by Calculated Risk on 11/14/2009 07:18:00 PM

Gretchen Morgenson at the NY Times writes about the tax loss carry-back¹ "gift" for home builders in the recently signed "Worker, Homeownership and Business Assistance Act of 2009": Home Builders (You Heard That Right) Get a Gift

The Center for Responsive Politics reports that through Oct. 26 of this year, home builders paid $6 million to their lobbyists. ... Much of this year’s lobbying expenditures were focused on arguing for the tax loss carry-forward, documents show.

Among individual companies, Lennar spent $240,000 lobbying while companies affiliated with Hovnanian Enterprises spent $222,000. Pulte Homes spent $210,000 this year.

That’s some return on investment. After spending its $210,000, Pulte will receive $450 million in refunds. And Hovnanian, after spending its $222,000, will get as much as $275 million.

That is quite a Return on Lobbying (ROL), although some of the money went to lobbying for the inefficient homebuyer tax credit.

And, oh, this "gift" will create few if any jobs.

¹ UPDATE: This is really a tax loss carry back to the profitable years.

by Calculated Risk on 11/14/2009 04:52:00 PM

From Barron's: Sam Zell: Too Soon for Dancing

Sam Zell ... said ... that the time isn't ripe because owners of office, retail and warehouse properties and their lenders are living in a dream world, believing that property prices will recover and vacancies will drop. ...

"Everybody is waiting for the Grave Dancer to come in, but at this point property owners won't tango," he told a gathering of prominent investors in downtown Chicago .

When Zell does start buying, he said, hotels are where he plans to play first ...

Zell has bought and sold CRE at the right time before.

However last year at the Milken Conference in Los Angeles, Zell thought CRE would be fine - from my notes:

Sam Zell started by saying we need to separate commercial from residential. Commercial will be fine in his view (not my view). ... Zell isn't talking about new construction (CRE), rather he is talking about prices for existing CRE. He feels there is too much global demand ("liquidity") for prices to fall too far - especially for Class-A buildings.

Watch what he does, not what he says!

by Calculated Risk on 11/14/2009 11:58:00 AM

The Pension Benefit Guaranty Corporation (PBGC) is the federal agency that guarantees pensions for 44 million Americans. The PBGC deficit doubled over the last six months to $22 billion ... but this is only just the beginning as the agency's potential exposure to future losses increased sharply.

From the Pension Benefit Guaranty Corporation (PBGC): PBGC Releases Annual Management Report for Fiscal Year 2009

The Pension Benefit Guaranty Corporation (PBGC) ended fiscal year 2009 with an overall deficit of $22 billion, according to the agency's Annual Management Report submitted to Congress today. The result compares with the $11.2 billion deficit recorded at the previous fiscal year-end on September 30, 2008.
...
The Annual Management Report classified 27 large pension plans with total underfunding of $1.64 billion as probable losses on the PBGC balance sheet. The report also shows that the agency's potential exposure to future pension losses from financially weak companies increased to about $168 billion from the $47 billion booked in fiscal year 2008.

"Exposure to possible future terminations means that we could face much higher deficits in the future," said Acting Director Vincent K. Snowbarger. "We won't fail to meet our obligations to retirees, but ultimately we will need a long-term solution to stabilize the pension insurance program."
emphasis added

With companies moving away from defined benefit plans, there will be fewer companies paying for insurance in the future - and the "long-term solution" will probably involve some sort of bailout.

by Calculated Risk on 11/14/2009 08:55:00 AM

This is amusing ...

From the Telegraph: FSA treats mortgage lenders like 'drug dealers', says CML chief

Hitting back at the idea that lenders are “evil” and reckless, [Council of Mortgage Lenders (CML) chief] Matthew Wyles said the industry should be allowed to treat its customers as adults, respecting their right to make their own decisions.

He said: “I have a sneaking suspicion that it’s the way that regulators see consumers – as wanton children who have a tendency to want what isn’t necessarily good for them, and for whom Nanny knows best.

“Increasingly, I also have the feeling that regulators see lenders and intermediaries as the sweetshop owners – or worse, the drug-dealers at the school gates – of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes.”

Speaking at the CML’s conference, he said the FSA was at risk of creating “the kind of moral hazard it wishes to avoid”, by making consumers feel they need to take no responsibility for their own decisions.

Mr Wyles added that the purpose of regulation should be to provide a sensible operating framework between businesses and their customers.

“It should not attempt to wrap consumers in cotton wool and make borrowing risk-free. That is not the nature of lending, and it is not the nature of borrowing,” he said.

There is nothing in the FSA proposals that would make borrowing "risk-free". That is absurd. And the consumers would still be responsible for all their own decisions.

The proposals are aimed at full disclosure, and to protect consumers from, uh, "drug dealers".

by Calculated Risk on 11/14/2009 12:23:00 AM

When Pacific National Bank of San Clemente was closed by regulators Friday, the TARP lost $4.12 million (ht Matt Padilla). Last week the TARP lost $298.7 million when San Francisco-based United Commercial Bank (UCBH Holdings) failed.

It looks like TARP losses are becoming a trend ... and, oh, the cost to the FDIC Deposit Insurance Fund (DIF) for the three bank failures today is estimated to be almost $1 billion.

Here is the updated Unofficial Problem Bank List

And the quote of the day via the WSJ: State Finance Directors Warn of More Trouble Ahead

"I looked as hard as I could at how states could declare bankruptcy," said Michael Genest, director of the California Department of Finance who is stepping down at the end of the year. "I literally looked at the federal constitution to see if there was a way for states to return to territory status."

And in economic news, the trade deficit increased in September. The major contributors to the increase were higher oil prices and more imports from China. Also - since the deficit was higher than expected - Q3 GDP will probably be revised down.