The Housing Bubble

Raining here in Bradenton, Fl at 8:30AM.

Leasing a new tool for mansions that aren’t selling
Phoenix Business Journal

As luxury home values in the Phoenix market continue to slide — some are down by 50 percent or more from three years ago — dozens of mansions sit vacant in Paradise Valley and other chic spots.

Now, some real estate brokers are learning the ins and outs of lease-option agreements to keep the local residential market from freezing up again.

“It requires much legal documentation, but … we see this as a way to save the community,” said Ann Heins, a broker who specializes in distressed property sales with her husband, Ralph.

After a brief lift in the marketplace, many local real estate professionals think there is more room for home values to fall, particularly in the high-end market.

The lease option is a way to get somebody into the house with a vested interest in maintaining it until the market turns around.

Not that it matters…

USA DEBT: $13,310,379,000,000.00

$44,000 PER CITIZEN…

ShoreBank of Chicago Said to Be Closed Today by FDIC

The Federal Deposit Insurance Corp. will shut down ShoreBank Corp., according to people with direct knowledge of the matter.

ShoreBank Corp., the Chicago lender operating under a Federal Deposit Insurance Corp. cease-and- desist order for 13 months, will be shut and most of its assets will be bought by Urban Partnership Bank, two people with direct knowledge of the matter said.

Urban Partnership, created to make the acquisition, will keep branches in Chicago, Cleveland and Detroit and continue to focus on low-income communities, the people said, speaking anonymously because the matter is private. Urban Partnership will have Tier 1 capital of at least 8 percent and its chief executive officer will be William Farrow, a former executive at the Chicago Board of Trade and Bank One Corp., they said.

“The good news is that the bank, under this new management, will still be there and serving the South Side community,” said Dory Rand, president of the Chicago-based Woodstock Institute, a non-profit that studies community lending. “They have made the South Side a decent place to live and work and do business.”

Home Sales Probably Plunged and Goods Orders Rose as U.S. Recovery Slowed

Home sales probably plunged in July, and orders for long-lasting goods climbed for the first time in three months as the U.S. strained to sustain the recovery from the worst recession since the 1930s, economists said before reports this week.

Purchases of new and existing houses dropped 12 percent to a 5.01 million annual pace, the lowest since March 2009, according to the median forecast of 54 economists surveyed by Bloomberg News. Durable-goods bookings climbed 3 percent last month, the survey showed.

“The economy is stuck in a rut,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “We lost the momentum in the second quarter and now we’re really struggling to regain any momentum at all.”

Visa, BofA join forces on mobile payments
San Francisco Business Times

Visa Inc. and Bank of America Corp. announced a joint pilot project that would allow consumers to use their smart-phones to make purchases.

The pilot teams San Francisco-based Visa, the world’s largest payment processor, with BofA, the nation’s largest bank. Initially to be tested in the New York metropolitan area, people selected for the trial could use their phones as virtual debit cards: after installing a chip, when making a purchase they could pass their phone near a point-of-sale device and money would be automatically be moved from their bank account.

The tie-up between the two titans potentially creates a dominant contender in the race to turn mobile phones into payment devices — but it’s already a crowded field, as Reuters pointed out: Visa is getting ready to run a similar pilot with US Bancorp. BofA has its own mobile trials under way, while Verizon Wireless, AT&T, T-Mobile USA and Discover Financial Services are also working on a similar joint venture.

Bloomberg reports At Least Half of Shanghai, Beijing Flats Are Vacant

At least half of the apartments in Shanghai and Beijing are empty, the China Daily reported today, citing an online investigation by volunteers conducted in 100 Chinese cities.

About 51 percent of Shanghai apartments, 66 percent of Beijing flats and more than 70 percent of units in Hainan are vacant, according to the survey, based on counting the number of apartments observed to have no lights on at night. It was conducted on more than 1,000 real-estate projects and was organized by news website Sina.com., according to the report.

“Investors and speculators are the owners of the vacant houses” as they wait to sell their properties at an appropriate time, said Lu Qilin, a Shanghai-based researcher at Uwin. “It’s important for the government to introduce more measures to curb speculation.”

Anyone who thinks China does not have a property bubble is in Fantasyland.

Hot topic. A couple of comments from

Demonstrators in West Palm Beach march against Arizona-style immigration law

By Andrew Marra Palm Beach Post Staff Writer
Posted: 6:59 p.m. Saturday, Aug. 21, 2010

2006 My son was killed by a drunk Guatemalan, driving with no lic. no car insurence and 12 passagers in the van with him. when the driver hit my son on his bike, his head went one way and the body the other. The driver and all the the passagers,but one fleed the crime area. The other was to drunk to know what had happen. when asked by WPPD, he said i dont speak no english. Til this day nothing was done about my only child murder. So i say treate them like you treate us. Lock them up!!!!!!
tonia
8:27 AM, 8/22/2010 HEY GRINGOS:

AMERIKA BELONGS TO US, NOT TO YOU.

WE WILL RECLAIM THE LANDS YOU STOLE FROM US AND SHIP YOU BACK TO EUROPA WHERE YOU BELONG.

ASTA LAVISTA BABY..

ASTA LAVISTA
JoseO
8:14 AM, 8/22/2010

My daughter started college this week(stayed local..doesn’t want student loans when she is done)…she is now one of 25,000 there. As I looked around at the campus..stared at the line going around the building for the financial aid office….knowing what unemployment has been for the last 2 years…other than bagging groceries..Where are all these people going to find jobs in their field of study?…And how are they going to afford to move forward with an average of 30-80K in debt in four years?…the future for the job market looks bleaker and bleaker as each month goes by….

I keep meeting parents whose kids have graduated and they are 1)boomeranged(back with mom and dad) 2)still unemployed 3)back in school hoping a Master’s will help or market recovers and 4)working at high school level employment jobs…

My daughter’s logic is that she will probably have to relocate in order to get employment in her field of study and doesn’t want to be hampered with loan payments if she has to rent her first place. She also stated that it would be torture to be “on her own for 4 years” only to return home to “mom and dad.”

New York Times: individual investors fleeing stocks, due to poor performance and the baby boomer selloff.

http://www.nytimes.com/2010/08/22/business/22invest.html?hp

Then again, perhaps that is one factor not two, as the boomers inflated stock prices (like everything else during their lives) in the buying phase, leading to poor performance when selling, especially since the generations behind them, now buying, are poorer.

