Bailout money to be used to pay Wall Street Bonuses

The massive government bailout given to Wall Street bankers will be used to pay billions of dollars in bonuses.

Looks like George and Hank got what they wanted - a failed bailout with Taxpayer dollars that will help the wealthy Wall Street bankers and do NOTHING for the other 99.9% of America. What a great country!

Wall Street banks in $70bn staff payout:

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government's cash has been poured in on the condition that excessive executive pay would be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany's Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have
fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP Morgan $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the total accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of August by 3% to $3.7bn.

Commercial Real Estate about to get much worse

Mervyn's is DONE and they are Filing Chapter 7:

HAYWARD (CBS 5) ― Department store chain Mervyns LLC will announce Friday that it is filing for chapter 7 bankruptcy protection — which means the Hayward-based retailer must shut its doors and liquidate its inventory, sources told CBS 5.

Over the summer, Mervyns had filed for chapter 11 protection from its creditors in U.S. bankruptcy court for the District of Delaware. The company said at the time that it planned to continue business as usual while it reorganized.

The privately-held retailer, which has languished for several years, operates about 175 locations in seven states - but primarily in California

Office vacancies rise and rents fall:

In some parts of the region, office buildings that once housed mortgage lenders and other housing-related businesses stand 20% empty, according to brokerage Cushman & Wakefield. Even in desirable Santa Monica, vacancies have almost doubled as companies have shunned the coastal area's still-pricey digs in favor of cheaper rents elsewhere in the region.

Altogether, Los Angeles County had a vacancy rate of 11.6% including sublease space at the end of the third quarter, up slightly from 9.5% a year ago."We are certainly going to see vacancy rates go up as we go into this economy," said Joe Vargas, regional manager of Cushman & Wakefield. "Rental rates will be slow to adjust down, but we are going to see it happen."

The situation is worse in Orange County, where office vacancy rates rose to 16.2% in the third quarter from 11% a year ago, spurred in large part by the closing of several lenders that specialized in subprime mortgage loans. In the buildings around John Wayne Airport, however, vacancy has surpassed 20%.

End of office party is coming:

The next shoe? After years of plunging residential property valuations, commercial real estate is heading into the danger zone as office vacancies rise, stores close and hotel bookings fall.

This could mean another body blow to already struggling financial institutions. Alan Todd, head of research on commercial-mortgage-backed bonds at J.P. Morgan Securities, projects commercial-property losses of as much as $250 billion over the next 10 years, or about 7% of the $3.4 trillion outstanding debt. That would rival the roughly 9% cumulative loss rate during the real-estate carnage of the early 1990s.

Something positive

From cnbc.com: (hat tip sm_landlord)

Bakersfield, California is known for three things: Buck Owens, Merle Haggard, and oil. All three were always pretty good at sad songs. But oil's boom over the last year has helped rejuvenate Bakersfield's fortunes.

It is one of the few places in America where the economy is growing, according to Moody's Economy.com. And even as oil prices come back down, they remain at levels elevated enough to unleash billions of dollars in new drilling in Bakersfield's Kern County, the largest oil-producing county in the lower 48.

This is helping offset an awful foreclosure problem in the area. The video clip has some interviews I did with a couple of local oilmen, Chad Hathaway, who runs his own operation, and Steve Black, the VP of Operations for Bonanza Creek Energy. These guys are not spending money based on $100 oil. As Chad Hathaway told me, "I base it on $30 oil."

3 posh projects go bust as Valley dreams bite the dust

Sacramento Bee has a story on the golf course community bust in the Valley

Sacbee.com:

In the Central Valley these days, the bankruptcies and foreclosures don't just affect individual homeowners.

They swallow entire developments – and the people who conceive them.

Winchester Country Club in rural Placer County, which went into foreclosure and sent legendary Sacramento highway contractor C.C. Myers into bankruptcy protection, isn't the only lavish golf-course housing development to fall on hard times. Three massive high-end projects in the San Joaquin Valley have fallen into bankruptcy proceedings in the past two years.

The three insolvencies symbolize the California housing bubble at its most extreme. Combined, they have cost lenders and investors tens of millions of dollars – and offer clues about the roots of the financial crisis that has gripped Wall Street and the world's economies.

