Archive for the ‘General’ Category

« Older Entries
Newer Entries »

Treasury Makes $25 Billion in Successful MBS Sale

Wednesday, April 4th, 2012

The Treasury Department just raked in a cool $25 billion for the American taxpayer. It sold the agency-backed mortgage-backed securities (MBS) that it bought during the financial crisis.  “The successful sale of these securities marks another important milestone in the wind-down of the government’s emergency financial crisis response efforts,” said Mary Miller, Treasury assistant secretary for financial markets.  The Treasury’s mortgage purchases were one part of the government’s support for banks and the financial markets.  The associated takeover of Fannie Mae and Freddie Mac cost another $151 billion.

Treasury bought the mortgage debt in an attempt to stabilize the housing industry, with funds approved by the Housing and Recovery Act of 2008.  Critics claim that it did more to prop up Wall Street than Main Street.  Anti-bailout anger fueled both the conservative Tea Party movement and Occupy Wall Street on the left.  Treasury Secretary Timothy Geithner argues that the government’s action helped prevent a deeper economic downturn.  TARP funds enabled the government to purchase preferred stock in banks, other financial firms and some automakers in return for the public investment.  Some of the preferred stock ultimately was converted to common stock.  According to a Treasury official, to date $331 billion has been repaid, including dividends and interest earned on the preferred shares.  While TARP currently is $83 billion in debt, Treasury projects losses will eventually number about $68 billion.  The nonpartisan Congressional Budget Office forecasts a lower loss of just $34 billion.

The Obama administration has stressed the TARP bank program’s performance, which has returned about $259 billion, more than the $245 billion lenders received.  At present. there are 361 banks remaining in TARP.

In all, Treasury bought $225 billion worth of mortgage-backed securities during the depths of the financial crisis between October of 2008 and December of 2009.  Some of those securities were backing loans believed to be worthless, according to some financial analysts at the time.  Treasury’s portfolio, however, was comprised mostly of 30-year fixed-rate mortgage-backed securities and were guaranteed by Fannie Mae or Freddie Mac, enhancing their value.  Congress authorized $700 billion for TARP, but Treasury only paid out $414 billion.  Of that, $331 billion has been paid back, including profits, interest and dividends made from investments.

Writing for The Hill, Peter Schroeder notes that “Now, with markets surging and the financial crisis in the rearview mirror — and with the presidential campaign rapidly approaching — the government is backing away from its outsized presence in the markets.  The move marks the latest in a series of steps by the government to exit its crisis-driven investments.  In July, the Treasury announced it was no longer invested in Chrysler, ending with a roughly $1.3 billion loss.  However, the government has fared better with investments in the banking sector.  The Treasury announced roughly one year ago that it had officially turned a profit on that portion of the bailout, and ultimately estimates it will turn a $20 billion profit on the $245 billion that was pumped into banks.”

All industry analysts are not as optimistic. Economist Douglas Lee, of the advisory firm Economics from Washington, said it is inevitable that the government will end up with “substantial losses” on the bailout, but that it was appropriate to try to reap gains where possible.  “A lot of these assets that were acquired were distressed at the time that they were bought so the chance of coming out ahead in selected areas is quite good,” Lee said.  For the long term, however, the effort to rebuild a reliable housing finance system means that costs for subsidizing operations of firms like Fannie Mae and Freddie Mac will continue to be expensive.  Investments in insurer AIG and in automakers might prove hard to recoup 100 percent.  Recently, Treasury said it was selling 206.9 million shares of AIG, which would reduce the government’s stake in the company to 70 percent from 77 percent.  “You have to say that these programs have worked in the sense that it’s restored a sense of stability that we sought,” Lee said, “but now it is right to have the government back out and let the private sector get on with their job.”

Tags: , , , , , , , , , , , , , , ,
Posted in Economics, Financing, General | No Comments »

Beware of Income Tax Identity Theft Scams

Tuesday, April 3rd, 2012

Scam artists across the country are stealing billions of dollars in tax refunds through a shameless form of fraud that takes advantage of the Internal Revenue Service’s (IRS) fast online returns.  Thanks to laptops and free Wi-Fi connections, these thieves steal identities and use the names of genuine taxpayers to file fraudulent online returns.  They’ve stolen billions to buy luxury cars, jewelry and plastic surgery, according to police.  “It’s like the federal government is putting crack cocaine in candy machines,” said Detective Craig Catlin of the North Miami Beach, FL, Police Department.  “It’s that easy.”