“As Argentina goes, so goes America in the race to see which country will go down in history as the worst kleptocracy”.
“As we see here, Argentina, jumping the gun on what Americans can anticipate with the newly announced deal between Google and Verizon; is consolidating power in the Internet space”. ~Clipped from Max Kieser.

Argentina orders Internet provider shut down

BUENOS AIRES, Argentina (AP) - Argentina’s government on Friday ordered the closure one of the nation’s three leading Internet providers, demanding that Grupo Clarin immediately inform “each and every one” of its more than 1 million customers that they have 90 days to find new ways of getting online.

The order says Grupo Clarin—which has grown through mergers to become one of Latin America’s leading media companies—illegally absorbed the Fibertel company through its Cablevision subsidiary in January 2009 because it failed to obtain prior approval from the commerce secretary.

Cablevision denied that Friday, citing a previous approval obtained in 2003, and planned to appeal, accusing the government of continuing a campaign to stifle opposition viewpoints.

President Cristina Fernandez has made dismantling Grupo Clarin a priority of her government. A new law that has been challenged in court would force the company to break apart in a drive to dissolve media monopolies.

America’s Healthcare

Edward Hanway, the former CEO of CIGNA was provided with a retirement package worth $110.9 million, paid for by the excessive and unnecessarily high insurance premiums billed to CIGNA’s policy holders.

Medical bankruptcies now account for more than one half of all personal bankruptcies filed in the U.S. each year. However, the excessive out-of-pocket costs have become leading contributors to America’s one million medical bankruptcies reported each year. Keep in mind that medical bankruptcy is virtually unheard of outside of the U.S.

Amazingly, according to medical researchers at Harvard, between 50 to 78% of all medical bankruptcies are filed by individuals who actually had full health insurance.

That means that co-payments and other out-of-pocket costs alone are enough to wipe out the savings of millions of Americans who purchased health insurance as a financial shield.

Once you examine all of the data, it’s easy to see that America’s health insurance system doesn’t provide real insurance. It’s really a very costly system of pre-paid medical that sticks you with a large chunk of the bill when you really need medical care the most.

While millions of Americans continue to struggle with the consequences of the most colossal and fraudulent transfer of wealth in world history, health insurance companies continue to ratchet down their vice of control over the nation’s healthcare system, with double-digit increases in premiums and soaring payouts to industry executives. Indeed, profits from the nation’s largest health insurers are soaring.

During the first half of 2010, health insurers’ profits on average soared by more than 20%. Leading the pack was Aetna, with earnings skyrocketing to more than 40% in the second quarter of 2010 versus a year earlier.

According to reports from the seven largest health insurers’, the proportion of premium dollars spent on medical care (known as the Medical Loss Ratio, or MLR) in recent quarters has declined by a significant amount. CIGNA led the way with a 6.4% reduction in the second quarter of this year, down from 85.2% to 78.8% MLR. This year-over-year decline in MLR is unprecedented.

Sadly, America’s tightly controlled corporate media monopoly has convinced the vast majority of Americans to think they have a democracy, and that “things will be better when the republicans (or democrats) are in office.”

President Obama’s healthcare reform requires health insurers to provide higher quality care at lower administrative costs. According to the new law, health insurers will be required to spend 80 to 85% of policy holders’ premium (the MLR) on medical care.

However, because Obama failed to mandate (a badly needed system of) federal regulation for the entire insurance industry, it’s up to each state insurance commission to draft the specific regulations pertaining to the insurance portion of the law.

We are now seeing health insurers play the same game mastered by the credit card industry. As the new healthcare law draws closer to implementation, insurers have raised the administrative costs while lowering the premium dollars to be spent on medical care (MLR) so as to “grandfather” the system when it comes time for the new guidelines to be made.

Election Deadlock May Weaken Australian Dollar as Investors Avoid Stocks

Australia’s dollar may fall and equities investors may look to other markets after the nation’s federal election failed to deliver a majority government for the first time in 70 years, according to market analysts.

With the expiration of the $8K first time buyer federal tax credit behind us and the $10K first time buyer CA state tax credit expiration soon to come, I don’t know how these flippers expect to make a profit by purchasing foreclosure homes now, unless by investing sweat equity into homes which have started to fall apart due to sitting vacant too long. If that is what they are doing, then I say, “Happy flippin’ to ya”…

Professional investors move into flipping foreclosed homes

Squeezing out amateurs, private equity funds and wealthy individuals are buying distressed properties at public auctions, refurbishing them and selling them for quick profits.

August 20, 2010
By Walter Hamilton and Alejandro Lazo, Los Angeles Times

Hoping there are big profits to be made in the aftermath of California’s housing collapse, professional investors are flocking to the business of buying foreclosed homes at distressed prices.

The investors, primarily private equity funds and groups of wealthy individuals, purchase the homes at public auctions, which are held daily on the steps of local courthouses. They refurbish the properties and try to sell them for quick profits.
…

Housing Can Find a Home Without Fannie, Freddie: Caroline Baum
Bloomberg Opinion ~ Caroline Baum

You are President Barack Obama, and your Summer of Recovery is looking like most lawns in the Northeast.

You succeeded in getting a financial reform bill through Congress, with many of the rules to be delivered in the future. But you have yet to address those malefactors of the mortgage market, Fannie Mae and Freddie Mac, which are bleeding cash — almost $150 billion since the government seized them two years ago. What do you do?

1. Let Nancy Pelosi figure it out.

2. Let Barney Frank figure it out.

3. Appoint a blue-ribbon commission to come up with options.

4. Convene a conference featuring a big-name panel of experts, give it a lot of advance hype, and hold a public hearing where the panelists can look appropriately serious as they talk amongst themselves.

Obama chose No. 4. Anyone interested in the proceedings could hear opening remarks from Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan, the co-hosts. Then came two panel discussions before the attendees left for working breakout lunches. The menu wasn’t included on the agenda.

The public got a bird’s-eye view into the process when the government should be focused on principles.

To its credit, Treasury asked all the right questions when it sought public input on reforming housing finance in April. What is the proper role for government? Should that role vary depending on the segment of the market? What can we learn from other countries, such as Canada, that escaped the ravages of the housing boom/bust?

Poor Return

The answers to those questions are a sticking point for any reform. It’s fair to say the participants agreed on only two things: 1) the government’s involvement in 90 percent of mortgage originations is too big; and 2) Fannie and Freddie can’t remain quasi-private, quasi-public entities.