President Bush in 2004

From the Idiot in charge: (hat tip bigpicture.com)

"One other thing I've done, is I've called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. There's a lot of people in this -- our communities around the country that deeply care about the issue of homeownership, and they've been responsive."

- George W. Bush, U.S. President, March 26, 2004.

Halloween 2008

What was this "insider" saying during the bubble years?

Before we look at today's article, I mean sales pitch from the long ago dis-credited REIC, lets discuss what this insider was saying during the bubble years.

I listened to Stan and Susan Ferguson's show during the bubble years and was absolutely disgusted with their mind numbing drivel. Every show started off with "its a great time to buy", "prices are not going any lower" and all of the other crap Realtors spew. Now we get another story from the local newspaper about how "now is the time to buy" (no really, this time).

Why doesn't the newspaper call these people out for what they said in the past? How about some real reporting instead of just parroting what they said? How many thousands of people have been foreclosed in our are because they listened to the horrible advice of a realtor?


Bakersfield.com:

Right time to buy a home? For some, definitely

Realtor Susan Ferguson of Coldwell Banker counsels clients to make sure they want to live in the home they would buy for five to 10 years. Gone are the days of buying a house and flipping it to make a quick profit.

The home you buy needs to be affordable, with payments you can comfortably manage.

“Prices right now are the best that they’ve been,” Ferguson said.

Instead of paying rent to somebody else, people with good credit and the resources for a down payment can “make that investment in yourself,” she said.

Latest bailout plan is to suspend fair-value accounting

Bloomberg:

Representative Todd Tiahrt, a Kansas Republican, said the House probably would have approved a $700 billion bailout of financial companies yesterday had the legislation included a suspension of fair-value accounting. The House rejected the measure 228-205.

It would have passed ``easily'' if the rules had been suspended, Tiahrt, who opposed the legislation, said today in a Bloomberg Television interview.

It looks like the Wall Street crooks are trying to change the accounting rules and they are using this bailout as an excuse. Unfortunately, it appears Congress is buying their bs hook, line and sinker!

Where were these crooks when the value of their assets was going up year after year? They were booking these increases in fair value to their bottom lines and paying out big bonuses based on these fair-value increases. Now that the assets are declining they want to stop this rule; so they don't miss out on another big bonus!

What is fair-value accounting?

For many years, standard setters have grappled with the issues associated with accounting for financial instruments. Decisions with regard to what valuation method should be applied have been difficult and in some cases controversial.

In 1994, FAS 115 was introduced into US GAAP as a partial solution. It required fair value accounting for many investments. In 2000, FAS 133 was introduced to improve the accounting model for derivatives by requiring fair value measurement. FAS 157, issued in 2007, established a common definition of fair value. Then FAS 159 expanded the ability of companies to elect fair value as their measurement basis for certain financial assets and liabilities.

Recently the US markets began experiencing significant illiquidity and volatility, creating conditions that made fair value assessments more controversial. The value of today’s innovative and complex financial instruments, such as derivatives, mortgage-backed securities and other structured financial products is subject to market illiquidity and volatility. Although fair value accounting could apply to other assets and liabilities, the focus of this piece is on financial instruments (particularly financial assets).

Implications of fair value accounting

While many agree that fair value yields a more relevant measure than historical cost, it is not perfect. Two controversies surround fair value measurements today: (1) the application of fair value accounting in illiquid markets, and (2) how and when modeling should be used as the method to determine fair value.

Fair value measurements in illiquid markets

Recent credit market conditions have resulted in large write-downs through the application of fair value measurements. Most of the charges have occurred within the banking and broker-dealer industries. Companies providing credit protection through credit default swaps on the under­lying asset, as opposed to insurance contracts, have been impacted by fair value measurements. Even though the default that would trigger protection may not have occurred, companies are required to recognize unrealized losses on the contract when the fair value of the underlying assets has significantly decreased. Also affected have been some corporations with investments in auction rate securities which suffered declines.

