Mish's Global Economic Trend Analysis

Constitutional Amendment in North Dakota Would Abolish Property Taxes
Libyan Rebels Retake Ajdabiya; Scores Killed in Syria Protests; French President Warns Arab Rulers of More Libya-Type Intervention; Ivory Coast Next?
FDIC "Cash for Keys" Proposal Would Pay Underwater Homeowners $21,000 to Walk Away; In Prison for Taking a Liar Loan

Constitutional Amendment in North Dakota Would Abolish Property Taxes

Posted: 26 Mar 2011 04:41 PM PDT

One of the best constitutional amendment proposals I have seen in years comes from a taxpayer group in North Dakota.

Please consider Amendment would abolish ND property taxes, order Legislature to figure out new revenue plan

Backers of a constitutional amendment to abolish North Dakota property taxes believe they have enough petition signatures to put the idea on the ballot, even though the number they thought they needed has risen.

"It's a new idea. It's something a lot of people hadn't even considered until we put it in front of them," said Charlene Nelson, of Casselton, who is chairwoman of the initiative campaign.

The amendment bars the state and local governments from levying any property tax, beginning Jan. 1. It says the Legislature must use other revenue sources, such as taxes on sales, income and energy, to decide how to replace the revenue that local governments will lose.

North Dakota's Constitution allows voters to bypass the Legislature and put a constitutional amendment directly to a vote if the proposal's supporters can gather enough petition signatures.

Property owners were billed $774.6 million in property taxes in 2009, according to the most recent North Dakota Tax Department data. Local school districts' share was about 41 percent, while cities billed 28 percent and counties 26 percent, the data say.

By comparison, the state collected $883.3 million in sales taxes during its 2010 budget year, which ended June 30, according to the state's most recent comprehensive annual financial report.

Individual and corporate income taxes raised $380.1 million during the same period, while taxes on oil, natural gas and coal raised $633.5 million.

Property taxes on a person's home means he or she never owns it, even after its mortgage is paid, Nelson said. The annual property tax bill is due regardless of a person's income, while taxes on income and sales depend on the amount of money a person has to spend, she said.

The proposed property tax ban "goes to the core of the lot of the problems that people in this state are facing. Economics, low-paying jobs, seeing their young children move out to other states," Nelson said. "The public debate, I think, is going to be the most healthy thing that comes out of this.

Never Owning Your Own Home

I agree with nelson that paying property taxes on your home means you can never own it. It is an insidious tax that hits those on fixed income the hardest.

Of course school districts love it. They collect more taxes over time, then waste the money. When valuations crash, they want to raise the tax rate to "make up for it".

Unlike California Property 13 type non-solutions that create huge winners and losers, everyone but the tax recipients win by abolishing them completely. Even renters win because landlords will not be struggling to pass on property tax hikes. Abolishing property taxes also helps out struggling businesses and creates an incentive for property owners to move businesses to states without such taxes.

I am also against taxes on store-bought food, medicine, and clothes priced below a certain amount. Although everyone would benefit from such tax relief, elimination of taxes on food, shelter, medicine, and clothes especially helps those who spend most of their money on such items.

Because of the new census, the petition gatherers do not have the signature cushion they thought. However, they still have a slim cushion and they have until Midnight Tuesday to gather more signatures. Good luck to them.

Side Benefit

As a side benefit, cities, towns, and counties would be able to fire all the local assessors, lawyers, and assistants associated with figuring out the tax and collecting it.

I would love to see a wave of proposals by states to abolish property taxes along with the other taxes I mentioned. So would the real estate industry, a group I generally do not side with. Such a move could hardly come at a better time for the real estate industry.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Libyan Rebels Retake Ajdabiya; Scores Killed in Syria Protests; French President Warns Arab Rulers of More Libya-Type Intervention; Ivory Coast Next?

Posted: 26 Mar 2011 01:44 PM PDT

In top Mideast and regional news...

Libyan rebels have retaken the strategic town of Ajdabiya

Scores are dead in violent protests in Syria

French president Nicholas Sarkozy has warned all Arab rulers that they risk Libya-type intervention if governments cross a certain line of violence against their own people.

Sarkozy suggested the Ivory Coast could be next in line for a UN vote on intervention.

Libyan Rebels Retake Ajdabiya

The New York times reports Qaddafi Forces Pull Back as Rebels Retake Ajdabiya

In Ajdabiya, the charred hulls of government tanks hit by allied missile strikes and strafing runs through the night were still smoldering on Saturday at the city's gates, where they had driven back rebel assaults over the past few days. But on Saturday, hundreds of rebels streamed in, honking their horns, shooting weapons into the air and waving their tricolored flags in celebration.

