| Commercial Real Estate Prices Tank; Late Mortgage Payments Spike; Half of Shanghai, Beijing Flats Are Vacant; Pension Fraud by New Jersey Cited by SEC Posted: 21 Aug 2010 09:41 PM PDT Weekend Potpourri: Here is a collection of recent articles I did not discuss in depth but is worth a quick look. Nevada Ranks #1 in Unemployment, Rate Hits 14.3% The Las Vegas Review Journal reports Nevada unemployment climbs in JulyThe employment department reported Friday that joblessness in Nevada hit a record 14.3 percent in July, up from 14.2 percent in June and 12.3 percent in July 2009. In Las Vegas, the rate jumped to 14.8 percent, compared with 14.6 percent in June and 13 percent in July 2009. Nearly 200,000 Nevadans lack jobs and are seeking work, including 144,500 Las Vegans.
Throw in discouraged workers who've left the labor force and underemployed workers who can't find full-time jobs, and Nevada's jobless rate exceeded 21 percent through June 30, according to the latest data from the U.S. Bureau of Labor Statistics. Nevada ranked No. 1 in the country for joblessness in June, while Las Vegas took the top spot among cities of 1 million or more in the month. State officials said they expect the state and city to keep those top positions once all July numbers come in. 'McMansion' Era is OverCNBC proclaims Death of the 'McMansion': Era of Huge Homes Is OverIn its latest report on home-buying trends, real-estate site Trulia declares: "The McMansion Era Is Over." Just 9 percent of the people surveyed by Trulia said their ideal home size was over 3,200 square feet. Meanwhile, more than one-third said their ideal size was under 2,000 feet.
"That's something that would've been unbelievable just a few years back," said Pete Flint, CEO and co-founder of Trulia. "Americans are moving away from McMansions."
The comments echoed those made in June by Kermit Baker, the chief economist at the American Institute of Architects.
"We continue to move away from the McMansion chapter of residential design, with more demand for practicality throughout the home," Baker said. "There has been a drop off in the popularity of upscale property enhancements such as formal landscaping, decorative water features, tennis courts, and gazebos." Commercial Real Estate Prices Tank in JuneBloomberg reports Retail Spaces Lead Drop in U.S. Commercial PropertyAug. 19 (Bloomberg) -- U.S. commercial real estate prices fell the most in almost a year in June as the economic recovery showed signs of faltering, Moody's Investors Service said.
The Moody's/REAL Commercial Property Price Index dropped 4 percent from May, the company said today in a report. The decline was the biggest since July 2009, and pushed the gauge down 0.9 percent from the start of the year.
"We expect property prices to remain choppy for some time as commercial real estate markets and the broader economy continue their slow recovery from the recession," Moody's researchers said in the report.
The Moody's index is down 41 percent from its 2007 peak, having gained 4.2 percent from the seven-year low set in October.
The value of malls and shopping centers fell almost 11 percent in the second quarter, the biggest drop of any commercial property type tracked in the Moody's index. Apartments and offices values both gained about 4 percent, while industrial properties dropped 2.9 percent. Half of Shanghai, Beijing Flats Are Vacant 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. Nevada Chancellor of Higher Education Loses MindThe Las Vegas Review-Journal reports Chancellor Requests to be Over BudgetThe higher education chancellor has submitted a budget for Board of Regents approval with a request for almost 25 percent more tax money than the current two-year budget. The board is scheduled to vote on the request at a special meeting set for Aug. 27.
"I'm serious with this request," said Dan Klaich, the chancellor. "I understand that it's a stretch. But I don't think this is a time that we can be timid or that we can give up before the fight is engaged."
The budget request includes eliminating state-mandated furloughs and restoring pay raises, as the governor's office asked. It does not, however, comply with Gov. Jim Gibbons' request for 10 percent cuts.
In total, the higher ed system is asking for $1.19 billion from the state for the 2011-2013 biennium, a 24.7 percent increase from $956 million in the current two-year budget. Overall, if the budget request were approved, the system's total budget including tuition and other funding would be $1.65 billion for the next two years, an increase of $51 million, or 3.2 percent, over the current budget.
The reality is that this budget, whether or not it is approved by the Regents, will almost surely never see the light of day. State tax revenues are expected to fall some $3 billion short, more than 40 percent, in the next two years from where they were in the past two years. Those revenues already were down over the previous budget cycle.
If those predictions turn out to be accurate, the state could eliminate all spending except on education and still be short of where it was two years ago.
State agencies must submit budgets to the governor by Sept. 1, despite not knowing for sure what the state's revenues will be in the next budget cycle.
Klaich contends that complying with the governor's requested 10 percent cuts would be an exercise in futility.
Without new taxes, a 10-percent revenue shortfall is highly unlikely. If the governor had asked for 40 percent cuts, Klaich said, that would be something realistic to plan for. I think the governor ought to oblige Klaich and ask for 40% cuts, since "that would be something realistic to plan for." Somehow a mere 10% budget cut request has Klaich asking for more. Late Mortgage Payments Spike YahooFinance reports Late mortgage payments spike in 2Q vs year agoThe rate at which U.S. homeowners fell behind on their mortgage payments remained stubbornly elevated in the second quarter.