The requirements to use fair value measurements have been criticized for producing inaccurate results in the unusual market conditions recently experienced. Such results, it is argued, hurt the company in the long run. If a company must record losses in such an environment, critics claim, it signals bad news to investors that may ultimately be misleading. Therefore, they say, it is preferable to record only realized gains and losses.

In considering this controversy, it is important to recognize that accounting principles such as fair value are developed with the objective of providing information that will best serve the interests of investors, businesses and policy makers over the long term.

Summary

Balancing the factors, fair value still represents the most effective method to reflect the economic realities of market conditions. If fair value were suspended or replaced with some method based on historical cost, investors would be left to their own devices to determine the current value of these instruments—which would be less reliable and could delay any market recovery.

Although it has generated controversy, fair value continues to represent the best available methodology for determining and reporting the value of financial instruments. Markets naturally respond to financial information that fair value provides. The impacts of such measurements—whether positive or negative on a given company—are the results of market forces, not accounting methodologies. When market conditions result in volatility in values and earnings, investors benefit when companies transparently report on these circumstances and their impact on financial reporting.

A bailout solution we can live with

There are thousands of people who come to this site (I have no idea why, but thank you), I figure I better offer a solution to this mess that we can all live with. A solution that does not reward the crooks on Wall Street and helps Main Street.

Solutions that I can live with:

1) Raise the FDIC limit to $5 million on bank deposits and $5 million insurance on money market accounts.

2)Once #1 is in place and the risk of capital flight is gone, start shutting down the insolvent banks and fire the management. Lets not let some Zombie banks stay alive for the next 3-5 years and get this credit crisis behind us.

3)The economy is in a recession and will be in one for some time, lets get on to some Keynesian Economics and start investing in jobs and projects that will move us forward. We need to re-build our crumbling infrastructure and construct projects that will allow us to become energy independent (nuclear, wind and solar investments). If we are going to spend trillions of dollars, why waste it on buying garbage from insolvent banks? Why not invest the funds in the USA and on projects that will create millions of jobs?

Some common sense thinking on this horrible bailout plan.

From CNN.com:

Commentary: Bankruptcy, not bailout, is the right answer

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth

LMFAO!! Paulson is an idiot!

WSJ, May 7, 2008:

WASHINGTON -- Treasury Secretary Henry Paulson said U.S. financial markets are emerging from the credit crunch and that "the worst is likely to be behind us," marking possibly the most optimistic comments yet from the Bush administration on the financial crisis.

Mr. Paulson's comments, made in an interview Tuesday, reflect Treasury's view that the administration and the Fed have already taken steps necessary to quell the situation.

Bank Failure

This one is across the pond.

BBC:

Treasury to nationalise B&B bank

Troubled bank Bradford & Bingley is to be nationalised, the BBC has learned.

Officials from the Treasury and the Financial Services Authority (FSA) have been in talks with executives from the bank in a bid to secure its future.

BBC News business editor Robert Peston says the Treasury will almost instantaneously sell to a bank, or a number of banks.

The bank will be nationalised using special legislation the Treasury put
through when it took Northern Rock into public ownership earlier this year.

The measure is expected be announced on Sunday night or Monday morning.

No soup for you!

Does this mean these guys will need to learn the phrase "would you like to supersize that"?

Bakersfield.com:

State revokes real estate licenses of Crisp, Cole

David Crisp and Carl Cole’s real estate licenses have been revoked by state regulators.

The decision, released today by the California Department of Real Estate, ended license hearings held this summer regarding a mortgage fraud case against Crisp, Cole and several employees that was filed last September.

Bank Failure

BushCo can't stop the tsunami

Washington Mutual is DONE! :

On September 25, 2008, the banking operations of Washington Mutual, Inc -
Washington Mutual Bank, Henderson, NV and Washington Mutual Bank, FSB, Park
City, UT (Washington Mutual Bank) were sold in a transaction facilitated by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC).

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Another mogul not his paying bills on time and Supreme Bean closes

Like many developers in the current downturn, Moreland has experienced some financial difficulties of late:

Last Friday, Moreland’s Val Verde LLC defaulted on a $5.4 million construction loan against a 126-lot residential project on the south side of Hosking Avenue, east of South H Street. More than $3.1 million was in arrears as of Sept. 17, the default filing showed. The May 2007 loan was made by PFF Bank and Trust.