Treasury and HUD didn’t need to stage a conference to learn the U.S. isn’t getting its money’s worth from the substantial housing subsidy it provides, as Moody’s Analytics chief economist Mark Zandi told the audience. Or that those subsidies channel resources to housing that could go to more productive areas of the economy. Or that the country can no longer afford them.

BAE Systems to lay off 124 at western Pa. plant
The Associated Press

UNIONTOWN, Pa. — Defense contractor BAE Systems plans to lay off 124 workers - half of the work force - at its western Pennsylvania plant beginning in mid-October.

The company Friday attributed the Fayette County layoffs to a decline in military spending.

BAE mostly builds Bradley Fighting Vehicles at the North Union Township plant. Spokesman Randy Coble said the military’s demand for the plant’s services was greatest about two years ago, at the peak of the conflicts in Iraq and Afghanistan.

A required notice filed with the state says BAE will lay off 53 workers in October, 63 in December and eight in January. Most of those to be laid off are production line employees. The company, which has a larger plant in York County, separately laid off 11 people this week.

Peninsula home sales plunge in July
By Patrick May
Posted: 08/19/2010 05:56:15 PM PDT

After steadily rising for several months, Peninsula home sales plummeted to near-historic lows in July as demand remained tepid and the federal homebuyer tax credits that had helped caffeinate the marketplace in the past year finally went away.

San Mateo County saw 463 sales of single-family resale homes, the lowest for a July in 20 years. In Santa Clara County, the 1,159 single-family resale homes that closed escrow represented a drop of 24.3 percent from the 1,531 sold a year earlier, making this the second-slowest July since 1990, according to figures released Thursday by the real estate information service MDA DataQuick.

And even though median prices rose in July from a year earlier, with a 7.2 percent rise in San Mateo County and an 8 percent increase in Santa Clara County, there are signs that recent home-price appreciation is losing steam. DataQuick’s sales figures for new and existing homes in the Bay Area show that the most recent price increase is the lowest in 10 months of steady gains.

Various factors helped pull down sales, but the loss of the federal tax credit made the drop especially dramatic, and DataQuick President John Walsh said his numbers hint at continued cloudiness in a real estate market being hammered by stubbornly high unemployment, meager job growth and tight credit.

“Some potential buyers, including those who held off until the tax credits expired, will take their time to assess market conditions, searching for signs of renewed price cuts,” said Walsh. “Depending on the economy and other factors, that might be what some of them find, especially in areas with a growing number of homes for sale — particularly distressed properties.”
…

With tax credit in rearview, July home sales fall 27% from last year
* by Jon Prior
* 11:59 AM August 19, 2010

Residential sales in July fell 27.8% from last year as the market heads forward without the homebuyer tax credit, according to the real estate brokerage chain RE/MAX.

In July, home sales fell 30% from June. The homebuyer tax credit, which gave a $8,000 to first-time homebuyers and $6,500 to existing ones, had an April 30 deadline to sign a sales contract. Double-digit drops have been common since. Pending home sales plummeted 30% in May, according to the National Association of Realtors (NAR). Two weeks after the credit expired, mortgage applications dropped 27.1%, according to the Mortgage Bankers Association (MBA).

RE/MAX surveyed closed transactions reported to multiple listing services (MLS) in 54 metropolitan areas. In each, sales were down from last year. July home sales in Houston dropped 25% from last year, according to the Houston Association of Realtors (HAR).

“With the expiration of the tax credit, home sales are making a serious correction, and it may take a couple of months for sales to find their footing,” according to the report.

Bill Gassett, a real estate agent with RE/MAX Executive Realty in Hopkinton, Mass. said even though he’s had a great year — thanks to some good fortune in securing quality listings — showings are beginning to slow.

“There certainly has been a slow down since the tax credit expired though. I have been fortunate in that I have had some very nice listings in attractive price points where there is not a lot of inventory,” Gassett said. “The amount of showings has decreased substantially over the last few months across the board in all price points.”

Gassett added, though, that REO buyers, usually investors, may not be concerned with a tax credit.

Despite the drop in sales, prices have remained level. The median sales price for July was $212,524, still 1.3% more than last year and only a 0.5% dip from the previous month. The highest climb came in San Francisco, where prices increased 16% — a trend the Northern California market’s seen across multiple indices. Prices in Boston rose 10%, and Honolulu climbed 9% from last year.
…
Related Stories
* Home sales in Houston fall 25% from last year: HAR
* Pending Home Sales Plummet 30% with Tax Credit Gone: NAR
* Pending Home Sales Up Again as Homebuyer Tax Credit Expires: NAR
* April Existing Home Sales Surge Ahead of Tax Credit Deadline

Could a similar scenario play out some time soon in FL or CA? One can always hope…

The Financial Times
Greeks sell their yachts to avoid tax investigations
By Kerin Hope in Athens
Published: August 22 2010 16:18 | Last updated: August 22 2010 16:18

“For sale” signs have appeared on a handful of gleaming Italian-made power boats and luxury motor-yachts after a team from SDOE, Greece’s financial police, visited the crowded Alimos marina near Athens.

Other yacht owners are trying to sell their craft by word of mouth as SDOE steps up a crackdown on tax evasion by high-earning Greeks.

“Make some discreet enquiries and you’ll find plenty of sellers,” said a marine technician who asked not to be named, gesturing towards a large vessel flying a Cayman Islands flag.

With first-half budget revenues lagging behind projections, the finance ministry is trying to boost tax inflows by attacking “lifestyle” tax evasion.

Last week it set a target of collecting at least €2.5bn this year in fines and back taxes owed by thousands of Greeks who “forgot” to declare ownership of yachts, swimming pools and luxury cars on their annual tax return.

“Among the big-ticket items were power boats costing up to €1.5m,” said Theodoros Floratos, a SDOE official co-ordinating the investigation of yacht owners.
…

Roots of sales-tax hike lie in city pension increases
Key votes in 1996 and 2002 boosted top 20 pensions by 176 percent
By Danielle Cervantes, UNION-TRIBUNE
Craig Gustafson, UNION-TRIBUNE
Saturday, August 21, 2010 at 11:36 p.m.

COMING MONDAY: Who are San Diego’s top 20 pensioners, and what would their pensions have been without key city votes in 1996 and 2002?

The deals struck by labor leaders and city officials in 1996 and 2002 created a financial windfall for thousands of city workers, some of whom enjoy double or triple the pensions they would have under the previous program, according to an analysis of pension records by The Watchdog.

