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It is among the cities most heavily indebted and at risk of defaulting on its loans, according to Nomura Holdings Inc By Enda Curran - Jun 10, 2015, 20:21:07 Under a plan approved by China's State Council yesterday, Wenzhou will develop more types of bonds and allow trading of unlisted equities, technology and cultural products, according to a statement on the government’s website. Wenzhou is among the Chinese cities most heavily indebted and at risk of defaulting on its loans, according to Nomura Holdings Inc. In a new analysis described as one of the first of its kind, Nomura has dug into China's lending trail to see which cities and provinces are creaking under debt. They examined credit risks covering 30 provincial authorities and 265 cities. The report comes as bad loans and defaults in China tick higher and local governments struggle to meet repayments after years of binge borrowing to build roads and bridges and keep the economy growing. Mizuho Securities Asia estimates China's regional liabilities have now reached 25 trillion yuan ($4 trillion), bigger than Germany’s economy. Here's what Nomura's research found: the highest default risk is concentrated in the coastal and western provinces. Central China fares better. The danger provinces include Qinghai, Zhejiang, Liaoning, Hainan, Jiangsu, Fujian, Guizhou, Gansu, Chongqing and Heilongjiang. "Assessing the geographic distribution of risks is becoming increasingly important, particularly as China’s bond market is on the verge of explosive growth," Nomura analysts led by Yang Zhao wrote in the report. Among the cities, about 60 so-called third and fourth-tier cities carry the highest risk. These include: Datong in Shanxi province, followed by Sanya in Hainan, Wulanchabu in Inner Mongolia, Ganzhou and Shangrao in Jiangxi, Lishui in Zhejiang, Wenzhou in Zhejiang and Bazhong in Sichuan. First-tier cities like Beijing and Shanghai fared better in the analysis, helped by stronger economic fundamentals. Nomura used 13 indicators that cover four risk areas: property market, fiscal, financial and economic fundamentals. China isn't the only country with heavily indebted cities or state governments. In the U.S., Detroit and Stockton, California both emerged from bankruptcy in the past year. It's the pace of Chinese borrowing and a lack of transparency around how much debt there is that has investors worried. Nomura estimates that China's local government bond market may balloon from around 1.2 trillion yuan to 12 trillion yuan by 2020. A string of defaults would gum up the lending system, bring economic growth to a halt and runs the risk of social unrest. So the idea is to keep the credit flowing. http://bloom.bg/1cMoOph Sent from my iPhone using Tapatalk

http://www.financialpost.com/story.html?id=2413317

Foreclosures, immigration linked in report Areas hit hardest have high percentage of foreign-born heads of household By Timothy Pratt (contact) Wed, May 13, 2009 (2 a.m.) Las vegas Sun Counties with high foreclosure rates also tend to have large immigrant populations, according to a Pew Hispanic Center report released Tuesday. The study ranked Clark County sixth nationwide in foreclosure rates last year with 8.9 percent of the valley’s houses in the courts. Nearly 1 in 4 heads of household locally were foreign-born, much higher than the national rate of 4.7 percent. Half of those immigrants were Hispanic. But the study’s main author, Rakesh Kochhar, cautioned that focusing on those factors can lead to a “chicken and egg situation.” “The two things appear together, but is there a causal relationship? Not necessarily,” he said. Kochhar noted that jobs building houses drew many immigrants to the Las Vegas Valley in the past two decades. An unknown number of those workers bought homes. The report also shows that Hispanics, blacks and minorities in general entered subprime mortgages at higher rates than the rest of the population. Nationwide, for example, 27.6 percent of home loans to Hispanics in 2007 were high-priced and a third of loans to blacks were in the same category. Only 1 in 10 loans to whites were high-priced. So areas with higher shares of minorities tend to have higher numbers of homeowners with loans at risk of entering foreclosure. Kochhar’s report, titled “Through Boom and Bust: Minorities, Immigrants and Homeownership,” shows that counties with high foreclosure rates exhibit other factors, including rising unemployment rates and sinking home values. Clark County’s unemployment rate for March was 10.4 percent, tenth-highest among major metropolitan areas nationwide. The Pew report looks at unemployment rates only for 2008 as a whole, which in Clark County was 6.5 percent. The construction sector is among the hardest-hit in terms of job loss. And home values in Las Vegas dropped 31.7 percent in 2008, second most in the nation behind Phoenix, according to a recent Standard & Poor’s report. So there are several factors related to high concentrations of immigrants, each somehow related to another. As Kochhar wrote, “the presence of immigrants in a county may simply signal the effects of a boom-and-bust cycle that has raised foreclosure rates for all residents in that county.” Ian Hirsch, who manages Fortress Credit Services and has taken on hundreds of clients seeking to adjust their mortgages to avoid or get out of foreclosure, said the report’s conclusions match his on-the-ground experience. “It doesn’t surprise me,” Hirsch said. He pointed to the dozens of minority and immigrant clients he has seen who say, “This is not what I was told I was getting into” when they come to his office for help. The adjustable rates in their mortgages and the lack of financial assets they brought to the table lead many of those clients to foreclosure, he added. Some of those clients worked in the construction industry, building the homes that came with the boom. Now, Hirsch noted, with the construction of CityCenter and other large commercial projects nearing an end, unemployment may continue to rise in the coming months. This could bring more foreclosures and failed businesses. “Unfortunately,” Hirsch said, “I think it’s going to get worse before it gets better.”