Last month, Moreland’s Monte Carlo LLC defaulted on a $15.4 million loan against northeast Bakersfield property near Highway 178 and Miramonte Drive.

In addition, liens and lawsuits from contractors and subcontractors have piled up against various projects in recent months, county filings show.

Workers: Supreme Bean closes, leaving them without paychecks :

Supreme Bean, a Bakersfield chain of drive-thru coffee stations acquired by a Texas company earlier this year, appears to have gone out of business.

It was unclear Monday whether the closure of the chain’s at least eight locations was permanent.

Employees were notified Saturday that they were not to return to work. When they asked how to obtain their final checks, one worker’s manager suggested she file for unemployment benefits.

Maybe Moreland and the owners of Supreme Bean can call up Bush/Paulson and see if they can get in on this bailout...free ponies for everyone.

Bank Failure!

Bushco can't stop the on coming train...

BANK FAILURE :

On September 19, 2008, Ameribank, Inc., Northfork, WV was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions

Privatize the profits and Socialize the losses

Today is the day whatever form of crony capitalism we had was lost. King Geroge Bush has now decided to Privatize all profits and Socalize the losses.

Where was Chimpy Bush during this run up? He was signing the praises of an "ownership society". Meanwhile the fat cats on Wall Street were being paid BILLIONS in bonuses.

Now we the American taxpayer must foot the bill for this mess, while the richest of the rich get to walk away with all the profits. $1 trillion to $2 trillion will be the price tag for the bailouts of Bear Stearns, Fannie Mae, Freddie Mac, AIG, actions by the Treasury and Fed and the cost to run and step up RTC2.

Welcome to the USSRA!

Commerical real estate market crumbling.

Where were these experts in this article when I was predicting a crumbling in the market? I know, they were cheer leading and talking their book. We are only in the early stages of this CRE bust. I have driven around town and there are many developments with zero or only a few tenants. As the Great Unwinding begins both the strong and weak hands will fold.

From the Bakersfield.com:

Victims of bad timing and economic conditions that have clobbered mom-and-pop store owners, Bakersfield’s independent retail market is struggling to an extent not seen since the 1990s.

The vacancy rate among Bakersfield’s standalone shopping centers has reached about 13 percent — double what it was a year to 18 months ago, according to Scott Underwood, a broker at Grubb & Ellis/ASU & Associates.

“It’s going to be a while before all this retail space is absorbed,” he said.

Just think...a few years ago everyone said we were nuts for thinking house prices were going to crash.

Defaults and foreclosures continue to grow...no bottom in sight

From Bakersfield.com:

One thousand properties foreclosed in Kern County during August, county figures show, the most ever for records going back to 1995

Default notices also hit a new all-time high. Lenders recorded 1,326 last month, numbers from the Kern County Recorder’s office show, reversing slight declines in June and July.

Tony Ansolabehere, the county’s assistant assessor, estimates there are currently about 5,600 foreclosed properties still owned by lenders in the county. Most are homes, he said.

“There’s a lot of inventory out there that needs to be absorbed,” Ansolabehere said.

Details at the County website

Friday Bank Failure

From the FDIC.com:

Regions Bank Acquires All the Deposits of Integrity Bank, Alpharetta, Georgia

Integrity Bank, Alpharetta, Georgia, with $1.1 billion in total assets and $974.0 million in total deposits as of June 30, 2008, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation was named receiver.

The FDIC Board of Directors today approved the assumption of all the deposits of Integrity Bank by Regions Bank, Birmingham, Alabama. All depositors of Integrity Bank, including those with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Regions Bank for the full amount of their deposits, and they will continue to have uninterrupted access to their deposits. Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.

The failed bank's five offices will reopen Tuesday, September 2nd, as branches of Regions Bank. However, for the time being, customers of both banks should use their existing branches until Regions Bank can fully integrate the deposit records of Integrity Bank.

Regions Bank has agreed to pay a total premium of 1.012 percent for the failed bank's deposits. In addition, Regions Bank will purchase approximately $34.4 million of Integrity Bank's assets, consisting of cash and cash equivalents. The FDIC will retain the remaining assets for later disposition.