The thieves obtain Social Security numbers and other personal information from accomplices who work at hospitals, doctor’s offices, car dealerships or any place the personal information is stored.  Next, they file an online tax return using the real taxpayer’s name and a fabricated income.  Usually, the scam artists obtain a debit card so the IRS can issue the refund, although some thieves have also received actual Treasury checks.  The thieves are well aware that the IRS does not authenticate the employer W-2s sent with the return until after the refund is sent.

“We can’t go…two days in a row without making a traffic stop, and there’s going to be tax return fraud in the car,” Catlin said.  “We could stop an 18-year-old kid who’s got five (debit) cards.  The average is $5,000 per card.  So they’ll have $25,000, which is really cash, even though it’s on debit cards.  We have other cases that range up to $100 million where subjects have opened up corporations and bank accounts and business accounts,” Catlin said.  “And they’re receiving millions of dollars from the IRS that are all fraudulent.”

Additionally, this particular crime is exploding because software like Turbo Tax make filing taxes fast and easy. Scammers buy black-market lists of names and Social Security numbers of living people, and scour Internet family support sites to steal the identities of the dead.  In the last three years, tax refund fraud has soared 700 percent — with $2 billion in tax dollars paid out to thieves last year alone.

How much does the IRS pay people who are not real taxpayers?  “It’s a number that I can’t get my head around,” said Tom Boyle of the U.S. Postal Inspection Service.  “We know one company that you can file through.  There was over $300 million filed alone.” Boyle said, “and there’s 20 of those companies.”  According to the IRS, they caught 87 percent of fraudulent returns filed in 2011, and have taken action to implement new ways of handling tax returns, as well as compliance filters that identify fraud.

“The IRS is confronted with the same challenges as every major financial institution in preventing and detecting identity theft,” according to Deputy Commissioner Steven Miller.  “We cannot stop all identity theft.  However, we are better than we were, and we will get better still.”  Last year, the IRS prevented $14 billion in fraudulent refunds, Miller said.  This year, the agency has added hundreds of employees to its anti-fraud efforts.  Legitimate refunds are delayed when the IRS spends additional time reviewing returns before issuing refunds, said Nina Olson, the national taxpayer advocate.  When the IRS speeds up returns, fraudulent refunds fall through the cracks.  “There is no way around these trade-offs,” said Olson, who runs an independent office inside the IRS.

Senator Bill Nelson (D-FL) said criminals have turned to tax fraud, impacting honest taxpayers.  “Their lives are being turned upside down by identity theft and then tax fraud,” said Nelson, who is chairman of the Senate Finance Economic Growth and Fiscal Responsibility Subcommittee.  “They have their tax refund stolen, and then they are delayed until the IRS sorts out the mess.”

Tags: , , , , , , , ,
Posted in Economics, General | No Comments »

Retail Sales Are on the Rise

Monday, April 2nd, 2012

February retail sales climbed the fastest in five months. Even rising gas prices didn’t dampen demand for cars, clothing and other goods.  According to the Commerce Department, retail sales rose a seasonally adjusted 1.1 percent to $407.8 billion in February; January retail sales were revised upwards to show a 0.6 percent rise instead of the initially reported 0.4 percent.  If you don’t count cars, sales climbed 0.9 percent.  Economists queried by MarketWatch had anticipated a 1.2 percent gain for the headline index and a 0.7 percent advance for retail sales, not counting autos.

Consumers are “unfazed by higher gas prices,” said Jonathan Basile, an economist at Credit Suisse, who accurately forecast the increase in spending.  “This is a pleasant surprise on the overall picture for the economy.  For the Federal Reserve, it’s steady as she goes.  They will be encouraged, but there is still a long way to go.”

Gourmet-cookware chain Williams-Sonoma Inc., said demand improved at the start of the year following the holiday shopping season.  “Post holiday, we saw a progressively stronger retail environment,” said Laura Alber, the company’s chief executive officer, which reported record earnings for 2011.  Sales increased 1.6 percent at automobile dealers, reversing the previous month’s decline.  The results fell short of what the industry expected.  Cars in February sold at the fastest pace in four years, led by Chrysler and a surprise gain from General Motors. Light-vehicle sales accelerated 6.4 percent from January to a 15 million annual rate, the strongest since February 2008, according to Ward’s Automotive Group.