By Sarah Mulholland April 23 (Bloomberg) -- Loan extensions will likely be insufficient to prevent a wave of commercial real-estate defaults as borrowers struggle to refinance debt amid tighter lending standards and plummeting property values, according to Deutsche Bank AG analysts. As much as $1 trillion in commercial mortgages maturing during the next decade will be unable to secure financing without significant cash injections from property owners, according to the Deutsche analysts. At least two-thirds, or $410 billion, of commercial mortgages bundled and sold as bonds coming due between 2009 and 2018 will need additional cash infusions to refinance, the analysts led by Richard Parkus in New York said in a report yesterday. Many commercial real-estate borrowers will be unwilling or unable to put additional equity into the properties, and will have to negotiate to extend the loan or walk away from the property, the analysts said. The volume of potentially troubled loans and declining real-estate values will make loan extensions harder to obtain. “The scale of this issue is virtually unprecedented in commercial real estate, and its impact is likely to dominate the industry for the better part of a decade,” the analysts said. Many dismiss the seriousness of the problem by assuming lenders will agree to extend maturities, according to the report. That approach might work if the amount of loans that failed to refinance was relatively small, but the percentage is likely to be 60 to 70 percent, the analysts said. The overhang of distressed real estate will hinder price appreciation, making lenders less likely to extend mortgages with the expectation that the value of the property will rise enough to qualify for refinancing, the analysts said. Loans made in 2007 when prices peaked and underwriting standards bottomed will face the biggest hurdles to refinancing. Roughly 80 percent of commercial mortgages packaged into bonds in 2007 wouldn’t qualify for refinancing, according to Deutsche data.

SAN FRANCISCO (MarketWatch) -- The credit crunch may only be in its early stages and a bigger contraction in lending in coming months could have "serious implications" for the U.S. economy, Standard & Poor's Rating Services said Friday. While politicians and others have complained that banks aren't lending, the data on credit outstanding credit in the U.S. only tenuously supports this idea, the rating agency said. See related story. "What's behind the apparent difference between perception and reality?" Standard & Poor's credit analyst Tanya Azarchs said. "It may be that, while growth in overall credit was positive through at least third-quarter 2008, it has risen at a slower pace than at any time since 1945 -- far below the 8%-10% rate in most years." Banks are replacing loans as they mature, but there's little net new loan growth, she noted. "That could mean that the slowdown in lending is just an opening act, and a true credit crunch may yet take the stage," Azarchs warned. Banks are making fewer and fewer commitments to lend, and new issues of bonds and securitized assets have slowed to a trickle, the analyst said. "This portends a contraction in total credit available in the coming months," she wrote. "Since this lack of lending may have serious implications for the economy, the U.S. government has been devising policies that would encourage banks to lend." Given such pressure, S&P is focusing more on whether banks are free to make loans they think are prudent and on the health of the overall economy, Azarchs said. http://www.marketwatch.com/news/story/Credit-crunch-may-only-have/story.aspx?guid={4F0DA616-A789-49A7-9EFE-A65C5A0986F9}

Twenty-five people at the heart of the meltdown ... * Julia Finch, with additional reporting by Andrew Clark and David Teather The Guardian, Monday 26 January 2009 The worst economic turmoil since the Great Depression is not a natural phenomenon but a man-made disaster in which we all played a part. In the second part of a week-long series looking behind the slump, Guardian City editor Julia Finch picks out the individuals who have led us into the current crisis Greenspan Testifies At Senate Hearing On Oil Dependence Former Federal Reserve chairman Alan Greenspan, who backed sub-prime lending. Alan Greenspan, chairman of US Federal Reserve 1987- 2006 Only a couple of years ago the long-serving chairman of the Fed, a committed free marketeer who had steered the US economy through crises ranging from the 1987 stockmarket collapse through to the aftermath of the 9/11 attacks, was lauded with star status, named the "oracle" and "the maestro". Now he is viewed as one of those most culpable for the crisis. He is blamed for allowing the housing bubble to develop as a result of his low interest rates and lack of regulation in mortgage lending. He backed sub-prime lending and urged homebuyers to swap fixed-rate mortgages for variable rate deals, which left borrowers unable to pay when interest rates rose. For many years, Greenspan also defended the booming derivatives business, which barely existed when he took over the Fed, but which mushroomed from $100tn in 2002 to more than $500tn five years later. Billionaires George Soros and Warren Buffett might have been extremely worried about these complex products - Soros avoided them because he didn't "really understand how they work" and Buffett famously described them as "financial weapons of mass destruction" - but Greenspan did all he could to protect the market from what he believed was