China beats U.S. in gov. Smart Grid funding with $7.3B
– The Chinese government will be sinking $7.3 billion into the creation of a cleaner, more energy efficient Smart Grid in 2010
, actually beating out the U.S.’s investment in the same area by more than $200 million, and rising to the top of the global list of Smart Grid leaders.The news indicates how Asia’s largest country is getting serious about distributed energy generation, renewable sources like solar and wind, and transmission inefficiencies — all of which a more developed Smart Grid would tie together. It has become such a priority there, that China is actually spending more on grid improvements than it will on power generation projects. This is a major turnabout for the nation, which has been growing its energy infrastructure as fast as it can to promote economic growth. Still, the sum committed to building a smarter grid may not be enough.
Fannie Mae, Freddie Mac delinquencies rise
– Fannie Mae and Freddie Mac’s home loan delinquencies rose 4.2 per cent in October and the companies modified more mortgages under President Barack Obama’s anti-foreclosure program, the Federal Housing Finance Agency said. The number of borrowers at least 60 days behind on home loans owned or guaranteed by Fannie Mae and Freddie Mac rose to 1.65 million in October from 1.59 million in September, and has more than doubled since a year earlier, FHFA said in a report today. Delinquencies of 60 days or more as a share of mortgages serviced by the companies rose to 5.4 percent, from 5.2 per cent."
Fannie, Freddie Chase Bad Mortgages
– It is payback time for Fannie Mae and Freddie Mac on some mortgages sold to the finance companies by lenders."Stuck with about $300 billion in loans to borrowers at least 90 days behind on payments, Fannie and Freddie have unleashed armies of auditors and other employees to sift through mortgage files for proof of underwriting flaws. The two mortgage-finance companies are flexing their muscles to force banks to repurchase loans found to contain improper documentation about a borrower’s income or outright lies. The result: Freddie Mac required lenders to buy back $2.7 billion of loans in the first nine months of 2009, a 125% jump from $1.2 billion a year earlier. Fannie Mae won’t disclose its figure, but trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009.
Russia tried to force a bailout of Fannie and Freddie, Paulson writes
– Russia urged China to dump its Fannie Mae and Freddie Mac bonds in 2008 in a bid to force a bailout of the largest U.S. mortgage-finance companies, former Treasury Secretary Henry Paulson said. Paulson learned of the "disruptive scheme" while attending the Beijing Summer Olympics, according to his memoir, "On The Brink." The Russians made a "top-level approach" to the Chinese "that together they might sell big chunks of their GSE holdings to force the U.S. to use its emergency authorities to prop up these companies," Paulson said, referring to the acronym for government sponsored entities. The Chinese declined, he said.
Ebbing US home sales hint prices may fall again-S&P
– A recent decline of U.S. home sales is swelling the supply of houses and may push prices down, adding to losses from an earlier three-year slide, said rating agency Standard & Poor’s in a statement on Friday." The recent fall in home sales is boosting the number of existing homes on the market, which grew to a 7.2 months supply in December from 6.5 months in November, S&P said. In coming months, "an expanding default and foreclosure pipeline of 2005-2007 vintage mortgage loans may push the ‘shadow’ inventory of distressed U.S. housing even higher," which could impede the market’s stability, S&P added.
Granholm seeks to retire 46,000 to address deficit – Granholm unveiled her reform plan Friday at a meeting of Lansing Rotary Club at the Radisson Hotel – five days before she is scheduled to give her State of the State address. The plan encourages state employees with 30 years or more of service to retire by forcing them to contribute 3 percent of their salary toward retirement effective Oct. 1 – and eliminating their retirement vision and dental care if they refuse to step down. In exchange, eligible employees would earn a slightly higher pension. "It’s more stick than it is carrot," said Ray Holman, spokesman for United Auto Workers 6000, a union that represents 17,000 state administrative workers, social service caseworkers and other employees."We’re open to talking to the governor about (other) early retirement proposals. This amounts to a 3 percent pay cut."
State Comptroller Says Current Year Deficit Closer to $1 Billion – New York State Comptroller Thomas DiNapoli is warning the state could end this fiscal year (ends March 31st) $1 Billion dollars in the red. That is twice as big as the deficit being projected by Governor David Paterson. DiNapoli says that’s largely due to pressure on Wall Street to change the way it hands out bonuses. The changes will likely impact the state’s tax revenue during this quarter, when the state typically receives a boost from Wall Street."The boost in revenue that we’d expect because Wall Street came back stronger, faster — if it’s paid not as cash, but as stock and other deferred revenues, we’re not going to see the boost in revenue. That’s one of the big unknowns at this time in terms of how we’re going to close out the current fiscal year.".
