UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

February 6, 2009

CRASH TALK

Phil Mattera, Dirt Diggers Digest - The contradictory impulses of the federal government were on full display today. At one location on Capitol Hill, a group of so-called Senate moderates were meeting to strip some $80 billion out of the Obama Administration's economic recovery plan. According to press accounts, they were mainly targeting proposed spending related to education, ranging from Head Start programs to Pell grants for college students. I guess they are telling us that in these hard times we shouldn't be lavishing taxpayer funds on fat cat students.

Meanwhile, in another part of Capitol Hill, the Senate Banking Committee heard testimony from Elizabeth Warren, Chair of the Congressional Oversight Panel that was created by the Troubled Asset Relief Program legislation enacted last fall. Warren gave a preview of her panel's new report that will contain estimates that, in its purchases of capital stakes in major banks, the Bush Treasury Department overpaid by some $78 billion.

Want to take bets on which group-students or banks-end up keeping their $80 billion?

NY Times, St Louis
- Buses will no longer stop at some 2,300 stops in and around this city at the end of next month because, despite rising ridership, the struggling transit system plans to balance its books with layoffs and drastic service cuts. . . "They're going to be stranding a whole lot of people," said Val Butler, a nurses' assistant at Garden View. . .
St. Louis may be girding itself for some of the most extreme transit cuts in the nation, but it is hardly alone. Transit systems across the country are raising fares and cutting service . . . Their problem is that fare-box revenue accounts for only a fifth to a half of the operating revenue of most transit systems - and the sputtering economy has eroded the state and local tax collections that the systems depend on to keep running.

CNN - More than eight in ten cities are in financial trouble, up from 64% six months ago, according to a survey. . . The nation's cities are counting on billions of dollars from the economic stimulus package now being debated in the Senate. . . The mayors have put together a "Ready to Go" report that details 18,750 local infrastructure projects in 779 cities that can be started as soon as funding is received. The projects, which represent an investment of $150 billion, would create 1.6 million jobs in 2009 and 2010.

Peter J. Henning, Deal Book -
Sophisticated investors who ran hedge funds were touted for their ability to beat the market with secretive strategies that could not be revealed to the general public at the risk of ruining those wonderful returns. These "black box" investment programs created the allure of the unknown, making those who reaped the benefits somehow special in their own right - in other words, they too assumed the mantle of "sophisticated investor."

The impetus to maintain the aura of secrecy around hedge funds seems to be breaking down as we now learn that they are hardly any better than many plain vanilla mutual funds. And unlike a mutual fund or an exchange-traded fund, you can't always get your money back, even if you have to continue to pay the annual fees on the amount invested.

That a person has a high net worth is hardly an indication of investment savvy, and calling your investment vehicle a "fund of funds" seems to mean only another layer of fees in many instances. Perhaps the term "sophisticated investor" should be understood to mean "I get mine first and the hell with the rest of you.". . .

Greater regulation is no panacea, but breaking down the idea that great wealth and a rising economy somehow makes one a "sophisticated investor" would be a positive development. Public disclosure can have a great leveling effect by showing that investment managers are not necessarily all that sophisticated. And rather than making investments more complex, perhaps a return to an earlier time that valued protecting clients and managing their investments for the long term might be worth considering.

Pro Publica
- Former Treasury Secretary Hank Paulson said last October that the taxpayers shouldn't fret about putting $250 billion in the nation's banks: "This is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything."

But a draft report from the Congressional Oversight Panel for the TARP says Paulson should have known better. According to the panel's analysis, the preferred stock and warrants Treasury received are worth far less than the investments themselves, amounting to at least a $43 billion subsidy to the banks. That shortfall, they found, was inevitable from the structure of the investments. . .

The subsidy climbs even more, to $78 billion, when you add in Treasury's investments to prop up ailing institutions like AIG and Citigroup. As of the report's completion, the Treasury had used $254 billion to buy stakes in banks and AIG, meaning about a third of that was a giveaway.

Sacramento Bee -
Counties in California say they've had enough - and they aren't going to take it anymore. In what amounts to a Boston Tea Party-style revolt against the state Capitol, they're threatening to withhold money. Los Angeles is considering such an option. And Colusa County supervisors said they authorized payment delays for February. "We didn't vote on it, because I don't think anybody wants to go to jail," Colusa County Supervisor Kim Vann said. Closer to home, Sacramento County is planning to file a lawsuit this week against the state and Controller John Chiang for withholding millions of dollars - much of it for social service programs. . . Riverside County is looking at a similar lawsuit but plans to go one step further. It authorized going to court to relieve it from having to provide state-mandated services without state funding.

Washington Times
- Financial problems often drive couples apart, but the nation's overwhelming economic crisis may be holding them together. "People simply can't afford to get divorced. They can't afford the legal fees; they can't afford having two separate places to live," said Michele Weiner-Davis, a Colorado social worker and founder of divorcebusting.com, an online community for couples considering ending their marriages.

Spouses who are divorcing are finding that the often-nasty experience is now even more contentious. "[Spouses] want to receive a certain amount of support and the other will say they simply don't have enough. "Divorce has become more contentious because there is less to divide. Then they are separating and the pot has shrunk. It is hard for the other spouse to comprehend that."

Divorce rates often fall in a bad economy. Statistics show divorces declining in the District and at least two states - Kansas and Connecticut - over the past three years.

NY Post
- A cornerstone of the economic recovery plan that President Barack Obama is expected to unveil Monday will be modifying problem mortgages, The Post has learned. Treasury Secretary Tim Geithner plans to allocate almost half of the remaining $350 billion in funds from the Trouble Asset Relief Program to the so-called "Mo Mod," or mortgage modification, platform.

"Mo Mod" is an algorithmic mortgage processing program that can rewrite up to 500,000 loans a month, and will be a major part of Treasury's plan to help repair tattered bank balance sheets.

The 21-day "Mo Mod" program works by structuring a new mortgage that more accurately reflects a home's worth so that a troubled borrower no longer owes more on their home than the property is worth.

The process then enables a lender to pool these new mortgages together into securities that reflect more accurately a home's value, which makes them less risky for investors.

NY Post
- A cornerstone of the economic recovery plan that President Barack Obama is expected to unveil Monday will be modifying problem mortgages, The Post has learned. Treasury Secretary Tim Geithner plans to allocate almost half of the remaining $350 billion in funds from the Trouble Asset Relief Program to the so-called "Mo Mod," or mortgage modification, platform.

"Mo Mod" is an algorithmic mortgage processing program that can rewrite up to 500,000 loans a month, and will be a major part of Treasury's plan to help repair tattered bank balance sheets.

The 21-day "Mo Mod" program works by structuring a new mortgage that more accurately reflects a home's worth so that a troubled borrower no longer owes more on their home than the property is worth.

The process then enables a lender to pool these new mortgages together into securities that reflect more accurately a home's value, which makes them less risky for investors.

0 Comments:

Post a Comment

<< Home