As night fell, rebel forces had not only recaptured Ajdabiya, a crucial hub city in eastern Libya, but had also driven almost uncontested to the town of Brega, erasing weeks of loss as the airstrikes opened the way.

There was evidence on Saturday that the allied military effort was having an effect not just in the rebel-held east, but in the west as well. In Misurata, where Libya's military has kept up a tight siege against the last opposition redoubt in the western part of the country, rebel commanders said the allied airstrikes had allowed them to hold out.

Fighting around Misurata erupted again on Saturday, according to a rebel spokesman using the name Aiman. He said tanks and artillery resumed firing into the city on Saturday morning until three waves of airstrikes forced them back.

Protests Continue in Syria, Scores Dead

Bloomberg reports Assad's Promise Fails to Halt Syria Unrest as Scores Die During Protests

Syrian President Bashar Al-Assad's security forces clashed with protesters in several cities after his promises of freedoms and pay increases failed to prevent dissent from spreading across the country.

The protests that started earlier this month in the southern province of Daraa may have resulted in the deaths of 55 people, London-based Amnesty International said in a statement on its website yesterday. Security forces opened fire on protesters in the town of al-Sanamein in Daraa and carried out arrests in the capital, Damascus, it said.

Protests began earlier this month, making Syria the latest Middle Eastern country to be hit by the wave of uprisings that ousted longtime rulers in Egypt and Tunisia, and sparked a civil war in Libya. Assad's regime is an ally of Iran and a key power broker in neighboring Lebanon, where it supports Hezbollah, a Shiite Muslim group that has a guerilla army.

"Security elements are firing live bullets on protesters," a man who identified himself as Omar al-Masri, told BBC Arabic television in a telephone interview from Daraa. "We are not gangs. We are peaceful protesters."

Sarkozy Warns Arab Rulers, Cites Ivory Coast

The EU Observer reports Sarkozy warns Arab rulers about Libya precedent

French President Nicolas Sarkozy has warned all Arab rulers that they risk Libya-type intervention if they cross a certain line of violence against their own people.

The president told press at an EU summit in Brussels on Thursday (24 March) that UN Security Council resolution 1973 authorising air strikes on Libya has created a legal and political precedent on the "responsibility to protect."

Referring to deadly violence in Syria, he explained: "Every ruler should understand, and especially every Arab ruler should understand that the reaction of the international community and of Europe will from this moment on each time be the same: we will be on the side of peaceful protesters who must not be repressed with violence."

Sarkozy indicated that he is ready to tolerate a certain level of violence, but that any country which orders its army to open fire on crowds will cross a red line.

"In any democracy there can be demonstrations which can turn violent. But no democracy can accept that the army shoots live ammunition at protesters. This is the position of France and it does not change no matter what the country concerned."

He suggested that the Ivory Coast, where President Laurent Gbago's forces recently fired a heavy artillery shell into a market square, will be next in line for a UN vote on intervention.

Recalling the "extremely moving" scenes of Libyan rebels in Benghazi celebrating the arrival of French warplanes and the "extreme importance" of the United Arab Emirates' and Qatari involvement in the coalition, he called Libya a "historic opportunity" for "reconciliation between the two worlds."

The hawkish speech comes amid criticism of EU "double standards" on tolerating violence in strategically important countries such as Bahrain, Syria and Yemen. Palestinian diplomats have also pointed out the EU did nothing when Israeli jets bombed civilians in Gaza in 2009.

The Mideast and Africa will be a big mess in a hurry if there is going to be military intervention in every country where there is violence.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

FDIC "Cash for Keys" Proposal Would Pay Underwater Homeowners $21,000 to Walk Away; In Prison for Taking a Liar Loan

Posted: 25 Mar 2011 11:32 PM PDT

The Financial Times reports US Banks in 'Cash for Keys' Foreclosure Talks

The five biggest US mortgage servicers were told this week at a private meeting with regulators to consider paying delinquent borrowers up to $21,000 each as part of a broader settlement of the foreclosure crisis.

People who attended the meeting, chaired by the Federal Deposit Insurance Corporation on Monday, said the industry-wide "cash for keys" program would involve the biggest servicers, led by Bank of America paying borrowers as an incentive to leave their homes.

Banks would pay borrowers who are more than 90 days behind on mortgage payments up to $1,000 to seek independent financial advice and up to $20,000 in cash as a "fresh start" payment towards living costs in a new home. They would have to vacate their properties quickly and leave them in good condition.

Sheila Bair, FDIC chairman, raised the idea but people involved said it was not an official government proposal and was rejected strongly by some of the banks.

The Department of Justice; state attorneys-general; banking regulators, including the FDIC; the Treasury; and the new Consumer Financial Protection Bureau are among the agencies trying to come to a settlement with the industry. A combined penalty of about $20 billion has been discussed, with one idea to use the money to write down the outstanding debt of struggling homeowners.