unnecessary regulation. In 2003 he told the Senate banking committee: "Derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so". In recent months, however, he has admitted at least some of his long-held beliefs have turned out to be incorrect - not least that free markets would handle the risks involved, that too much regulation would damage Wall Street and that, ultimately, banks would always put the protection of their shareholders first. He has described the current financial crisis as "the type ... that comes along only once in a century" and last autumn said the fact that the banks had played fast and loose with shareholders' equity had left him "in a state of shocked disbelief". Mervyn King, governor of the Bank of England Mervyn King When Mervyn King settled his feet under the desk in his Threadneedle Street office, the UK economy was motoring along just nicely: GDP was growing at 3% and inflation was just 1.3%. Chairing his first meeting of the Bank's monetary policy committee (MPC), interest rates were cut to a post-war low of 3.5%. His ambition was that monetary policy decision-making should become "boring". How we would all like it to become boring now. When the crunch first took hold, the Aston Villa-supporting governor insisted it was not about to become an international crisis. In the first weeks of the crunch he refused to pump cash into the financial system and insisted that "moral hazard" meant that some banks should not be bailed out. The Treasury select committee has said King should have been "more pro-active". King's MPC should have realised there was a housing bubble developing and taken action to damp it down and, more recently, the committee should have seen the recession coming and cut interest rates far faster than it did. Politicians Bill Clinton, former US president Clinton shares at least some of the blame for the current financial chaos. He beefed up the 1977 Community Reinvestment Act to force mortgage lenders to relax their rules to allow more socially disadvantaged borrowers to qualify for home loans. In 1999 Clinton repealed the Glass-Steagall Act, which ensured a complete separation between commercial banks, which accept deposits, and investment banks, which invest and take risks. The move prompted the era of the superbank and primed the sub-prime pump. The year before the repeal sub-prime loans were just 5% of all mortgage lending. By the time the credit crunch blew up it was approaching 30%. Gordon Brown, prime minister The British prime minister seems to have been completely dazzled by the movers and shakers in the Square Mile, putting the City's interests ahead of other parts of the economy, such as manufacturers. He backed "light touch" regulation and a low-tax regime for the thousands of non-domiciled foreign bankers working in London and for the private equity business. George W Bush, former US president Clinton might have started the sub-prime ball rolling, but the Bush administration certainly did little to put the brakes on the vast amount of mortgage cash being lent to "Ninja" (No income, no job applicants) borrowers who could not afford them. Neither did he rein back Wall Street with regulation (although the government did pass the Sarbanes-Oxley Act in the wake of the Enron scandal). Senator Phil Gramm Former US senator from Texas, free market advocate with a PhD in economics who fought long and hard for financial deregulation. His work, encouraged by Clinton's administration, allowed the explosive growth of derivatives, including credit swaps. In 2001, he told a Senate debate: "Some people look at sub-prime lending and see evil. I look at sub-prime lending and I see the American dream in action." According to the New York Times, federal records show that from 1989 to 2002 he was the top recipient of campaign contributions from commercial banks and in the top five for donations from Wall Street. At an April 2000 Senate hearing after a visit to New York, he said: "When I am on Wall Street and I realise that that's the very nerve centre of American capitalism and I realise what capitalism has done for the working people of America, to me that's a holy place." He eventually left Capitol Hill to work for UBS as an investment banker. Wall Street/Bankers Abby Cohen, Goldman Sachs chief US strategist The "perpetual bull". Once rated one of the most powerful women in the US. But so wrong, so often. She failed to see previous share price crashes and was famous for her upwards forecasts. Replaced last March. Kathleen Corbet, former CEO, Standard & Poor's The credit-rating agencies were widely attacked for failing to warn of the risks posed by mortgage-backed securities. Kathleen Corbet ran the largest of the big three agencies, Standard & Poor's, and quit in August 2007, amid a hail of criticism. The agencies have been accused of acting as cheerleaders, assigning the top AAA rating to collateralised debt obligations, the often incomprehensible mortgage-backed securities that turned toxic. The industry argues it did its best with the information available. Corbet said her decision to leave the agency had been "long planned" and denied that she had been put under any pressure to quit. She kept a relatively low profile and had been hired to run S&P in 2004 from the investment firm Alliance Capital Management. Investigations by the Securities and Exchange Commission and the New York attorney general among others have focused on whether the agencies are compromised by earning fees from the banks that issue the debt