For example, the highest-paid retiree in the city’s pension system, former Assistant City Attorney Eugene Gordon, would have been due an annual benefit of roughly $64,600 after his 34 service years if city leaders hadn’t significantly increased retirement benefits.

Instead, bumped-up pension formulas entitled him to more than $155,000 annually when he retired in 2008. Factor in cost-of-living adjustments and special add-on programs approved by past city administrations and his current annual take is about $187,000.

To put that in perspective, a private retiree would need a nest egg of $3.8 million earning 5 percent a year to produce an income stream to equal $187,000 in the first year, plus 2 percent annual cost-of-living adjustments the city allows.

That person would be out of money after 30 years, whereas the city pension is in place for life.

The Watchdog reviewed data for Gordon and the city’s other 19 top pensioners. It found that, on average, pension boosts and programs approved by the city made them eligible for pensions 176 percent higher than they would have been.
…

METHODOLOGY

The Watchdog analysis included information about the pensions of 4,153 current service retirees and survivors, provided by the San Diego Employees’ Retirement System (excluding disability pensions). The data consisted of monthly allowances paid in February and was annualized for yearly figures.

The analysis arrived at three key data points:

Current pension: For the current benefit, no extrapolation was necessary. The Watchdog used data for actual payments issued by the retirement system that may include cost-of-living adjustments; payouts from city programs such as the Deferred Retirement Option Plan, or DROP; and credit from a program in which employees purchase credit for years they did not work. Overall figures in the story regarding pension trends and averages are based on this data.

Initial pension benefit: This figure was calculated to show an expected pension benefit with enhanced pension formulas and programs in effect at the time all top 20 pensioners retired. It was calculated using highest salary, years of service, age at retirement and a pension multiplier, all supplied by retirement officials. Because of the way the data was released, the estimates include purchased service credits but not payments from the DROP program, which allows employees to collect pension money in a special account before they retire. Individual circumstances are not captured in the analysis, which was designed to illustrate the scope of the benefit changes.

What that benefit would have been without key city votes: For the estimate of how the initial allowance would have differed without the 1996 and 2002 benefit boosts, the analysis used salary, service years and age at retirement and then applied the lower pension multipliers that were in effect until 1997. Again, individual circumstances and decisions about matters such as beneficiary payments would have changed actual payouts in a way that is not reflected in the data or the analysis.

To calculate pensions with and without the 1996 and 2002 votes, the newspaper was provided the highest one-month salary for the top 20 pensioners, a figure that was annualized to estimate the highest one-year salary. For the top 20 pensioners who were enrolled in DROP, the year of retirement was calculated per retirement system practices as the entry into the program, not the actual year that work stopped.

Each pensioner’s date of birth was not provided, although month of birth was. Therefore, a small number of retirement ages used in the analysis may be off by one year. For the top 20, a date of birth was determined using other public records.

Individual circumstances that may have affected initial payout — and estimated payout without key city votes — include lawsuit settlement groups, beneficiary options, tax law and employee contribution levels.

Finally, to figure the estimated nest egg that a private citizen would need to match the top city pensioner’s income, The Watchdog relied on the expertise of Jon Beyrer of Blankinship & Foster.

Journalism that upholds the public trust, regularly

Call 619-293-2275. Fax 619-260-5094.

E-mail watchdog@uniontrib.com.

Well, if it`s a good thing then it`s O.K.

Obama Administration Defends Lackluster Foreclosure Programs; Says Interest Rates Will Remain Low To Help Housing Market
First Posted: 08-20-10 10:18 AM | Updated: 08-20-10 10:18 AM

The official touted the ever-growing pipeline of homes likely to enter foreclosure as a success in the administration’s fight to stem the rising tide of home foreclosures. It’s taking longer for homes to enter foreclosure, and it’s taking longer to evict homeowners once they enter foreclosure. The so-called “shadow inventory” of homes — those with severely delinquent mortgages, in foreclosure or already repossessed that have not yet been put on the market — has significantly grown since the administration took office and is estimated to range from 5 to 7 million homes. Through June, borrowers in foreclosure have been delinquent for an average of 461 days before being evicted from their homes, according to Jacksonville, Fla.-based data provider Lender Processing Services.

That’s a good thing, the official said, because it gives the market time to absorb these homes gradually — without leading to a dramatic drop in home prices. While analysts disagree — prices will decline when those homes flood the market, which many, like Mark Hanson, a housing industry analyst based in California, believe to be a virtual certainty — the official pointed to the futures market where traders are betting that home prices will remain stable through the fall of 2014.

I applaud the U-T’s move towards objective reporting on the San Diego real estate picture, away from cheerleading. This is a sea change from the approach during the bubble years.

U-T EconoMeter
Housing prices and sales: Where are they headed?
Panelists weigh in on the next 6 months

By Roger Showley, UNION-TRIBUNE

Saturday, August 21, 2010 at 3:52 p.m.

Introducing our weekly U-T EconoMeter:

Each week the Business section will ask its panel of economists to weigh in on an economic issue of issue to San Diegans. They’ll answer yes or no, up or down or give a neutral response. Sometimes they might be unavailable to participate.

If you have a question you’d like them to address, send it to roger.showley@uniontrib.com. Feel free to add your comments, as well.

This week’s question: In light of the latest MDA DataQuick figures showing sales down in July and prices slightly up from June:

Do you think San Diego’s housing market – prices and sales – will fall between now and the year’s end in the wake of the end to federal and state tax rebates?

* Results:
* Yes - 4
* No - 2
* Neutral - 1
…

Has there ever previously been an 80 percent collapse in CA home construction over a five-year period? I’m thinking maybe during the 1930s, but probably not since.

Business

Home construction output worse than reported
But homebuilding still added $14 billion in California last year
By Dean Calbreath, UNION-TRIBUNE

Wednesday, August 18, 2010 at 3:01 p.m.

Homebuilding output in California declined more sharply than previously indicated, according to a construction industry report today.
…
The downfall of the California housing industry last year was worse than previously reported, according to a key industry report released Wednesday.

In 2009, new home construction in California contributed $13.8 billion to the state’s economy and employed nearly 77,000 workers, according to an updated study by the California Homebuilding Foundation and Center for Strategic Economic Research. That’s half a billion dollars less than the groups reported earlier this year.
…
The industry’s output has dropped 80 percent over the past five years, representing a loss of tens of billions of dollars and hundreds of thousands of jobs. At its peak in 2005, the housing industry generated $67.7 billion dollars and 487,000 jobs.