“There are a number of factors that are helping release this pent-up demand,” said Don Johnson, vice president of GM’s U.S. sales.  “They include stronger employment, good credit availability, and both of those are leading to improving consumer sentiment.”

Clothing store purchases rose 1.8 percent, the most since November 2010.  Furniture and general merchandise stores were the only categories to show a decrease in sales.  An improved employment and income picture are giving consumers the confidence to spend more. This is demonstrated by the fact that the Bloomberg Consumer Comfort Index rose to an almost four-year high in the week ended March 4.

Employers boosted payrolls more than forecast in February.

Dean Maki, chief U.S. economist at Barclays Capital Inc. and a former Fed researcher who specialized in consumer spending, projects Americans will boost purchases at a three percent yearly rate in the 2nd half of the year after a 2.5 percent gain in the first six months.

Federal Reserve policymakers are likely to retain their plan to keep interest rates low at least through late 2014.  Chairman Ben S. Bernanke said maintaining monetary stimulus is warranted even with employment gains and a lower jobless rate.  While there are “some positive developments in the labor market,” Bernanke said, “the pace of expansion has been uneven.” The rise in gas prices “is likely to push up inflation temporarily while reducing consumers’ purchasing power,” he said.

“We believe that the consumer is in better shape than recent downbeat commentary from Fed Chairman Bernanke,” said John Ryding and Conrad DeQuadros, analysts with RDQ Economics. Another Commerce Department report showed U.S. companies restocked at a faster rate in January, a sign that businesses expect stronger job growth to fuel more sales.  Business stockpiles rose 0.7 percent in January, while sales grew 0.4 percent.  For the remainder of 2012, JPMorgan Chase analysts forecast growth of 2.2 percent, an improvement from the 1.7 percent growth seen in 2011.

The rise in sales “signals that the improving economic fundamentals, particularly strong employment growth, are being translated into higher spending activity,” said Millan Mulraine, senior macro strategist at TD Securities. “This building momentum is especially encouraging for the recovery as it suggests that the self-reinforcing positive dynamics between jobs growth and spending activity could foster a more robust economic recovery in the coming months.”

Tags: , , , , , ,
Posted in Economics, General | No Comments »

Want an Energy Efficient Home? Push the Green Button

Wednesday, March 28th, 2012

Want more control over electrical use in your home?  The Green Button Initiative might be the answer. “Imagine being able to shrink your utility bill, or knowing the optimal size and cost-effectiveness of solar panels for your home, or verifying that energy-efficiency retrofit investments have successfully paid for themselves over time” said Aneesh Chopra, Chief Technology Officer for the United States.  “Far too often these and similarly important — and potentially money-saving — opportunities are unavailable to us.  Why?  Because consumers haven’t had standard, routine, easy-to-understand access to their own energy usage data.”

To help achieve that goal, the Obama Administration recently announced a major step forward in solving this problem.  According to Chopra, “I announced the launch of the Green Button initiative, an Administration-led effort based on a simple, common-sense goal: provide electricity customers with easy access to their energy usage data in a consumer-friendly and computer-friendly format via a ‘Green Button’ on electric utilities’ website.  With this information in hand, customers can take advantage of innovative energy apps to help them understand their energy usage and find ways to reduce electricity consumption and shrink bills, all while ensuring they retain privacy and security.”

Access to household energy use data is key to helping consumers conserve energy and save money. Because Green Button is available to everyone, it is already driving innovation among website and software developers interested in using that standard to provide innovative services -  from information about how to save energy or choose appropriately sized solar panels to fun Facebook apps.  Additionally, the Green Button is likely to support a new generation of interactive thermostats and virtual energy audits that will recommend retrofits that will improve efficiency in homes and businesses.

“Green Button marks the beginning of a new era of consumer control over energy use, and local empowerment to cut waste and save money,” Chopra said.  “With the benefits of open data standards, American app developers and other innovators can apply their creativity to bring the smart grid to life for families — not only in California but in communities all across the nation.”