they rate. The reputation of the industry was savaged by a blistering report by the SEC that contained dozens of internal emails that suggested they had betrayed investors' trust. "Let's hope we are all wealthy and retired by the time this house of cards falters," one unnamed S&P analyst wrote. In another, an S&P employee wrote: "It could be structured by cows and we would rate it." "Hank" Greenberg, AIG insurance group Now aged 83, Hank - AKA Maurice - was the boss of AIG. He built the business into the world's biggest insurer. AIG had a vast business in credit default swaps and therefore a huge exposure to a residential mortgage crisis. When AIG's own credit-rating was cut, it faced a liquidity crisis and needed an $85bn (£47bn then) bail out from the US government to avoid collapse and avert the crisis its collapse would have caused. It later needed many more billions from the US treasury and the Fed, but that did not stop senior AIG executives taking themselves off for a few lavish trips, including a $444,000 golf and spa retreat in California and an $86,000 hunting expedition to England. "Have you heard of anything more outrageous?" said Elijah Cummings, a Democratic congressman from Maryland. "They were getting their manicures, their facials, pedicures, massages while the American people were footing the bill." Andy Hornby, former HBOS boss So highly respected, so admired and so clever - top of his 800-strong class at Harvard - but it was his strategy, adopted from the Bank of Scotland when it merged with Halifax, that got HBOS in the trouble it is now. Who would have thought that the mighty Halifax could be brought to its knees and teeter on the verge of nationalisation? Sir Fred Goodwin, former RBS boss Once one of Gordon Brown's favourite businessmen, now the prime minister says he is "angry" with the man dubbed "Fred the Shred" for his strategy at Royal Bank of Scotland, which has left the bank staring at a £28bn loss and 70% owned by the government. The losses will reflect vast lending to businesses that cannot repay and write-downs on acquisitions masterminded by Goodwin stretching back years. Steve Crawshaw, former B&B boss Once upon a time Bradford & Bingley was a rather boring building society, which used two men in bowler hats to signify their sensible and trustworthy approach. In 2004 the affable Crawshaw took over. He closed down B&B businesses, cut staff numbers by half and turned the B&B into a specialist in buy-to-let loans and self-certified mortgages - also called "liar loans" because applicants did not have to prove a regular income. The business broke down when the wholesale money market collapsed and B&B's borrowers fell quickly into debt. Crawshaw denied a rights issue was on its way weeks before he asked shareholders for £300m. Eventually, B&B had to be nationalised. Crawshaw, however, had left the bridge a few weeks earlier as a result of heart problems. He has a £1.8m pension pot. Adam Applegarth, former Northern Rock boss Applegarth had such big ambitions. But the business model just collapsed when the credit crunch hit. Luckily for Applegarth, he walked away with a wheelbarrow of cash to ease the pain of his failure, and spent the summer playing cricket. Dick Fuld, Lehman Brothers chief executive The credit crunch had been rumbling on for more than a year but Lehman Brothers' collapse in September was to have a catastrophic impact on confidence. Richard Fuld, chief executive, later told Congress he was bewildered the US government had not saved the bank when it had helped secure Bear Stearns and the insurer AIG. He also blamed short-sellers. Bitter workers at Lehman pointed the finger at Fuld. A former bond trader known as "the Gorilla", Fuld had been with Lehman for decades and steered it through tough times. But just before the bank went bust he had failed to secure a deal to sell a large stake to the Korea Development Bank and most likely prevent its collapse. Fuld encouraged risk-taking and Lehman was still investing heavily in property at the top of the market. Facing a grilling on Capitol Hill, he was asked whether it was fair that he earned $500m over eight years. He demurred; the figure, he said, was closer to $300m. Ralph Cioffi and Matthew Tannin Cioffi (pictured) and Tannin were Bear Stearns bankers recently indicted for fraud over the collapse of two hedge funds last year, which was one of the triggers of the credit crunch. They are accused of lying to investors about the amount of money they were putting into sub-prime, and of quietly withdrawing their own funds when times got tough. Lewis Ranieri The "godfather" of mortgage finance, who pioneered mortgage-backed bonds in the 1980s and immortalised in Liar's Poker. Famous for saying that "mortgages are math", Ranieri created collateralised pools of mortgages. In 2004 Business Week ranked him alongside names such as Bill Gates and Steve Jobs as one of the greatest innovators of the past 75 years. Ranieri did warn in 2006 of the risks from the breakneck growth of mortgage securitisation. Nevertheless, his Texas-based Franklin Bank Corp went bust in November due to the credit crunch. Joseph Cassano, AIG Financial Products Cassano ran the AIG team that sold credit default swaps in London, and in effect bankrupted the world's biggest insurance company, forcing the US government to stump up billions in aid. Cassano, who lives in a townhouse near Harrods in Knightsbridge, earned 30 cents for every dollar of profit his financial products generated - or about £280m. He