However, prospects for a single "mega settlement" have worsened because officials disagree on the level of penalty and whether money raised in fines should be used for a principal writedown. The banking regulators, who do not agree among themselves, are nonetheless keen to come to an agreement quickly.

One way through the gridlock, which has been discussed among officials, is giving the servicers a menu of options for settlement, which might include principal writedown or a "cash for keys" scheme.

No Winnable Actions

If this absurd proposal were to pass, can someone tell me who the hell the banks would sell those properties to, how fast, and at what loss?

Of course I also want to know what valuation these distressed properties are kept on bank balance sheets if banks do not immediately take possession.

Is there a winning action here?

Obama's $20 Billion Civil Fine Scheme

Bear in mind the FDIC discussion stems from Obama's request for $20 Billion in Civil Fines, Money to be Used for Loan Modifications.

How Far would the Money Go?

Let's assume this proposal is adopted. How many would benefit? The answer of course depends on the criteria. However, but the goal seems to be to help those in distress, so let's use those currently in distress as a starting point.

Total Non-Current and Delinquent Loans

The above chart and following stats from the LPS Mortgage Monitor, January Observations

As of December 2010 there were 2,117,845 90+ day delinquent loans.
As of December 2010 there were 2,555,799 30-60 day delinquent loans.
As of December 2010 there were 2,195,940 in foreclosure.
As of December 2010 there were 6,869,584 in total non-current loans

Those in foreclosure are clearly too far gone to help. If we take $20 billion and spread it out over the rest, we can calculate mortgage principal reductions several ways.

$20 billion divided by 2,555,799 would give everyone 30-60 days late a principal reduction of $7,825
$20 billion divided by 2,118,845 would give everyone 90+ days late a principal reduction of $9,439
$20 billion divided by both groups would give everyone a principal reduction of $4,278

This is supposed to help?

By the way, history suggests once someone gets to 90+ days late, the situation is hopeless. Even if the $20 billion was entirely thrown at those 30-60 days late, we are talking about principal reductions of under $8,000.

Doing Nothing Not a Solution

Assuming banks gave everyone $20,000, they would help 1 million people. However, what would banks do with those 1 million "cash for keys" houses?

If banks helped 2 million people at 10,000 each, what would banks do with another 2 million houses?

However, doing nothing is not a solution given there are 6,869,584 in total non-current loans of which 2,195,940 are already in the foreclosure process.

One irony is that previous programs attempted to halt foreclosures, this would speed it up.

While I see merit in speeding things up, I see little merit in forcing banks to pay $20 billion to kick people out of their houses.

Kicking the Can

The administration, the banks, the FDIC, and the Fed have collectively managed to kick the can down the road. Meanwhile the problem keeps growing.

In Prison for Taking a Liar Loan

Of all the crooked bankers from the top on down, of all the millions of potential cases, government managed to go after a one person who took out two liar loans.

Please consider In Prison for Taking a Liar Loan

This story is truly amazing, you have to read it to appreciate it.

I do not condone liar loans but sending someone to prison for that is more than a bit ridiculous. The punishment should fit the crime.

By the way what does it cost to imprison someone for 2 years? Meanwhile let's recap my rolling list of bank fraud and what little was done about it.

Rolling List of High Profile Fraud Targets

October 10, 2010: FDIC Authorizes $1 Billion Lawsuits Against Failed-Bank Executives; Token Search for Low-Profile Scapegoats

April 29, 2010: Barofsky Threatens Criminal Charges in AIG Coverup, Goldman Sachs Abacus Deal, TARP Insider Trading; New York Fed Implicated

April 16, 2010: Rant of the Day: No Ethics, No Fiduciary Responsibility, No Separation of Duty; Complete Ethics Overhaul Needed

March 2, 2010: Geithner's Illegal Money-Laundering Scheme Exposed; Harry Markopolos Says "Don't Trust Your Government"

January 31, 2010: 77 Fraud, Money Laundering, Insider Trading, and Tax Evasion Investigations Underway Regarding TARP

January 28, 2010: Secret Deals Involving No One; AIG Coverup Conspiracy Unravels

January 26, 2010: Questions Geithner Cannot Escape

January 07, 2010: Time To Indict Geithner For Securities Fraud

October 20, 2009: Bernanke Guilty of Coercion and Market Manipulation

July 17, 2009: Paulson Admits Coercion; Where are the Indictments?

June 26, 2009: Bernanke Suffers From Selective Memory Loss; Paulson Calls Bank of America "Turd in the Punchbowl"

April 24, 2009: Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Mish's Global Economic Trend Analysis

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