Writing for the View on Energy blog, Jeanne Roberts says that “What it means for consumers is a way to monitor and take charge of their home energy use, via computer technology, and hopefully to lower monthly utility bills as a result. In short, a little bit of ‘green’ technology that could allow consumers to save a lot of green if used wisely.  As an added advantage, energy use reduction nationwide by residential consumers could help the nation reach Obama’s stated goals of energy security (by reducing dependence on oil) and energy efficiency, both of which lead to a ‘clean’ energy future.”

Philip Henderson of GreenBiz.com has an interesting take on the Green Button after perusing his difficult-to-read electric bill.  “If my bill were entered in a Worst Utility Bill contest, it probably would not win — I’ve seen some that are worse.  This is NOT to denigrate my utility company — it is a power company, after all, not a design shop.  This is why the ‘Green Button Project’ is so interesting and important.  It’s based on a simple concept — give the customer his or her utility billing information in a form that actually usable.  Click a green button on the utility’s website and billing data is delivered and can be used by various apps.  With my data, I will be able to use any billing presentation system I want — I can find the one that suits me best.  (Can’t you hear the iPhone developers tapping away to create cool new tools?)”

Tags: , , , , , , , , , , , , ,
Posted in General, Green | No Comments »

The Trouble With Kony 2012

Tuesday, March 27th, 2012

The “Kony 2012” film, made by an organization called Invisible Children, Inc., (IC) is a prime example of how social media can push out a video and people react to it without time to get context and background to make an informed judgment.

Joseph Kony, who is believed to be in his early 50s, is head of the Lord’s Resistance Army (LRA), a Ugandan guerrilla group accused of widespread atrocities.  Although he initially enjoyed strong public support, the LRA turned on its own supporters, allegedly wanting to turn Uganda into a theocracy.  Kony claims that he is the spokesperson of God and a spirit medium, primarily of the Holy Spirit, which the group believes can represent itself in multiple manifestations.  In 2005, Kony was indicted for war crimes by the International Criminal Court in The Hague, Netherlands, but has not yet been captured.

The film immediately spread virally on the internet. As of March 12, 2012, the film had more than 74 million views on video-sharing website YouTube and more than 16.6 million views on Vimeo, with other viewing coming from a “Kony2012″ website operated by Invisible Children.  The forceful exposure of the video caused the Kony 2012 website to crash shortly after it began gaining widespread popularity.

But, there appear to be problems with Invisible Children that call into question how much of “Kony 2012” should be believed.  According to The Daily What website, the organization behind Kony 2012 — Invisible Children Inc. — is an extremely shady nonprofit that has been called ‘misleading,’ ‘naive,’ and ‘dangerous’ by a Yale political science professor, and has been accused by Foreign Affairs of ‘manipulating facts for strategic purposes.’  They have also been criticized by the Better Business Bureau for refusing to provide information necessary to determine if IC meets the Bureau’s standards.  Additionally, IC has a low two-star rating in accountability from Charity Navigator because they won’t let their financials be independently audited.

“By IC’s own admission, only 31 percent of all the funds they receive go toward actually helping anyone.  The rest go to line the pockets of the three people in charge of the organization, to pay for their travel expenses (over $1 million in the last year alone) and to fund their filmmaking business (also over a million).

Writing for the Atlantic Wire, Alexander Abad-Santos notes that the Invisible Children’s organization’s financials are questionable, with most of their money stashed in a tax-free bank in the Cayman Islands.  According to Visible Children, an anti-Invisible blog, the company spent only 33 percent of its $8 million-plus in spending on ‘direct services.’”

Not surprisingly, Invisible Children is fighting back. On a video on the group’s website, Chief Executive Ben Keesey described his group’s finances, saying that more than 80 percent of funding is spent on program costs out in the field, and emphasized that most funds were spent through partner organizations in northern Uganda and the northeast Democratic Republic of Congo.  He also said that the group, which has launched the most viral YouTube video campaign in history, is dedicated to bringing warlord Joseph Kony to justice.  “I understand why a lot of people are wondering, ‘Is this just some slick, kind of fly-by-night, slacktivist thing?’ when actually it’s not at all,” Keesey said in Invisible Children’s response video.  “It’s connected to a really deep, thoughtful, very intentional and strategic campaign.”

“Any claims that we don’t have financial transparency, or that we’re not audited every year by an independent firm, or that we don’t have financial integrity, just aren’t true,” Keesey said.