The report shows that the impact of the decline in housing went far beyond the construction industry. Every dollar spent on new housing construction in California generates another 80 cents in total economic activity and that each job created through residential construction supports an additional 1.2 jobs, according to the report.

“The downturn in building activity has also generated a considerable decline in all of the sectors that supply goods and services to the construction industry as well as those that benefit from workers spending their wages,” said Ryan Sharp, director of the economic research center.
…

Yesterday morning (a Saturday), a pipe started leaking that goes to my bathroom which was soaking the carpet in the master bedroom closet.

I had a wedding to go to, so I stopped by the resident manager’s apartment (yes, I rent), who promptly got on taking care of things. The plumber is here right now (on a Sunday) fixing it–he just went outside since it looks like the problem is more severe than he originally though.

Just another one of the joys of renting… I don’t even want to think about how much major repairs cost to get done on a Sunday, nor having to worry about replacing water soaked carpets.

I know PB warned about the “bond bubble” yesterday and some also chimed in with agreement. However here is the counter-argument from someone who has a lot of the credibility in the economic blogsphere (The Pragmatic Capitalist, who got all the big macro econo calls correctly the at least the last 5 years I have read him/her):

http://pragcap.com/the-myth-of-the-great-bond-bubble

THE MYTH OF THE GREAT BOND “BUBBLE”

There is increasing chatter of the great “bond bubble” as U.S. Treasury bonds surge ever higher and deflation fears rise. This is just one more myth that has persisted in recent years (decades really) due to mass misconception of the way the bond market actually operates and this propensity to label everything as a “bubble”.

……………

There is ever increasing chatter of a bubble in the U.S. bond market. This idea of a bubble has become pervasive due to the myth that the U.S. government bond market can and will collapse under mounting fiscal burdens and the idea that bonds are “expensive” when compared to other assets.

Over the years investors have become increasingly concerned about the risk of sovereign default in the United States. China officially “hates” us. Alan Greenspan is frightened that the bond vigilantes are merely sleeping. Jeff Gundlach is worried that the United States is already insolvent. But are these concerns justified?

Op-Ed Columnist
Paralysis at the Fed
By PAUL KRUGMAN
Published: August 12, 2010

Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.

At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.

That was malfeasance, declared the eminent U.S. economist: “Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He rebuked officials hiding “behind minor institutional or technical difficulties in order to avoid taking action.”

Who was that tough-talking economist? Ben Bernanke, now the chairman of the Federal Reserve. So why is the Bernanke Fed being just as passive now as the Bank of Japan was a decade ago?
…

I’m on a plane somewhere over Minneapolis, reading the HBB. Life is good. Although, I’m wondering if this much access is really in my best interest!

Santa Cruz Sentinel
Jeffrey Scharf, Everybody’s Business: Fannie and Freddie played a role in financial crisis

Posted: 08/22/2010 01:30:07 AM PDT

“Fannie and Freddie were allowed to build up substantial portfolios of mortgage-backed securities, which rose to a level of more than $1.6 trillion dollars at their peak, without the financial resources to cover potential losses…. [This was made possible by] the toxic combination of a perceived guarantee by the government and an absence of effective oversight. [Fannie and Freddie] were not the sole causes of the crisis, but they made the financial crisis worse. And they resulted in huge losses for the taxpayer.”

– Treasury Secretary Timothy Geithner, speaking at the “Conference on the Future of Housing Finance

At long last, a ranking government official has come close to recognizing the central role of Fannie Mae, Freddie Mac and the government in the financial crisis.

Fannie Mae and Freddie Mac were originally government agencies similar to today’s FHA. For a modest fee, a mortgage originator could pay Fannie or Freddie to guarantee loan payments if a borrower defaulted. To make sure that defaults would be uncommon, Fannie and Freddie enforced what came to be “conforming” lending standards — down payments of at least 20 percent and documented income approximately three times annual principal, interest and taxes.

In time, Fannie and Freddie became publicly traded companies although they retained federal charters subjecting them to oversight by politically appointed directors and Congressional directives. These charters gave
significant advantages over their private competitors — Fannie and Freddie were exempt from state and local taxes, did not have to file financial reports or offering documents with the SEC, and were allowed to operate with much greater leverage and less capital than banks. Most importantly, Fannie and Freddie were perceived as having the financial backing of the United States Government although legally they did not.

Things were going reasonably well until Fannie and Freddie expanded into the business of buying mortgages. With lower funding costs and other advantages, Fannie and Freddie were able to marginalize their competitors and amass the $1.6 trillion of mortgage-backed securities cited by Geithner.

Even this might have been OK had Congress not given the companies lending quotas that induced the companies to lower mortgage lending standards. The frenzy of sub-prime lending followed. As more and more buyers “qualified” for loans, home buying demand accelerated driving prices ever upward. Rising prices made it appear that lower lending standards did not increase losses thereby creating the rationale for still lower standards.

When the bubble burst, Fannie and Freddie were broke. The government could have allowed the companies to go into bankruptcy with losses absorbed by bondholders such as China, Pimco and others who took their chances on non-government guaranteed debt and lost. Instead, as it did in so many other cases, the government made good on the debt and stuck taxpayers with losses that are expected to reach $300 billion.

One might think that the best way to prevent a recurrence of this disaster would be to put Fannie and Freddie into run-off and get the government out of the mortgage business. Geithner takes a different view, “As I have said in the past, I believe there is a strong case to be made for a carefully designed guarantee in a reformed system, with the objective of providing a measure of stability in access to mortgages, even in future economic downturns.”

Well, we had a carefully designed system and it was overthrown to suit political purposes. To quote President Barack Obama quoting Albert Einstein, “Insanity is doing the same thing over and over again and expecting different results.”

Back online after most of a week of vacation.

SanFranciscoBayAreaGal: so very sorry to hear about your loss… Your mom sounded like an amazing person, and you were truly blessed to have her.

SanFranciscoBayAreaGal
I too, send my condolences to you in the passing of your mom. Evidently, she left good memories as her legacy. You’re such a great gal, no doubt you came from good stock. She’ll always be part of you. Hugs sent your way in cyberspace.
(It feels surreal, doesn’t it? Have patience with yourself.)

It’s great to know that belief in magic has not died out in 21st Century California.

Conjuring Magic To Cover States’ Debts: Fiscal Reality Sets In
Written by Bob Adelmann
Thursday, 19 August 2010 07:00

The first warning about the possible bankruptcy of the town of Vallejo, California, was reported by the Associated Press on February 28, 2008, when Councilwoman Stephanie Gomes said, “Our financial situation is getting worse every single day. No city or private person wants to declare bankruptcy, but if you’re facing insolvency, you have no choice but to seek protection.”

