utah is owned by the U.S. government, and policy makers here have long complained that federal ownership hinders their ability to generate tax revenue and adequately fund public schools.

Utah Democrats have slammed the eminent domain measure as a waste of money, emphasizing that the move is on shaky legal ground. Why spend taxpayer money defending legislation that likely won’t withstand legal muster, opponents say.

But if the law is as bad as Democrats say it is, a court will quickly overturn it and the state won’t have to spend much money defending it, Herbert said.

The Wall Street Journal

* REVIEW & OUTLOOK
* MARCH 30, 2010

The Ballad of Sallie Mae
A cautionary tale of public subsidy and arbitrary politics.

President Obama today signs his nationalization of the college student loan market, which will put the Department of Education directly in charge of doling out cash to students and colleges. It’s one more plank in the cradle-to-grave entitlement state, but this landmark is also a good moment to recount the rise and fall of Sallie Mae. It’s a cautionary tale for our times about public subsidy, arbitrary politics and doing business with the government.

The story begins in another progressive heyday, 1965, when the federal government launched a program to make college “affordable” by offering a taxpayer guarantee on student loans. College has if anything become even less affordable since, as the subsidies have merely driven up the prices that colleges charge.

So in 1972, with affordability still an issue, Congress created a new government-sponsored enterprise, the Student Loan Marketing Association, or Sallie Mae. Like Fannie Mae and Freddie Mac in housing, Sallie was born with a federal charter and an implied taxpayer backstop to provide a secondary market for student loans. Sallie would go public in 1983 and, also like Fan and Fred, mint money for shareholders by enjoying a lower cost of funds than fully private lenders.
[1sallie]

This free lunch gradually became a source of political concern and an inviting target under federal accounting. In 1993 President Bill Clinton claimed in his first budget that the government could save billions by cutting out the private firms and lending directly to students. But even a liberal Congress had concerns about this “single-payer” model.

That year the White House and Congress compromised and created a “public option.” The government’s new Direct Lending program would compete with private loan originators. Sallie would still be able to provide a secondary market for the loans made by private firms, but new fees in the law took away much of Sallie’s cost-of-funds advantage.

The Clinton Administration continued to push for the end of Sallie’s federal charter. But in contrast to Margaret Thatcher’s campaign to convert U.K. state-owned monopolies into private competitive companies, the Clinton team wanted to turn most of the market over to its new state-owned program at the Department of Education.
…