“I understand because for many people they just learned about Invisible Children a couple of days ago through the Joseph Kony 2012 movie, according to Keesey.  “If all you see is the 29 minute movie and then you try to go to our website and it doesn’t exist because the traffic crashed it.  So you’re not seeing any information about our programs, you’re not understanding that this has been going on for a long time,” Keesey said.  The “goal has always been the same, it’s always been one thing and that’s to stop the violence of the LRA permanently and help restore the war-affected communities”.

Tags: , , , , , , , , , , , , , , , , , , ,
Posted in General | No Comments »

Foreclosures Decline, But Expect a Spike Thanks to Banks Settlement

Monday, March 26th, 2012

Foreclosure filings declined eight percent in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, according to RealtyTrac Inc. A total of 206,900 homes received notices of default, auction or repossession last month, down two percent from January, according to the data firm, which noted that one in every 637 households received a filing.  Those numbers could rise sharply in coming months.

Banks slowed foreclosures for more than a year as attorneys general in every state investigated charges of shoddy and incomplete paperwork.  A $25 billion settlement with the five largest lenders removed some roadblocks to property seizures and gave the go-ahead for future actions, Brandon Moore, RealtyTrac’s chief executive officer, said.  “February’s numbers point to a gradually rising foreclosure tide.  That should result in more states posting annual increases in the coming months.”

“The pig is starting to move through the python,” said Daren Blomquist, RealtyTrac’s director of marketing.  The banks “have already adjusted their foreclosure practices to fit the terms of the settlement.  We expect that to continue as (the settlement) gets finalized,” Blomquist said.

The settlement clarifies the way in which foreclosures must be handled.  That is expected to let banks speed up their processing, putting many delinquent homeowners into the foreclosure process.  Cases could move forward after being on hold for months — even years — with their delinquent owners still living illegally in the properties.

“The foreclosure and mortgage settlement filed in court earlier this week will help pave the way to a properly functioning foreclosure process by providing a clear roadmap for necessary foreclosures,” Moore continued.  “That should result in more states posting annual increases in the coming months.  Not surprisingly, many of the biggest annual increases in February were in states with the more bureaucratic judicial foreclosure process, which resulted in a larger backlog of foreclosures built up over the last 18 months in those states.”

Cities with the highest foreclosure rates were Riverside-San Bernardino in California (one in 166 housing units); Atlanta (one in 244); Phoenix (one in 259); Miami (one in 264); and Chicago (one in 302).

The Department of Housing and Urban Development’s (HUD) Office of the Inspector General’s report found that several banks violated servicing standards and foreclosure procedures and engaged in extensive robo signing.  The banks agreed to follow new servicing standards and offer relief to borrowers by providing $10 billion in principal reductions, $3 billion in refinancing loans and $7 billion in alternatives to foreclosure.  Foreclosures in the 26 states with a judicial foreclosure process rose 24 percent over last year, while activity in the 24 states that follow a non-judicial foreclosure process fell by 23 percent

Default notices, the initial step in the foreclosure process increased more than 20 percent in 12 states, including Hawaii, Maryland, Connecticut, South Carolina, Indiana, Pennsylvania and Florida.  State attorneys general have filed lawsuits against major lenders in New York, California and Nevada in recent months, further slowing the pace of foreclosures in those states.

Tags: , , , , , , , , , , , , , , , , , , , , , , ,
Posted in Economics, Financing, General, Residential | No Comments »

Great Lakes Are on Thin Ice

Friday, March 23rd, 2012

The Great Lakes winter ice cover has dropped dramatically over the past 40 years, according to a new report. On average, peak ice has fallen by 71 percent; Lake Michigan’s ice cover has shrunk even more than that.

Researchers at the National Oceanic and Atmospheric Administration (NOAA) compared satellite photos dating to 1973.  Jia Wang, a NOAA ice climatologist, said the changes are stark.  In a year like 1979, ice covered about 94 percent of the lakes in the coldest months of that winter.  “This winter the maximum ice cover is about five percent,” Wang said.  “It’s the lowest ever since the satellite era.”  The drop in ice cover is largely a result of rising temperatures due to climate change.  There are also other factors at play this year in particular, such as El Nino weather patterns.  According to Wang, such a loss of winter ice can cause several problems for the Great Lakes ecosystem.  For example, it can accelerate wintertime evaporation from the lakes, which could reduce water levels.  The trend could also stimulate more and earlier algae blooms, which damage water quality and habitat.  Additionally, it leaves the shoreline more exposed to waves, exacerbating erosion.