was fired after the division lost $11bn, but stayed on as a $1m-a-month consultant. "It seems he single-handedly brought AIG to its knees," said John Sarbanes, a Democratic congressman. Chuck Prince, former Citi boss A lawyer by training, Prince had built Citi into the biggest bank in the world, with a sprawling structure that covered investment banking, high-street banking and wealthy management for the richest clients. When profits went into reverse in 2007, he insisted it was just a hiccup, but he was forced out after multibillion-dollar losses on sub-prime business started to surface. He received about $140m to ease his pain. Angelo Mozilo, Countrywide Financial Known as "the orange one" for his luminous tan, Mozilo was the chairman and chief executive of the biggest American sub-prime mortgage lender, which was saved from bankruptcy by Bank of America. BoA recently paid billions to settle investigations by various attorney generals for Countrywide's mis-selling of risky loans to thousands who could not afford them. The company ran a "VIP programme" that provided loans on favourable terms to influential figures including Christopher Dodd, chairman of the Senate banking committee, the heads of the federal-backed mortgage lenders Fannie Mae and Freddie Mac, and former assistant secretary of state Richard Holbrooke. Stan O'Neal, former boss of Merrill Lynch O'Neal became one of the highest-profile casualties of the credit crunch when he lost the confidence of the bank's board in late 2007. When he was appointed to the top job four years earlier, O'Neal, the first African-American to run a Wall Street firm, had pledged to shed the bank's conservative image. Shortly before he quit, the bank admitted to nearly $8bn of exposure to bad debts, as bets in the property and credit markets turned sour. Merrill was forced into the arms of Bank of America less than a year later. Jimmy Cayne, former Bear Stearns boss The chairman of the Wall Street firm Bear Stearns famously continued to play in a bridge tournament in Detroit even as the firm fell into crisis. Confidence in the bank evaporated after the collapse of two of its hedge funds and massive write-downs from losses related to the home loans industry. It was bought for a knock down price by JP Morgan Chase in March. Cayne sold his stake in the firm after the JP Morgan bid emerged, making $60m. Such was the anger directed towards Cayne that the US media reported that he had been forced to hire a bodyguard. A one-time scrap-iron salesman, Cayne joined Bear Stearns in 1969 and became one of the firm's top brokers, taking over as chief executive in 1993. Others Christopher Dodd, chairman, Senate banking committee (Democrat) Consistently resisted efforts to tighten regulation on the mortgage finance firms Fannie Mae and Freddie Mac. He pushed to broaden their role to dodgier mortgages in an effort to help home ownership for the poor. Received $165,000 in donations from Fannie and Freddie from 1989 to 2008, more than anyone else in Congress. Geir Haarde, Icelandic prime minister He announced on Friday that he would step down and call an early election in May, after violent anti-government protests fuelled by his handling of the financial crisis. Last October Iceland's three biggest commercial banks collapsed under billions of dollars of debts. The country was forced to borrow $2.1bn from the International Monetary Fund and take loans from several European countries. Announcing his resignation, Haarde said he had throat cancer. The American public There's no escaping the fact: politicians might have teed up the financial system and failed to police it properly and Wall Street's greedy bankers might have got carried away with the riches they could generate, but if millions of Americans had just realised they were borrowing more than they could repay then we would not be in this mess. The British public got just as carried away. We are the credit junkies of Europe and many of our problems could easily have been avoided if we had been more sensible and just said no. John Tiner, FSA chief executive, 2003-07 No one can fault 51-year-old Tiner's timing: the financial services expert took over as the City's chief regulator in 2003, just as the bear market which followed the dotcom crash came to an end, and stepped down from the Financial Services Authority in July 2007 - just a few weeks before the credit crunch took hold. He presided over the FSA when the so-called "light touch" regulation was put in place. It was Tiner who agreed that banks could make up their own minds about how much capital they needed to hoard to cover their risks. And it was on his watch that Northern Rock got so carried away with the wholesale money markets and 130% mortgages. When the FSA finally got around to investigating its own part in the Rock's downfall, it was a catalogue of errors and omissions. In short, the FSA had been asleep at the wheel while Northern Rock racked up ever bigger risks. An accountant by training, with a penchant for Porsches and proud owner of the personalised number plate T1NER, the former FSA boss has since been recruited by the financial entrepreneur Clive Cowdery to run a newly floated business that aims to buy up financial businesses laid low by the credit crunch. Tiner will be chief executive but, unusually, will not be on the board, so his pay and bonuses will not be made public. ... and six more who saw it coming Andrew Lahde A hedge fund boss who quit the industry in October thanking "stupid" traders and "idiots" for making him rich. He made millions by betting against sub-prime. John Paulson, hedge fund boss He has been described as the "world's biggest winner" from the credit crunch, earning $3.7bn (£1.9bn) in 2007 by "shorting" the US mortgage market - betting that the housing bubble was about to burst. In an apparent response to criticism that he was profiting from misery, Paulson gave $15m to a charity aiding people fighting foreclosure. Professor Nouriel Roubini Described by the New York Times as Dr Doom, the economist from New York University was warning that financial crisis was on the way in 2006, when he told economists at the IMF that the US would face a once-in-a-lifetime housing bust, oil shock and a deep recession. He remains a pessimist. He predicted last week that losses in the US financial system could hit $3.6tn before the credit crunch ends - which, he said, means the entire US banking system is in effect bankrupt. After last year's bail-outs and nationalisations, he famously described George Bush, Henry Paulson and Ben Bernanke as "a troika of Bolsheviks who turned the USA into the United Socialist State Republic of America". Warren Buffett, billionaire investor Dubbed the Sage of Omaha, Buffett had long warned about the dangers of dodgy derivatives that no one understood and said often that Wall Street's finest were grossly overpaid. In his annual letter to shareholders in 2003, he compared complex derivative contracts to hell: "Easy to enter and almost impossible to exit." On an optimistic note, Buffett wrote in October that he had begun buying shares on the US stockmarket again, suggesting the worst of the credit crunch might be over. Now is a great time to "buy a slice of America's future at a marked-down price", he said. George Soros, speculator The billionaire financier, philanthropist and backer of the Democrats told an audience in Singapore in January 2006 that stockmarkets were at their peak, and that the US and global economies should brace themselves for a recession and a possible "hard landing". He also warned of "a gigantic real estate bubble" inflated by reckless lenders, encouraging homeowners to remortgage and offering interest-only deals. Earlier this year Soros described a 25-year "super bubble" that is bursting, blaming unfathomable financial instruments, deregulation and globalisation. He has since characterised the financial crisis as the worst since the Great Depression. Stephen Eismann, hedge fund manager An analyst and fund manager who tracked the sub-prime market from the early 1990s. "You have to understand," he says, "I did sub-prime first. I lived with the worst first. These guys lied to infinity. What I learned from that experience was that Wall Street didn't give a shit what it sold." Meredith Whitney, Oppenheimer Securities On 31 October 2007 the analyst forecast that Citigroup had to slash its dividend or face bankruptcy. A day later $370bn had been wiped off financial stocks on Wall Street. Within days the boss of Citigroup was out and the dividend had been slashed.

Downturn Ends Building Boom in New York Charles Blaichman, at an unfinished tower at West 14th Street, is struggling to finance three proposed hotels by the High Line. NYtimes By CHRISTINE HAUGHNEY Published: January 07, 2009 Nearly $5 billion in development projects in New York City have been delayed or canceled because of the economic crisis, an extraordinary body blow to an industry that last year provided 130,000 unionized jobs, according to numbers tracked by a local trade group. The setbacks for development — perhaps the single greatest economic force in the city over the last two decades — are likely to mean, in the words of one researcher, that the landscape of New York will be virtually unchanged for two years. “There’s no way to finance a project,” said the researcher, Stephen R. Blank of the Urban Land Institute, a nonprofit group. Charles Blaichman is not about to argue with that assessment. Looking south from the eighth floor of a half-finished office tower on 14th Street on a recent day, Mr. Blaichman pointed to buildings he had developed in the meatpacking district. But when he turned north to the blocks along the High Line, once among the most sought-after areas for development, he surveyed a landscape of frustration: the planned sites of three luxury hotels, all stalled by recession. Several indicators show that developers nationwide have also been affected by the tighter lending markets. The growth rate for construction and land development loans shrunk drastically this year — to 0.08 percent through September, compared with 11.3 percent for all of 2007 and 25.7 percent in 2006, according to data tracked by the Federal Deposit Insurance Corporation. And developers who have loans are missing payments. The percentage of loans in default nationwide jumped to 7.3 percent through September 2008, compared with 1 percent in 2007, according to data tracked by Reis Inc., a New York-based real estate research company. New York’s development world is rife with such stories as developers who have been busy for years are killing projects or scrambling to avoid default because of the credit crunch. Mr. Blaichman, who has built two dozen projects in the past 20 years, is struggling to borrow money: $370 million for the three hotels, which include a venture with Jay-Z, the hip-hop mogul. A year ago, it would have seemed a reasonable amount for Mr. Blaichman. Not now. “Even the banks who want to give us money can’t,” he said. The long-term