The FDIC estimates that the cost to its Deposit Insurance Fund will be between $250 million and $350 million. Regions Bank's acquisition of all deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the failed bank's franchise.

Integrity Bank is the tenth FDIC-insured bank to fail this year, and the first in Georgia since NetBank in Alpharetta on September 28, 2007.

Bankers are dumb!

I wanted to highlight a post by Ichabod that was very interesting. It really shows how slow the banks are to react to this downturn:

Actually, the bank needs to wise up and TAKE the short sales! With our market going downward (it used to be the kiddie slope, now its triple diamond slope!) the banks will make MORE money on homes through short sales. I had a home listed with a buyer wiling to pay $204,000 in April of '07- the bank wouldn't halt the trustee sale. They are now trying to sell it REO (after putting a town of money into the house for new carpet, paint, plus the monthly utility bills, hello?) for $100,000 LESS!

I had another house listed where the owner owed $254,000. I was trying to short sale the house, I had a buyer willing to pay $180,000 CASH, the bank said they refused to look at offers less than $200K. The house foreclosed (oh, and a transient broke in, flooded the bathroom, trashed the place) and the house sold REO for LESS THAN $120K!!! The funny thing is, the bank never even listed it for $200K!

One more boring example: I had a house listed For under $200K and had a buyer willing to pay $150K- the bank demanded $175K. The buyer was even willing to pay $175K if the bank would simply compensate him for the missing appliances- the bank refused, and foreclosed on the house. The bank then listed it for $134K! They never even tried to get $175 or even $150! It is still on the market for less than $100K!In conclusion- short sales are the best bet to a bank- but they have so much red tape, they are losing so much more than they really have to.

Will Crisp be homeless?

Oh how the phony rich have fallen:

The Southern Oaks house where David Crisp has been staying in recent months — after the once high-flying Realtor lost all of his own properties to foreclosure — fell into default Tuesday, county records show.

The property at 9808 Fitzgerald Drive is owned by real estate broker David “Ty” Stewart.

“I’d like to keep it if I could,” Stewart said, “so I don’t have to evict a tenant who can’t pay rent.” Monthly payments are $4,500, Stewart said, and the interest rate is 12.5 percent.

The house is also worth $200,000 less than Stewart bought it for, he said,
because of the declining market.

“I’m just a victim” of the down economy “who’s struggling like everyone
else,” he said.

Victim? Whatever!

Maybe a victim of greed and hubris?

Weight Loss, Defaults and Nurseries

Weight Loss centers trim the fat?:

Both of Bakersfield’s L.A. Weight Loss Centers appear to be closing amid nationwide reports that the Pennsylvania-based company is finished.

The east Bakersfield store at 2625 Mount Vernon Ave. is full of packed boxes. A handwritten sign says it is open three days a week. A manager was not available to comment.

Another handwritten sign on the door of the southwest store at 5113 Ming Ave. says it closed in July. No customer information was posted.

Options wilt as some nurseries close

Two perennial Bakersfield nurseries — businesses once hearty enough to pass from one generation to the next — may be going the way of last year’s petunias

Robby’s Nursery & Landscape Service, founded in 1962, and Cooper’s Gardens, another independent around since 1941, appear to have succumbed to economic and competitive maladies spreading among mom-and-pops industrywide.

Both nurseries’ owners pointed to the housing slump, tighter consumer spending and pressure from big-box retailers. They also blamed specific local factors: brutal weather, commercial property values that encourage selling out and shifting shopper habits.

Las Palmas Nursery on Coffee Road also closed recently. The owner could not be reached for comment

Another real estate "mogul" can't pay his bills on time:

Two residential tracts in Rosedale defaulted on more than $29.5 million worth of loans Friday, county records show. The abandoned construction sites are both on the north side of Meacham Road, near Heath Road.

One is the southern half of the Tallus Ranch development at the northeast intersection of Heath and Meacham Road. There, Modesto developer John Carter Williams defaulted on a $19.5 million loan from Colonial Bank N.A. made in June 2005. As of Thursday, the developer was behind on more than $10.5 million worth of payments, the default filing showed.