The changes in the Great Lakes could make them a dead zone. According to the University of Michigan’s Don Scavia, “By end of the century, Illinois will feel like Texas.  And Michigan will feel like Arkansas.”  Scavia, who leads the university’s Environmental Sustainability Institute, laid out a disconcerting list of changes already taking place in the Great Lakes region as the result of climate change.  According to Scavia the changes include the last frost in spring occurs earlier and earlier, while the first frost in fall is later and later.  This is extending the growing season, as well as changing what plants and crops can grow in the region.  Storms are more intense, and major weather events happen more frequently.

The most alarming potential scenario is the possibility that the Great Lakes to become a dead zone, a body of water that lacks oxygen and no fish or plants can survive.  This happened to Lake Erie in the 1960s, resulting from algal blooms caused by industrial pollution, human waste and farm run-off.  Lake Erie’s devastation led to the passage of the federal Clean Water Act in 1972.  Oxygen levels in the lake improved in the 1980s, but worsened again in the 1990s.  Recent studies have shown that algae in Lake Erie is returning.

Although lakefront residents may enjoy the more temperate beachfront this year, ice is crucial in maintaining coastal wetlands and water depth.  The wetlands act as an incubator for wildlife in the Great Lakes basin.  Wetlands — the marshy shorelines that harbor numerous plants and animals — require the constant variation of the seasons and Great Lakes water levels.  The lack of substantial ice coverage results in greater evaporation, which leaves water levels across the Great Lakes lower over the long term.

“Having low water levels next year doesn’t make me nervous.  Having low levels over the last 10 years makes me worry,” said Donald Uzarski, director of Central Michigan University’s Institute for Great Lakes Research.  “We’ll see what happens with respect to the water levels.  When the water level’s lower, the coastal wetlands stretch out towards the water’s edge,” out into exposed shoreline areas that are usually under water.

Rather surprisingly, extreme summer and winter temperatures are actually considered good for wetlands. These conditions can feed the growth of wetlands, which are “very dynamic and very responsive to water levels,” according to Kurt Kowalski of the United States Geological Survey.  Climatologists studying lake ice have noticed a steadier pattern of temperatures within the last 10 years.  “The frequency of mild winters has been on the increase.  We’re certainly in a trend for milder winters now,” said Ray Assel, a retired climatologist, recently of the Great Lakes Environmental Research Laboratory.

According to the Canadian Ice Service, ice cover on the Great Lakes for the week of March 5, 2011 was approximately 36 percent and close to the historical average of 38 percent.  By contrast, ice cover for the week of March 5, 2012 has been exceptionally low and is only about 12 percent.

Writing on the earthsky.org website, Deanna Conners says that “In fact, ice cover has been so low this year on Lake Erie that officials began removing the ice boom that prevents large chunks of ice from flowing out into the Niagara River on February 28, 2012.  This is the earliest date for removal since the boom was first installed in the mid 1960s.  The ice boom acts to prevent ice damage to hydropower intake equipment.  Early boom removal is our harbinger of an early spring in western New York.  Dare I say that I think the groundhog was wrong this year?”

Another sign of the times comes from the Daily Great Lakes Seaway Shipping News, which notes that “Shipments of iron ore on the Great Lakes totaled 3,587,016 net tons in January, an increase of 24 percent over a year ago, and 57 percent ahead of the month’s five-year average”.  In typical winters when the Great Lakes have a more widespread ice cover, the billion dollar shipping activity comes to a virtual halt.  Click on this link to view a map of the extent of Great Lakes ice during the cold and snowy winter of 1979, the last time the Great Lakes were more than 95 percent frozen over.

Tags: , , , , , , , , , , , , , , , , , ,
Posted in General, Green | No Comments »

Fannie Mae Asks Uncle Sam For More Money

Wednesday, March 21st, 2012

In an attempt to dig itself out of a deepening hole, Fannie Mae has requested $4.6 billion in additional federal aid. “We think that we have reserved for and recognized substantially all of the credit losses associated with the legacy book,” Chief Financial Officer Susan McFarland said.  “We’re very focused on returning to profitability so we don’t have to draw (from Treasury) to cover operating losses.”