impact is potentially immense, experts said. Construction generated more than $30 billion in economic activity in New York last year, said Louis J. Coletti, the chief executive of the Building Trades Employers’ Association. The $5 billion in canceled or delayed projects tracked by Mr. Coletti’s association include all types of construction: luxury high-rise buildings, office renovations for major banks and new hospital wings. Mr. Coletti’s association, which represents 27 contractor groups, is talking to the trade unions about accepting wage cuts or freezes. So far there is no deal. Not surprisingly, unemployment in the construction industry is soaring: in October, it was up by more than 50 percent from the same period last year, labor statistics show. Experience does not seem to matter. Over the past 15 years, Josh Guberman, 48, developed 28 condo buildings in Brooklyn and Manhattan, many of them purchased by well-paid bankers. He is cutting back to one project in 2009. Donald Capoccia, 53, who has built roughly 4,500 condos and moderate-income housing units in all five boroughs, took the day after Thanksgiving off, for the first time in 20 years, because business was so slow. He is shifting his attention to projects like housing for the elderly on Staten Island, which the government seems willing to finance. Some of their better known and even wealthier counterparts are facing the same problems. In August, Deutsche Bank started foreclosure proceedings against William S. Macklowe over his planned project at the former Drake Hotel on Park Avenue. Kent M. Swig, Mr. Macklowe’s brother-in-law, recently shut down the sales office for a condo tower planned for 25 Broad Street after his lender, Lehman Brothers, declared bankruptcy in September. Several commercial and residential brokers said they were spending nearly half their days advising developers who are trying to find new uses for sites they fear will not be profitable. “That rug has been pulled out from under their feet,” said David Johnson, a real estate broker with Eastern Consolidated who was involved with selling the site for the proposed hotel to Mr. Blaichman, Jay-Z and their business partners for $66 million, which included the property and adjoining air rights. Mr. Johnson said that because many banks are not lending, the only option for many developers is to take on debt from less traditional lenders like foreign investors or private equity firms that charge interest rates as high as 20 percent. That doesn’t mean that all construction in New York will grind to a halt immediately. Mr. Guberman is moving forward with one condo tower at 87th Street and Broadway that awaits approval for a loan; he expects it will attract buyers even in a slowing economy. Mr. Capoccia is trying to finish selling units at a Downtown Brooklyn condominium project, and is slowly moving ahead on applying for permits for an East Village project. Mr. Blaichman, 54, is keeping busy with four buildings financed before the slowdown. He has found fashion and advertising firms to rent space in his tower at 450 West 14th Street and buyers for two downtown condo buildings. He recently rented a Lower East Side building to the School of Visual Arts as a dorm. Mr. Blaichman had success in Greenwich Village and the meatpacking district, where he developed the private club SoHo House, the restaurant Spice Market and the Theory store. He had similar hopes for the area along the High Line, where he bought properties last year when they were fetching record prices. An art collector, he considered the area destined for growth because of its many galleries and its proximity to the park being built on elevated railroad tracks that have given the area its name. The park, which extends 1.45 miles from Gansevoort Street to 34th Street, is expected to be completed in the spring. Other developers have shown that buyers will pay high prices to be in the area. Condo projects designed by well-known architects like Jean Nouvel and Annabelle Selldorf have been eagerly anticipated. In recent months, buyers have paid $2 million for a two-bedroom unit and $3 million for a three-bedroom at Ms. Selldorf’s project, according to Streeteasy.com, a real estate Web site. “It’s one of the greatest stretches of undeveloped areas,” Mr. Blaichman said. “I still think it’s going to take off.” In August 2007, Mr. Blaichman bought the site and air rights of a former Time Warner Cable warehouse. He thought the neighborhood needed its first full-service five-star hotel, in contrast to the many boutique hotels sprouting up downtown. So with his partners, Jay-Z and Abram and Scott Shnay, he envisioned a hotel with a pool, gym, spa and multiple restaurants under a brand called J Hotels. But since his mortgage brokers started shopping in late summer for roughly $200 million in financing, they have only one serious prospect for a lender. For now, he is seeking an extension on the mortgage — monthly payments are to begin in the coming months — and trying to rent the warehouse. (He currently has no income from the property.) It is perhaps small comfort that his fellow developers are having as many problems getting loans. Shaya Boymelgreen had banks “pull back” recently on financing for a 107-unit rental tower the developer is building at 500 West 23rd Street, according to Sara Mirski, managing director of development for Boymelgreen Developers. The half-finished project looked abandoned on two recent visits, but Ms. Mirski said that construction will continue. Banks