The second site is slightly west, at the northeast corner of Meacham and Wegis Avenue. The 116-acre property is bounded by Hageman Road on the north. There, Williams defaulted on a $10.3 million construction loan from Colonial Bank made in March 2006. More than $3.7 million was in arrears as of Thursday.

Both loans were made to Williams through his company, J.C. Williams Co.

More trouble for the City in the Hills and Ca home prices crash even more

Bakersfield.com:

Construction at two tracts in northeast Bakersfield’s City in the Hills development has been halted by one of the builders there, K. Hovnanian Homes, a company official said.

The Rosemary Arbor and Lantana’s Edge neighborhoods are on hold, said Joseph Manisco, vice president and chief legal officer at the company’s Southern California regional office in Ontario. Manisco said the tracts weren’t profitable.

DQNews.com:

"What we're looking at is a fire sale of properties in newer affordable neighborhoods that were bought or refinanced near the price peak with lousy mortgages.

The median price paid for a Southland home was $348,000 last month, down 2.0 percent from $355,000 in June and down 31.1 percent from $505,000 for July 2007. That peak of $505,000 was reached in March, April, May and July of last year.

Orange County down 28% YOY

Riverside County down 34.8% YOY

San Bernardino County down 35.2% YOY

City in the Hills defaults and others.

This is getting ugly...I might need to move out of town...maybe we will have a grapes of wrath II, except this time we go back to Oklahoma...

From the Bakersfield Californian:

A trio of large developments in northeast Bakersfield have defaulted — two of them from the master developer of the City in the Hills project, county records show, continuing to a string of such troubles in Kern. More than $26 million was past due on the three loans.

Here are details:

Three loans made by Indymac Bank to subsidiaries of City in the Hills’ master developer defaulted Thursday.

• A $19.8 million construction loan to S & J Alfalfa Inc. for about a square mile at the southeast corner of Highway 178 and Morning Drive. More than $9.7 million was owed as of July 29, the default notice said. The loan was made in December 2006.

• A $9.8 million loan to SKY 21 LLC for about 3/4 of a square mile on the east side of Masterson Street, at the southeast corner of its intersection with 178. More than $7.4 million was in arrears as of July 29 on the loan made in October 2006.

• A $17.9 million construction loan to Sycamore Villas Development LLC. More than $1.9 million was owed as of July 29. The loan was made in January 2007. All loans were signed by then-president Dennis A. Harris, records show. Indymac, based in Pasadena, was seized by federal regulators in July. Last month, another related company, MVB Ventures LLC, defaulted on a tract in City in the Hills known as Juliana’s Garden. Los Angeles-based Mountain View Bravo LLC is the master developer of nearby City in the Hills, on the north side of 178.

• Another northeast parcel defaulted Wednesday. Monte Carlo LLC defaulted on a $15.4 million construction loan from County Bank in Merced. Developer Terry L. Moreland owed more than $9.1 million as of Aug. 12 for the December 2006 loan against 105 acres near the northeast intersection of 178 and Alfred Harrell Highway
Federal regulators last month entered into a written agreement with County Bank requiring better lending oversight and disclosure of problem loans.

• In southwest Bakersfield, the Destefani family defaulted last week on a $3.6 million loan from Bakersfield-based A-C Electric Co. on about 143 acres at the northeast corner of Taft Highway and Old River Road. The area has plans for residential and commercial development, though the lot is currently agricultural land. More than $2 million was owed as of July 31, the default notice showed.

I assume the Nascar race track is dead now that the Destefani family is defaulting on their debts and begging for investors?

California's unemployment rate at a 12 year high

As expected...California's unemployment rate just hit a 12 year high.

From the La Times.com:

California's unemployment rate in July rose to 7.3%, its highest level in 12 years as many areas of the economy shed jobs.

The state's nonfarm payroll shrunk by 14,900 jobs last month, the California Employment Development Department reported today. The unemployment rate increased by three-tenths of a percentage point from a revised 7% for June and now stands almost two full percentages points higher than the 5.4% it was at a year ago.

The unemployment rate was worse in the Inland Empire, rising to 8.9% in July from a revised 8.1% in June. Orange County fared better, with the unemployment rate reaching 5.7% in July from a revised 5.3% the previous month.