Although the nation’s banks seem to be recovering nicely, the same cannot be said for mortgage giants Fannie Mae and Freddie Mac.  Writing in Forbes, Steve Schaefer notes that “The mortgage finance giants have taken on a greater share of supporting the U.S. housing market as private players pared back their exposure in recent years, and the result has been billions of losses on the taxpayer dime.  Fannie Mae reported booking a $16.9 billion 2011 loss capped off by the loss of $2.4 billion in the 4th quarter.  Fannie Mae’s losses are still coming largely from its legacy book of business (from before 2009), which led to $5.5 billion in credit-related expenses tied to declining home prices.

“The black holes of Fannie and Freddie – Fannie’s Q4 report shows it has requested to draw $116.2 billion since being placed under conservatorship Sept. 6, 2008 while paying back $19.9 billion in preferred stock dividends – are the biggest black eyes of the 2008 bailouts.  Plenty of critics of the Troubled Asset Relief Program (TARP) have made their voices heard over the years, but at least most of the banks that received TARP injections – the biggest of which went to Bank of America and Citigroup – have paid back the government’s loans and are back to making profits, if modest ones. Even American Intl Group and the automakers  that received bailouts – General Motors and Chrysler – have moved beyond needing additional government dollars.  Fannie and Freddie, on the other hand, show few signs of becoming anything resembling productive companies until the housing market turns around or the pre-2009 assets are completely wiped off the books or new policies are necessary to encourage new refinancing beyond those currently in place that have had limited impact.”

“While economic factors such as falling home prices and high unemployment produced strong headwinds for our business again in 2011, we continued to grow a very strong new book of business as we have since 2009, “said CEO Michael Williams, who handed in his resignation in January but is still on board while the government-sponsored enterprise (GSE) looks for his replacement.

Bank of America last week announced that it had stopped selling some mortgages to Fannie Mae because of a dispute over requests from the government-run company to buy back defective loans.  “If Fannie Mae collects less than the amount it expects from Bank of America, Fannie Mae may be required to seek additional funds from Treasury,” the company said.

Fannie Mae blamed its loss primarily on pre-2009 loans and falling home prices, which pushed up the company’s credit-related expenses.  In the 4th quarter of 2010, Fannie Mae posted a slight profit to end a streak of 13 consecutive quarterly losses, though the company was back in the red in the following quarter and each since.  The net cost to taxpayers for bailing out Fannie and Freddie stands at more than $152 billion.

During the 4th quarter, Fannie Mae acquired 47,256 single family homes through foreclosure compared with 45,194 in the 3rd quarter.  The company disposed of 51,344 REO properties in the quarter, down from 58,297 in the 3rd quarter.  As of the end of 2011, Fannie Mae was holding 118,528 REO properties, a reduction from the 122,616 at the end of September and 162,489 on December 31, 2010.  The value of the single-family REO was $9.7 billion compared with $11.0 billion at the end of the 3rd quarter and $15.0 billion at the end of 2010.  The single family foreclosure rate in the 3rd quarter was 1.13 percent annualized compared with 1.15 for the first three quarters of the year and 1.46 percent for 2010.

Meanwhile, the federal government wants to sell approximately 2,500 distressed properties in eight locations to investors who buy them in bulk and rent them out for a predetermined period.  The properties, located in Atlanta, Phoenix, Las Vegas, Los Angeles/Riverside, and three Florida regions, include single-family homes and co-op apartment buildings.  “This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,” said Edward J. DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae.

Tags: , , , , , , , , , , ,
Posted in Economics, Financing, General | No Comments »

Rising Gas Prices Send Americans to Mass Transit

Monday, March 19th, 2012

American public transportation ridership rose 2.3 percent last year as gas prices rose to their highest-ever annual average, according to the American Public Transportation Association (APTA).  The 10.4 billion trips recorded last year was the highest since 2008, when gas prices hit more than $4 a gallon nationwide for seven weeks in the summer.

APTA said economic recovery, that sees more Americans commuting to and from work, added to ridership.  Approximately 60 percent of commutes are for work.  Greater use of smart-phone apps, which “demystify” schedules for riders, also boosted ridership, the APTA said.  Increases in public transportation were reported in communities of all sizes and among light rail, subway, commuter train and bus services, the APTA said.  The largest increase — 5.4 percent — occurred in rural communities with populations of less than 100,000, said Michael Melaniphy, APTA’s president and chief executive.