Marci Fritz, vice president of the California Foundation for Fiscal Responsibility, blamed the action on promises made earlier by the council to the city’s employees concerning salaries and retirement benefits that the city no longer can afford. According to Fritz, these were promises made during economically flush times, and were due to the city council’s unrealistic expectations that those times would continue indefinitely. She said, “It’s a nightmare for city governments because they have to continue to pay these benefits that were granted when they had extra money from real estate and sales tax[es].”

Vallejo, a city of 120,000 across the bay from San Francisco, faced a $9 million budget shortfall at the time, owing to soaring payroll costs for its firefighters and police officers whose pay and pension costs make up almost 80 percent of the city’s budget. Those pay packages were negotiated with the unions representing those workers, and were necessary, according to spokesmen for the city, to be competitive with surrounding towns.

In May of 2008, the council voted 7-0 to declare Chapter 9 bankruptcy to “reorganize its finances,” which meant attempting to break the promises it had made earlier to the unions through the bankruptcy court. By this time, the budget shortfall had increased from $9 million to $15 million, despite efforts to cut expenses for museums, public works, senior centers, and libraries. The bankruptcy process allows the judge to void the union contracts, which essentially forces the city workers to accept a pay package that the city can afford, in light of declining tax revenues. But city employees weren’t the only ones at risk: The city had sold tax-exempt general obligation bonds whose interest payments would also be reduced or even eliminated. With an annual budget of $80 million, the city owed $53 million to those bondholders, and another $220 million in unfunded pension and retirement health benefits, totaling more than three times the city’s annual revenues.

When Judge Michael McManus determined that labor contracts can be broken in the Chapter 9 bankruptcy, union spokesmen said this set a dangerous precedent for other cities and townships in similar trouble to “do a Vallejo.” However, because of a binding arbitration clause inserted into the city charter in 1970, unions were able to renegotiate another contract with the city and, starting in July, 2010, police officers are getting a seven-percent pay raise. New Vallejo Councilwoman Marti Brown was appalled: “No one is getting a 7 percent increase, even in cities not in bankruptcy.” This raise takes place when the city’s budget has decreased from over $80 million in 2008 to just over $63 million in 2010.

The city of Maywood, California, took a different approach to its fiscal difficulties. On July 1, 2010, everyone on the payroll was fired. The Los Angeles Times said that by laying off an estimated 100 workers and contracting the remaining essential services such as finance, rec-ords management, parks and recreation, and street maintenance to a nearby town, Maywood would save the city $165,000 a year. On July 1, “We will become a 100 percent contracted city,” said interim City Manager Angela Spaccia.

San Diego is considering bankruptcy as a result of a report by the San Diego Grand Jury that “such a step could help the city cut its onerous retirement and health benefits.” At present the city has an unfunded pension obligation of $2.2 billion and another unfunded retiree healthcare liability of $1.3 billion. And MoneyNews said that San Diego is the fifth major city in the state to consider such a move, along with Los Angeles.

The recent exposure by the Los Angeles Times of the outrageous salary and retirement benefits being provided by Bell City to its City Manager and Chief of Police confirms the attitude of entitlement and disregard for fiscal responsibility that appears to be rampant in cities across the state and the country.

Papering Over Problems

All of this is putting the state of California on the “verge of system failure,” warns Jean Ross, executive director of the California Budget Project. With an annual budget of about $125 billion, California faces a $19 billion shortfall this year, and an expected $37 billion gap next year. But that’s just the tip of the iceberg. A recent Stanford University study concluded that the state’s pension fund is short by roughly $500 billion. The study urged Governor Schwarzenegger “to inject $360 billion into its public benefit systems … [just to] have an 80 percent chance of meeting 80 percent of [the state’s] obligations over the next 16 years.”
…

Aug. 22, 2010, 8:25 p.m. EDT

Inflation, not deflation, Mr. Bernanke
Commentary: World divides into ice-cold and red-hot economies

By Andy Xie

BEIJING (Caixin Online) — In the wake of a barrage of bad economic data, the yield on two-year U.S. Treasury notes has tumbled to 0.5% and the 10-year note to 2.8%, almost reaching the levels after Lehman’s collapse. Pundits in the U.S. and other Western countries are talking about deflation again.

The decline in the consumer price index for the past three months gives this view ammunition. The Fed is coming under pressure to resume quantitative easing (QE). In anticipation of the Fed resuming QE — nicknamed “QE 2″ — the dollar has declined quickly by 10% from its recent high. Both the Treasury and currency markets have already priced in “QE 2.”

The Fed just downgraded the U.S.’s economic outlook and decided to reinvest its proceeds from its huge mortgage-bond holdings in Treasurys. It is not quite “QE 2,” as it doesn’t involve additional QE, just maintaining the past liquidity injection. But it leaves much for the market to imagine.
…

Pension reform revolution is coming. Mayor Antonio Villaraigosa can either ride the wave or get crushed by it.
Posted: 08/22/2010 09:18:22 AM PDT

THERE’S a rebellion brewing. The gaping disparity between private sector and public sector workers’ pay and benefits has fueled an uprising that is playing out across California and the country. And nowhere is this disconnect more apparent than in publicly funded retirement plans.

Weak-kneed politicians have created a system of haves and have-nots - the haves are public employees with generous, guaranteed pensions, no matter the state of their pension fund. The have-nots are the private sector workers, who have taken a hit on both sides of the equation; they lost value on their own retirement plans and then have to fork over more taxpayer dollars to keep public employee pensions secure.

Finally, politicians have picked up on the public fury and are beginning the process of reform.

At least seven states have required existing or new public employees to pay more toward their retirement; Colorado and Minnesota legislators even took the unprecedented step cutting promised cost-of-living increases for retirees. Bakersfield and San Jose officials put measures on the November ballot designed to roll back pension benefits for public employees. And voters in San Francisco and Menlo Park bypassed reluctant elected officials and collected enough signatures to qualify their own pension reform initiatives.

And can you blame them? While Average Joes suffer stagnant wages and punch the clock until until 66 or so, they see friends or family members -
police officers, firefighters, city workers - retire at 50 or 55 with generous monthly checks, sometimes as much as 90 percent of their best-paid year of work, and free health care for life.