In the three months ended June 30, the number of mortgage holders 60 days or more behind on their payments was 6.67 percent, credit reporting agency TransUnion said Tuesday. That's a big jump from 5.81 percent in the second quarter of last year, and well above the historical norm of 1.5 percent to 2 percent.
One positive sign is that the statistic reveals a slower rate of increase from the pace seen a year ago. Watch what happens when home prices start sinking again. Paychecks in Vernon Rival Bell, CaliforniaThe Los Angeles Times reports Hefty paychecks for Vernon officials rival those in BellThe ex-city administrator who now serves as a legal consultant earned seven figures in each of the last four years, records show. Others in Bell's neighboring city got $570,000 to $800,000 last year.
Vernon City Council members are paid $68,052 each year, far greater than in most cities in Los Angeles County, according to a Times survey.
Vernon has long been dogged by accusations that it is a fiefdom run by a family that has held sway over the town for generations.
In January, former Mayor Leonis Malburg was ordered to pay more than $500,000 in fines and reimbursements to the city after his conviction for voter fraud and conspiracy charges, bringing an ignoble end to his lengthy reign as Vernon's patriarch. Federal workers earning double their private counterpartsThe USA Today reports Federal workers earning double their private counterpartsAt a time when workers' pay and benefits have stagnated, federal employees' average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.
Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.
Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.
The federal compensation advantage has grown from $30,415 in 2000 to $61,998 last year.
What the data show:
•Benefits. Federal workers received average benefits worth $41,791 in 2009. Most of this was the government's contribution to pensions. Employees contributed an additional $10,569.
•Pay. The average federal salary has grown 33% faster than inflation since 2000. USA TODAY reported in March that the federal government pays an average of 20% more than private firms for comparable occupations. The analysis did not consider differences in experience and education.
•Total compensation. Federal compensation has grown 36.9% since 2000 after adjusting for inflation, compared with 8.8% for private workers. Pension Fraud by New Jersey Is Cited by S.E.C.The New York Times reports Pension Fraud by New Jersey Is Cited by S.E.C.Federal regulators accused the State of New Jersey of securities fraud on Wednesday for claiming it had been properly funding public workers' pensions when it was not.
The Securities and Exchange Commission said the action was its first ever against a state, and only its second against any government over the handling of a public pension fund. The first was the city of San Diego. More may be in store; the agency announced in January that it had a special unit looking into public pension disclosures. The S.E.C. has been trying to assume more authority over municipal securities.
The commission settled its suit with New Jersey by issuing a cease-and-desist order, which the state accepted without admitting or denying the findings. No penalties were imposed.
Nor did the S.E.C.'s order name any individual state officials, nor the bond underwriters and other professionals whose job it was to vouch for the state's financial statements. New Jersey's largest bond underwriters during the period in question include Citigroup, J. P. Morgan Securities, Morgan Stanley, Bank of America, Merrill Lynch, Goldman Sachs and Barclays Capital.
The S.E.C. said its action was meant to dissuade other governments and their advisers from hiding bad fiscal news in a fog of pension numbers. Actuaries, for instance, have been raising questions about the framework Illinois has laid out for bolstering its pension funds. In New York, California and other places, financial advisers have told lawmakers that benefits could be sweetened at virtually no cost, only to be proved wrong once those benefits were adopted.
"Hopefully, it will send a message to other states or local governments," Elaine C. Greenberg, chief of the S.E.C.'s municipal securities and public pensions unit, said in an interview. SEC Scorecard - No one fined
- No one admits guilt
- Enormous fees were earned by Citigroup, J. P. Morgan Securities, Morgan Stanley, Bank of America, Merrill Lynch, Goldman Sachs and Barclays Capital
Pray tell exactly what message does this send anyone? Greed Pays? The SEC only goes after small fish? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List 
|
| Trends in School Supplies; Reflections on Property Taxes Posted: 21 Aug 2010 09:53 AM PDT Tony, from Elmhurst, Illinois is wondering about all the supplies he has to send with his kids this year. Tony writes ... Mish,
As our kids go back to school in the coming weeks, I thought that I would make an observation regarding the way things were when I was a kid, and how certain things have changed.
My wife usually handles the back to school supplies lists, so I guess I never noticed the trend until now. About 1/2 of the items that we were asked to buy this year were supplies for the classroom itself and for the teacher, and not for specifically used by kids.
The list included two reams of paper for the classroom, sharpies and red pens to be used by the teachers to grade papers, dry erase board markers, 10 glue sticks, several boxes of tissues for the classroom, etc.
Yet, our school fees are now over $200 per student as well. Since when do the parents have to pay for all of the supplies for a teacher to do their job, and where is the District's responsibility in this? It seems brazen that the District would unashamedly send a message requiring the students all bring these supplies, considering the funding they get. What about the kids whose parents can't afford this additional bill like we can?
We have a large tax bill (about $10K per year), of which a good portion goes towards "education". Our kids go to the public school system in Elmhurst, a district that spends over $11K per child per year, doubling from the figure just a decade ago.
Obviously, little of the money actually goes towards classroom needs - it must all be going to outsized pensions and salaries.