Spending on public transport totals in the region of $50 billion a year, Melaniphy said.  Funding for public transportation is split nearly 50/50 between federal dollars from the gas tax, money from state and local property and sales taxes, and ridership fees.

In Boston, where unemployment has fallen two percent since the beginning of 2010, ridership rose four percent last year to an average of 1.3 million passenger trips a day on weekdays, said Joe Pesaturo, of the Massachusetts Bay Transportation Authority.

Because of the recession, transit agencies were forced to operate more efficiently and better care for existing systems and equipment, said Robert Puentes, senior fellow in the Metropolitan Policy Program at the Brookings Institution.  That has resulted in better service.

In terms of specific modes of transit, light rail (including streetcars and trolleys) led with a 4.9 percent increase.  This was followed by heavy rail (subways and elevated trains) at 3.3 percent; commuter rail at 2.5 percent; and large bus systems at 0.4 percent.

It’s ironic that these increases occurred despite the fact that transit agencies have had to increase fares and decrease service because of budget cuts, according to Melaniphy. “Can you imagine what ridership growth would have been like if they hadn’t had to do those fare increases and service cuts?”

Tags: , , , , , , , , , , , , ,
Posted in Economics, General | No Comments »

A New Chapter for Iconic Empire State Building

Wednesday, March 14th, 2012

The landmark 102-story Empire State Building in midtown Manhattan could raise as much as $1 billion in a share sale and become a real estate investment trust (REIT), if the company that controls that iconic structure if its plans pan out.  According to a Securities and Exchange Commission filing, Empire State Realty Trust, Inc., intends to list the shares on the New York Stock Exchange.  The firm, Malkin Holdings, LLC, will consolidate a group of closely held companies to form the REIT as part of the IPO, according to a separate filing.

Malkin, supervisor of the company the holds the title to the tower, said that it had “embarked on a course of action” that could result in the Empire State Building becoming part of a new REIT.  Malkin Holdings supervises property-owning partnerships led by Peter and Anthony Malkin, and owns the 2.9 million-square-foot Empire State Building in conjunction with the estate of Leona Helmsley.  Bank of America, Merrill Lynch and Goldman Sachs Group Inc. will advise on the IPO.  The price and number of shares were not disclosed in the filing.

The proposed IPO would give investors a rare opportunity to own a piece of one of the world’s most famous buildings as New York’s real estate values rebound after the recession.  Midtown Manhattan office property prices have recovered 87 percent of their value since bottoming out in mid-2009, according to Green Street Advisors Inc., a REIT research firm.

The REIT would consolidate Manhattan and New York area properties owned by companies including Empire State Building Associates LLC, 60 East 42nd St. Associates LLC and 250 West 57th St. Associates LLC. Participants can opt to receive cash instead of shares for as much as 15 percent of the value.

Since gaining control of the building 10 years ago, Malkin has invested tens of millions of dollars to improve the office spaces and cut the cost of heating and maintaining the 81-year-old structure.  That helped attract tenants such as social networking site LinkedIn.  According to the SEC filing, Malkin said that upgrading the building still requires additional investment of between $55 million and $65 million over the next four years.

As with many recent tech and internet IPOs, the company plans to have two classes of stock — class A shares that are sold to the public and worth one vote, as well as class B shares with 50 votes each.  The structure leaves the Malkin family with significant control.  The proceeds will pay existing stakeholders in the buildings who chose to take cash in exchange for their interests, and to repay debt.  The REIT will list itself on the New York Stock Exchange under the symbol “ESB.”

The Malkins realize that leasing in New York is “highly competitive,” and faces new rivals in the skyline, primarily the One World Trade Center, which will have a broadcast antenna and observation deck that could attract tenants away from the Empire State Building.

At 1,250 feet and 102 floors, the art deco-style building is one of New York City’s most recognizable tourist destinations, enjoying its second stint as the city’s tallest building.  It was the world’s tallest building from its 1931 opening until 1974, when the 442-meter Sears Tower (now Willis Tower) was completed in Chicago.

The building played a starring role in several movies, most notably “King Kong,” “An Affair to Remember” and “Sleepless in Seattle.”

Tags: , , , , , , , , , , , , , , , , , , , , , , , , ,
Posted in Economics, Financing, General, Office | No Comments »

« Older Entries
Newer Entries »