Over the last month, we’ve called on Los Angeles Mayor Antonio Villaraigosa to tackle the city’s key issues. As part of that, we asked readers to tell us what is the No. 1 problem Villaraigosa should tackle. Overwhelmingly, the most frequent answer was employee pension and pay reform.

They ask how city leaders and workers can defend a system that requires taxpayers to spend $1.4 billion this year to fund city retirees’ pension and health care, while programs for the unpensioned poor are cut, current workers are laid off, libraries close an extra day each week and infrastructure is allowed to crumble. Retiree obligations are projected to cost $2.2 billion by 2015.

Their outrage is more than just pension envy. The foul economy has exposed fundamental flaws in the promises Los Angeles has made to its workers. They are simply unsustainable.

Pensions will eventually bankrupt Los Angeles if not dealt with soon. Villaraigosa must do more than tinker with the budget. He must use the small window of opportunity opened by the economic downfall and the public disgust over government salaries to force through full pension reform within the year. In so doing, not only will he set Los Angeles on the path to long-term sustainability, he will make the city a model for pension reform around the country.
…

Though this article is already five months old, it seems somehow still pertinent.

Can California Declare Bankruptcy? What about Greece?
By Christopher Beam
Posted Monday, March 8, 2010, at 5:01 PM ET

California passed a gas tax last week to help make up for its nearly $20 billion budget gap, the latest in a series of measures to right the state’s teetering economy. The country of Greece is in even worse shape, with accumulated debt higher than 110 percent of GDP, set to reach 125 percent this year. Can a state declare bankruptcy? Can a country?

No and no. Chapter 9 of the U.S. bankruptcy code allows individuals and municipalities (cities, towns, villages, etc.) to declare bankruptcy. But that doesn’t include states. (The statute defines “municipality” as a “political subdivision or public agency or instrumentality of a State”—that is, not a state itself.) For one thing, states are said to have sovereign immunity, as protected by the 11th Amendment, which means they can’t be sued. In other words, they don’t need any protection from angry creditors who would take them to court for failing to pay their debts. As a result, states can simply borrow money ad infinitum.

Say the state can’t make its debt payments, and no one will lend it any more money. In that case, the federal government can step in and put the state into receivership. This would involve the assignment of an accountant to manage the state’s debt, overseen by a judge. It would be a lot like bankruptcy, except instead of following a structured set of steps—informing creditors, appointing creditors’ committees, a 120-day window to file a plan, etc.—a receiver has the authority to force creditors to renegotiate loans in a speedy fashion. However, the accountant in charge would not have the power to make decisions about the state’s budget, such as which programs needed to be cut and which taxes had to be raised. (No state has ever gone into receivership.)
…

This news should be good for Keynesians who favor broken window economic stimulus over any sign of a slow down.

* REAL ESTATE
* AUGUST 23, 2010

Mortgage Fraud Is Rising, With a Twist
Adopting to Tighter Rules After Collapse, Scammers Turn to More Complex Plots

By ROBBIE WHELAN

New data suggests that mortgage fraud—which got tougher to pull off after the collapse of the U.S. real estate market—is returning in a big way.

Data prepared for The Wall Street Journal by research firm CoreLogic, examining about seven million home loans made by hundreds of lenders, show that losses from mortgage fraud—ranging from falsified credit reports to identity theft—rose 17% last year after declining 57% in the two years after its 2006 peak.

In 2009, $14 billion in loans, or about 0.7% of all mortgage loans made in the U.S., were originated with fraudulent application data.

The figures are a fraction of the mortgage market, but the increase is sharp.

CoreLogic, which tracks fraud only by mortgage value, examines about 7 million loans each year using a proprietary computer program that detects discrepancies in loan documents and predicts the likelihood of fraud. The real losses to banks won’t be known for several years when banks are forced to write off the value of the loans’ value.

New data suggest losses from mortgage fraud nationwide rose 17% last year. Above, a view of Las Vegas, where home prices have fallen.

Some of CoreLogic’s profits come from selling market research to lenders aiming to cut losses from mortgage fraud.

Investigators and lenders say they are seeing a similar upswing in fraud.

The Federal Bureau of Investigation in June indicted a Phoenix man for mail and wire fraud among other alleged crimes when the agency says he tried to steal a house from his landlord. Also in June, federal prosecutors in New Jersey charged 29 defendants—including 12 real-estate agents, four mortgage consultants, an appraiser, a bank employee and a mortgage broker—with wire fraud in an alleged scheme involving 17 properties in the state and losses of $5.5 million.

“Even though we have certain compliance measures in place, people will adapt whatever scheme,” said Sharon Ormsby, the FBI’s section chief for financial crimes. “It doesn’t matter if the market is going up or down.”
…

Program to Modify Loans Loses Steam
By NICK TIMIRAOS

The Obama administration’s loan-modification program appears to be running out of eligible borrowers who can qualify for restructured loans.

The number of homeowners who began government-sponsored loan-modifications in July grew by the slowest rate since the program began nearly 18 months ago and was dwarfed by the number of borrowers whose modifications were canceled.

Half of the 1.3 million modifications that have been extended to borrowers have been canceled since the program began, and around one-third, or around 422,000 borrowers, have received permanent loan modifications.

So far, the Home Affordable Modification Program, or HAMP, has helped hold back the shadow inventory of more than seven million loans that are delinquent or in some stage of foreclosure, which has helped home prices to stabilize over the past year.

In July, nearly 17,000 new trial modifications were started. More than five times as many borrowers saw their reduced-payment programs canceled, either because they failed to make payments, didn’t provide necessary financial documents, or didn’t meet qualification guidelines.

Still, it isn’t clear how many of those borrowers will ultimately go through foreclosure. Among the top eight mortgage-servicing companies, around half of all borrowers who exit the government program end up receiving a modification or become current; just 15% are in some stage of foreclosure.

Under HAMP, lenders receive incentives to help troubled borrowers avoid foreclosure by reducing their mortgage payments through a combination of a longer term and a lower interest rate. Homeowners must make at least three “trial” payments before the modification can become permanent.

In an effort to scale up the program quickly, officials initially prodded banks to begin trial modifications without obtaining supporting documents to make sure borrowers were eligible. That has produced a high rate of modifications that are ultimately canceled, and the Treasury Department earlier this year began requiring banks to qualify borrowers before beginning the trials.

The Treasury warned on Friday that cancellations will exceed the number of new modifications for the next few months as banks “clear their backlog of aged trials.”

Officials said it was unfair to write off HAMP as a failure because they say it has forced the mortgage industry to focus its efforts to provide sustainable loan modifications.