Have any of your other readers sent letters identifying this trend?
Tony Anyone else noticing this? We have no kids and what Tony describes is certainly a massive change from when I went to school. By the way, those of you from low-tax states might be questioning that $10,000 property tax bill. It is quite realistic. Ours is $14,000 on a 3400 sq ft. home and that is on a reduction. We protested our tax bill about 3 years ago and got a $2,000 reduction to $12,000. Here we are again, right back at $14,000. You can never "own" your home in Illinois, even when it is completely paid off. Property taxes are a killer. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List 
|
| Eight Banks Seized, One with Ties to Obama; Regulators Allow "Unusual Bid" for Failed Bank Posted: 20 Aug 2010 11:06 PM PDT The bell rings once again on "Foreclosure Friday". The toll this week is 8 banks. One of the banks, Shore Bank, has ties to the Obama administration, Goldman Sachs, and other notables. Eight Banks Shuttered as 2010 Failures Reach 118 Bloomberg reports ShoreBank, Seven Others Shuttered as 2010 Failures Reach 118ShoreBank Corp., the Chicago lender operating under a Federal Deposit Insurance Corp. cease-and- desist order for 13 months, and seven other banks were shut by regulators as 2010 bank failures climbed to 118.
Regulators also closed four banks in California, two in Florida and one in Virginia. All eight closures cost the FDIC's deposit-insurance fund $473.5 million, the agency said yesterday. This year's bank failures will surpass last year's total of 140, FDIC Chairman Sheila Bair said last month in a Bloomberg Television interview. Regulators Allow "Unusual Bid" for Shore BankThe Wall Street Journal reports Regulators Seize ShoreBank; Management Takes OverRegulators seized ShoreBank Corp. on Friday and agreed to sell assets to a team led by the community lender's executives and backed by several large U.S. financial firms.
The bank closure, among the 118 failures in the U.S. this year, caps months of uncertainty for a $2.16 billion Chicago bank that had ties to the Obama administration and deep roots on Chicago's South Side. The new institution will be known as Urban Partnership Bank and led by William Farrow, a former First Chicago Corp. executive who was ShoreBank's president and chief operating officer at the time of its failure.
The decision to sell to management is a rare move by the Federal Deposit Insurance Corp., which generally bars investors who own more than 10% of the failed bank from bidding on its assets. The FDIC also typically wants to know if bidders have "ever been an officer or director of a failed institution" and "participated in a material way in one or more transactions that caused a substantial loss to any such failed institution," according to an FDIC document.
The structure of the deal "is unusual," said Atlanta banking attorney Chip MacDonald.
The holding company will remain intact, according to a person familiar with the deal. Urban Partnership is backed by a consortium of large U.S. financial institutions, including Bank of AmericaCorp., Goldman Sachs Group Inc. and Morgan Stanley. Follow the MoneyZeroHedge reports Failure Of Obama's Pet ShoreBank Costs Taxpayers $368 Million, Which Immediately Goes To Goldman Sachs Among OthersAfter a lengthy attempt to bail out his pet bank, ShoreBank Chicago, Illinois, which included several alleged armtwisting episodes by the administration, the president has finally let the bank die (with its assets valued at about 50% of face). Yet instead of going to hell, it was immediately resurrected with a bevy of new owners, among them Goldman, Morgan Stanley, and BofA, all of whom received nearly $400 million in taxpayer money for their "generosity" to keep the bank zombified even in the afterlife.
Some details on the bank from the FDIC press release: "As of June 30, 2010, ShoreBank had approximately $2.16 billion in total assets and $1.54 billion in total deposits." In other words, the value of ShoreBank's assets was well below 70% of face, if the bank was undercapitalized at its current deposit level.
As it stands, Goldman and 11 other banks are receiving a multimillion dollar gift to conduct a portfolio liquidation run-off of ShoreBank's assets, while merely making sure existing deposits are serviced.
The funniest bit: this is how efficient the auction process was (from the press release Urban Partnership Bank, Chicago, Illinois, Assumes All of the Deposits of ShoreBank, Chicago, Illinois):
"FDIC received only one bid, which included an asset discount of $146 million and a 0.5 percent deposit premium. This saved the FDIC's insurance fund $250 million to $334 million over liquidation."
This also padded the top line of the above mentioned banks by $368 million off the bat, over and above whatever they make as they collect the proceeds from the portfolio run off.
In other words, Wall Street's core banks could have come up with any bid they wanted, and the FDIC would have had no choice but to fund the difference, because the alternative would be, gasp, so much scarier. Hm, where have we heard this before. Whether or not the above math is totally accurate is essentially irrelevant. This is what matters: It is crystal clear there were irregularities in attempting to keep this turkey of a bank alive, irregularities in who was allowed to bid, irregularities in selling the assets to failed management, and a suspicious single bid by a consortium of large U.S. financial institutions, including Bank of AmericaCorp., Goldman Sachs Group Inc. and Morgan Stanley. The FDIC's handling of Shore Bank smells as bad as a pile of dead alewives on a Chicago beach in mid-July. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List 
|
No comments:
Post a Comment