have “invited” the developer to reapply for a loan next year and have offered interim bridge loans for up to $30 million. Mr. Blaichman cuts a more mellow figure than many other developers do. He avoids the real estate social scene, tries to turn his cellphone off after 6 p.m. and plays folk guitar in his spare time. For now, Mr. Blaichman seems stoic about his plight. At a diner, he polished off a Swiss-cheese omelet and calmly noted that he had no near-term way to pay off his debts. He exercises several times a week and tells his three children to curb their shopping even as he regularly presses his mortgage bankers for answers. “I sleep pretty well,” Mr. Blaichman said. “There’s nothing you can do in the middle of the night that will help your projects.” But even when the lending market improves — in months, or years — restarting large-scale projects will not be a quick process. A freeze in development, in fact, could continue well after the recession ends. Mr. Blank of the Urban Land Institute said he has taken to giving the following advice to real estate executives: “We told them to take up golf.” Correction: An article on Saturday about the end of the building boom in New York City referred incorrectly to the family relationship between the developers William S. Macklowe, whose planned project at the former Drake Hotel is in foreclosure, and Kent M. Swig, who shut down the sales office for a condominium tower on Broad Street after his lender, Lehman Brothers, declared bankruptcy. Mr. Swig is Mr. Macklowe’s brother-in-law, not his son-in-law.

Bush offers $17.4B to automakers Ford tells White House it doesn't need bailout loan Last Updated: Friday, December 19, 2008 | 12:14 PM ET CBC News U.S. President George W. Bush pauses during a statement on the auto industry at the White House on Friday in Washington. (Evan Vucci/Associated Press) Calling it the "more responsible option," U.S. President George W. Bush on Friday dipped into the massive financial bailout package to offer $17.4 billion US in short-term loans to automakers. "If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers," he said during a news conference at the White House. "Under ordinary circumstances, I would say this is the price that failed companies must pay. These are not ordinary circumstances." U.S. stocks rose in trading on Friday after the president's announcement. U.S. president-elect Barack Obama praised the announcement. "Today's actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and workers," he said. "With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together — including labour, dealers, creditors and suppliers — to make the hard choices necessary to achieve long-term viability." TARP loans The loans will come from the $700-billion financial market rescue package approved by Congress in October, the Troubled Asset Relief Program (TARP). The loans will be handed out in December and January, but will be recalled if the companies are not viable by March 31, 2009. GM CEO Rick Wagoner told reporters in Detroit that he doesn't think the March deadline is impossible. "What we need to do is show we can get that stuff done on the required timeframe, and then on the basis of that we will develop future projections for the company, and I'm highly confident we'll be able to meet that test," he said. The plan requires firms to accept limits on executive compensation and eliminate certain corporate perks, such as company jets. "The automakers and its unions must understand what is at stake and make hard decisions necessary to reform," Bush said. White House officials said Ford has told them it doesn't need the loan, so the money will likely go to General Motors and Chrysler. Chrysler CEO Bob Nardelli thanked the Bush administration for the help, saying it would get the companies through their immediate needs and on the path back to profitability. Ford CEO Alan Mulally said the bailout will help stabilize the industry, even though his company doesn't immediately need cash. "The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mulally said. Treasury Secretary Henry Paulson said Congress should authorize the use of the second $350 billion from TARP. Tapping the fund for the auto industry basically exhausts the first half of the $700-billion total, he said. Collapse would be 'painful blow' Bankruptcy was unlikely to work for the auto industry at this time because the global financial crisis pushed the automakers to the brink of bankruptcy faster than they could have anticipated, Bush said. "They have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring," he said. Consumers, already wary of additional spending, will be more hesitant to buy a Big Three auto if they think their warranties will become worthless, said the president. "Such a collapse would deal a painful blow to hardworking Americans far beyond the auto industry." Bush said the "more responsible option" is to provide short-term loans to give the companies time to either restructure, or set up the legal and financial frameworks necessary to declare bankruptcy. The Senate failed to pass a $14-billion US bailout package to the automakers last week. Earlier this month, Ottawa and the government of Ontario reached a deal to offer money to Canada's auto industry based on a proportion of any package agreed to by U.S. officials. Auto sales have dropped drastically, with carmakers reporting their lowest sales in 26 years. With files from the Associated Press

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