Since July 2007, California has lost a total of payroll 75,900 jobs -- down to 15.1 million.

The steadily worsening unemployment is evidence that California's economic weakness is spreading from the hard-hit construction, real estate and financial sectors to other once-healthy fields, said Howard Roth, chief economist for the state Department of Finance."

The state's economy continues to sputter, and it looks like the job losses are getting distributed to manufacturing and retail," Roth said. "It's not just housing but it's also high energy and food prices that are squeezing consumers."

The combination of a rising unemployment rate plus soaring inflation - the so-called Misery Index - is making life painful for even working Californians, said Stephen Levy, chief economist and executive director of the Center for Continuing Study of the California Economy in Palo Alto.

The index topped 12% in July, its highest point in 15 years, Levy said

Abolish the Fed!

Alan Greenspan came out today and called his 4th or 5th bottom. Why should we belive him or anyone else at the Fed? This is what Greeny said in 2006:

Former Federal Reserve Chairman Alan Greenspan said the "worst may well be
over" for the U.S. housing industry that's suffering its worst downturn in
more than a decade. I suspect that we are coming to the end of this
downtrend, as applications for new mortgages, the most important series, have
flattened out." - October 2006

Lets flashback to what the head housing cheerleader at the Fed(who worked for the NAR and MBA) said in 2006 in Time Magazine:

"My view is that the run-up of home prices has been driven by the fundamentals,"
says Dick Peach, an economist with the Federal Reserve Bank of New York. He
figures we'll have a soft landing"

Don't believe the liars and crooks at the Fed!

Commercial vacancy rate to soar

From Dow Jones Newswire:

After 113-years in business, Whitehall Jewelers said today its 373 stores in 39 states will be liquidated following the company's inability to find a buyer or drum up fresh equity after filing for Chapter 11 in late June.

"We're experiencing the most active period of liquidation sales in 10 years, due to a combination of consumer cutbacks on peripheral pending and tightening by retail lenders," said James Schaye, CEO of retail liquidator Hudson Capital Partners.

As part of a joint venture Hudson Capital Partners, Great American Group, Silverman Jeweler Consultants and Gordon Brothers Group will manage a court-ordered bankruptcy liquidation sale of Whitehall.

The sale, which will begin Aug.13, was ordered by the bankruptcy court as a result of Whitehall's Chapter 11 filing in June.

Inventory will be liquidated at below market prices, in a sale that is expected to last approximately four and a half months. Merchandise to be sold will include a selection of diamonds, gold, precious and semi-precious jewelry and watches.

Today a judge also approved Whitehall Jewelers Holdings Inc.'s request to employ a financial consulting firm over objections by a federal monitor who claimed that the move would represent a conflict of interest.

Company Locator:

Bakersfield Lundstrom201 Valley Plaza CenterBakersfield, CA
Bakersfield Whitehall2701 Ming AvenueBakersfield, CA

Look for more commerical space to open up as the economy begins to slow. If you have driven around town you already know there are entire strip centers that are 80-100% vacant. As more businesses go bust, I expect more malls & strip centers to receive foreclosure notices.

Recall this post from the local perma-bulls who made some comments they might regret.

When will we hit bottom? Open thread.

I have received numerous emails on when I think we will hit the bottom of this housing bust. Right now prices have gone from a peak of $315,000 (median) to $190,000 (median) that is a drop of 40%. Add in inflation and selling expenses and the numbers look even worse. Remember all those realtors telling us in 2004-2007 that "now is the time to buy". Thanks for the good advice!


Questions for the readers -

How much lower will prices go?

When will we hit bottom?



(I am going to turn off the comment moderation for this)


Update:

Central Valley Business:

Pre-foreclosure filings set record in July

Pre-foreclosures hit record highs in July 2008 both nationally and in 14 states and the District of Columbia according to new figures from Foreclosures.com Inc., a Fair Oaks-based foreclosure information company.

“So far this year, more than 1.25 million Americans faced the risk of loosing their homes to foreclosure, up 7.3 percent from June 2008, and up 88.62 percent from July 2007,” says Alexis McGee, president of Foreclosures.com