Illinois is Broke – By July, Illinois will be $130,000,000,000 (that’s BILLION!) in debt. This crushing load hampers the state’s ability to fund public schools and universities, health care, and other essential public services. Most of that money is owed to the state’s pension funds and retiree health care plans. And YOUR SHARE of that debt is $25,000 per household. How did this happen? Basically, Illinois spends $3 for every $2 it takes in. Only in Springfield is this kind of math possible. The state accomplishes this by borrowing or by simply ignoring its unpaid bills. And it has been doing so for years. This year alone, Illinois will be short more than $14,000,000,000. Things are so bad that Illinois now has one of the worst budget deficits in the nation. This has to stop! Financial disaster is on the horizon. We can no longer ignore the problem.
State layoffs to affect PERS assets -Nevada — Massive layoffs of state employees could induce many long-term workers to retire and potentially affect the assets of the Public Employees Retirement System, its top official said today. Gov. Jim Gibbons plans to call the Legislature into a special session to deal with sagging tax revenues. Employee representatives have said laying off workers, cutting pay and reducing or eliminating some programs are his most likely options. PERS has $22 billion invested to pay for retirement for its 40,000 retirees and 104,000 active members, which include local government employees, teachers and general state government employees. The money now covers 72.5 percent of what PERS estimates ultimately will be needed to pay their retirement costs, down from a peak of 83.4 percent.
Obama to propose further Medicaid help for states
– The Obama administration will propose giving cash-strapped states about $25 billion worth of help with their Medicaid budgets when presenting its 2011 budget on Monday, a White House official with knowledge of the plan said Friday. The proposal would extend for six months – until July of next year – the help that states got in last year’s economic stimulus bill with their Medicaid programs. Under the Medicaid initiative, the federal government takes on a higher share of state Medicaid costs, with every state getting an additional 6.2 percent of its Medicaid budget paid for by the feds. States with higher unemployment rates get additional help.
(Barron’s) GREECE WAS THE WORD DOMINATING global capital markets last week as concern about the debt of the so-called PIIGS of Europe sent their yields soaring. Ironically, those worries worked to the benefit of the securities of the largest debtor nation, the U.S. Still, the week may mark a watershed, with the realization that governments no longer could borrow without limit. Sovereign debt, long seen a riskless asset in modern financial markets, no longer is presumed as such. And with governments’ credit lines running out, harsh choices are being forced upon them and their citizens. By week’s end, the markets for bonds of the rudely named PIIGS — Portugal, Italy, Ireland, Greece and Spain — settled down after volatile swings that have posed the greatest threat to the viability of the euro since the common currency was introduced just over a decade ago."
Europe feels chill of 10pc unemployment
– Unemployment hit 10 per cent in Europe on Friday, amid rising inflation and a weakened euro currency according to new data that shows recession-mired Spain bearing the brunt of a jobless recovery. The human cost of post-recession, structural economic rebirth could be seen in updated European Union data when the seasonally-adjusted unemployment rate for the 16 euro countries hit a miserable one in 10 in December. The news came on top of rising inflation with separate official figures showing the annual rate of price rises hitting 1.0 per cent, a new peak after falling to an all-time low of minus 0.7 per cent six months earlier. The rising prices also come at a time when the euro is losing ground against the dollar with the European currency’s value having slipped considerably from a November peak of 1.50 dollars to currently trade at under 1.40 dollar
Euro Sovereign Debt Crisis Expands – A leading story in Germany’s Spiegel Online, datelined from Davos, Switzerland, site of the ongoing economic summit, carries the alarming headline, "Economists Warn of Domino Crash." It’s report begins: "Greece is on the verge of a crash, and Europe fears for the Euro." The debt crisis in Greece, with Spain not far behind, is breaking out as a threat in Europe at the same time as the drastic crisis precipitated by Obama’s downfall in the United States.Despite the safety net organized by private banks to buy Greek bonds Jan. 25, the Greek (and Euro) financial crisis is worsening, with Greek spreads yesterday climbing to 405 points, to settle back at 390, still higher than the day before. Secondly, Spain is now in the line of fire, with Spanish spreads for the first time higher than Italian spreads. Italian three-years bonds yesterday suffered, with the government deciding to sell a little bit less than scheduled in order not to pay penalties. And Moody’s has put Portugal under watch.
Greek Debt Swap Counterparty Risk May ‘Spook’ Market
(Bloomberg) — Greece’s economic woes will “spook” the derivatives market because of concern the nation’s banks may struggle to honor their credit-default swap trades, according to BNP Paribas SA. Asset quality at the country’s lenders will deteriorate as the economy slows, forcing them to mark down about 40 billion euros ($56 billion) of government bond holdings, Funding costs are also rising as the European Central Bank tightens its lending criteria, Frieser wrote. “What will spook the markets is CDS counterparty risk, our understanding is that Greek banks were active CDS players, and there is no way of finding out about these particular exposures,”. “As long as Greek sovereign and bank spreads remain under pressure, this will weigh on the wider European banking sector.”