“This program has actually been transforming the mortgage-servicing industry,” said Herbert Allison, assistant Treasury secretary.
…

* BUSINESS
* AUGUST 23, 2010

Credit-Card Rates Climb
Levels Hit Nine-Year High as New Rules Limiting Penalty Fees Help Fuel Rise

By RUTH SIMON

Interest rates continue to tumble for the U.S. Treasury, companies and home buyers alike. But for a large portion of 381 million U.S. credit-card accounts, borrowing rates have been moving only one way: up.

And average rates are likely to climb further in the near future.

New credit-card rules that took effect Sunday limit banks’ ability to charge penalty fees. They come on top of rule changes earlier this year restricting issuers’ ability to adjust rates on the fly. Issuers responded by pushing card rates to their highest level in nine years.

In the second quarter, the average interest rate on existing cards reached 14.7%, up from 13.1% a year earlier, according to research firm Synovate, a unit of Aegis Group PLC. That was the highest level since 2001.

Those figures look especially stark when measuring the gap between the prime rate—the benchmark against which card rates are set—and average credit-card rates. The current difference of 11.45 percentage points is the largest in at least 22 years, Synovate estimates.

By comparison, the spread between 10-year Treasurys and a standard 30-year fixed-rate mortgage is just 1.93 percentage points, near historical averages, according to mortgage-data provider HSH Associates.
…

“The focus is now on execution…”

Sounds quite unpleasant.

* BUSINESS
* AUGUST 22, 2010

Hiring Spree Gets Long in the Tooth
By LIZ RAPPAPORT And CARRICK MOLLENKAMP

Wall Street employees about to return from the summer doldrums have something new to worry about: their jobs.

The weak economy, volatile markets, regulatory upheaval and changes in how traders and investment bankers are paid are starting to trigger job cuts that could reverse a recent rebound in overall employment levels at banks and securities firms.

While the firings so far add up to a tiny slice of all Wall Street jobs, companies and analysts say deeper cuts are looming unless business revs up soon. “When push comes to shove, Wall Street firms are erring on the side of caution,” says Michael Franzino, head of the global financial-services practice at executive-search firm Korn/Ferry International in New York.

Barclays Capital, the investment-banking unit of Barclays PLC, has eliminated about 400 jobs, most of them back-office positions. Credit Suisse Group AG has warned its staff that the Swiss bank might trim 75 positions from its London office.

And other firms are contemplating cuts as they look at their bonus pools for 2010 amid sluggish securities sales and trading. The outlook for merger activity also remains cloudy despite last week’s surge in deal making to its highest level since December 2009.

Some firms say that the recent job cuts are routine and that they will continue to hire people for roles that are especially important. Other companies are continuing to expand the businesses they entered as financial markets recovered last summer.

Nomura Holdings Inc.’s Nomura Securities unit has hired more than 600 people since March 2009 and is going ahead with plans to hire at least 300 employees by next March.

But even Wall Street firms that have been in hiring mode are completing those moves. UBS AG Chief Executive Oswald Grübel said last month that the “rebuilding of our fixed income is nearly completed,” referring to the addition of 300 employees to the Swiss bank’s fixed-income operations since 2009.

“The focus is now on execution and how can we increase revenue and client business,” he said.
…

Unfortunately, the events of 9/11/01 will be forever associated in the minds of Americans with the actions of the Islamic terrorists who flew the planes. It is hard to understand why so much of the world is mystified regarding America’s heated debate over building an Islamic center at Ground Zero of the 9/11 attack. Certainly there are plenty of other locations around New York City which would provide suitable alternatives without providing such a painful reminder of the religious affiliation of the 9/11 perpetrators?

It is pretty clear at this point that this issue will stay alive for at least the next two years as a 2012 presidential campaign issue.

Islamic center debate stupefies Muslim world

The heated debate across America over construction of an Islamic center near Ground Zero is reverberating across the globe, with the …

By Borzou Daragahi
Los Angeles Times

New York police on Sunday separate demonstrators — for, left, and against the construction of an Islamic center near Ground Zero. No physical clashes were reported, but nose-to-nose confrontations were plentiful. Opponents appeared to outnumber supporters.
Enlarge this photo

DON EMMERT / AFP/GETTY IMAGES

New York police on Sunday separate demonstrators — for, left, and against the construction of an Islamic center near Ground Zero. No physical clashes were reported, but nose-to-nose confrontations were plentiful. Opponents appeared to outnumber supporters.

BEIRUT — The heated debate across America over construction of an Islamic community center near Ground Zero is reverberating around the globe, with the potential of creating a black eye for the United States.

Many Muslims abroad are miffed by the debate, largely conducted by non-Muslims, that has grown so loud as to become a topic of discussion on talk shows and newspapers from Bali to Bahrain, from Baghdad to Berlin. The proposed Cordoba House has become a symbol of America’s fraught relations with the world’s 1.5 billion Muslims.

“Rejecting this has become like rejecting Islam itself,” said Ahmad Moussalli, a professor of Islamic Studies at the American University of Beirut. “The United States has historically been distinguished by its tolerance, whereas Europe, France, Belgium and Holland have been among those who have rejected the symbolism of Islam. Embracing it will be positively viewed in the Islamic world.”
…

Without getting into the underlying calculations, this story strikes me as highly implausible on the face of it.

And it seems highly unlikely that while a 60 percent drop in housing prices would have no noticeable effect in the default rate on Chinese home loans, a 63 percent drop in prices would some how be catastrophic.

China property plunge would barely dent CCB
BEIJING | Sun Aug 22, 2010 11:13pm EDT

BEIJING Aug 23 (Reuters) - If housing prices in China plummeted by 60 percent, there would be no noticeable increase in the default rate on loans issued by China Construction Bank (CCB), a newspaper report reported on Monday.

CCB (601939.SS), China’s biggest lender to home buyers, would only suffer a clear rise in defaults if property prices tumbled by 63 percent, the 21st Century Business Herald reported, citing an unnamed source who is close to the bank.
…
Related News

* UPDATE 2-China’s CCB Q2 net up 20 pct, beats forecasts
Sun, Aug 22 2010
* China’s CCB posts 20 percent rise in Q2 net profit
Sun, Aug 22 2010
* China bank property stress test finds risk: report
Sat, Aug 21 2010
* China bank property stress test finds risk - paper
Sat, Aug 21 2010
* UPDATE 2-China tries to soothe fears about local debt
Thu, Aug 19 2010