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Fasincating article by Leslie Crawford in the Financial Times on how Spain's lenders may have some issues with marginal borrowers. Bonus: did you know that Spain has an extremely high rate of homeownership, about 85 percent? I didn't.
The chill winds of the home loan crisis in the US are having a sobering effect in Spain, where mortgage lending and house prices have risen faster than anywhere else in continental Europe.As with the US, low interest rates and a buoyant job market have made home ownership affordable to lower income groups in Spain. Fierce competition has driven some Spanish banks into the riskier segments of the market. In particular, Spain's 4m-strong immigrant population - young, low-skilled and with no credit history in Spain - have proved to be too large and tempting a group to ignore. Mortgage brokers who specialise in arranging loans for immigrants are doing a roaring trade.
Caja Madrid, Spain's fourth-largest financial group, boasts half a million immigrants as customers, who account for almost 20 per cent of the savings bank's mortgage portfolio. Other banks have followed suit, opening branches staffed with Moroccans, Chinese and Latin Americans in immigrant neighbourhoods and tailoring mortgages to the special needs of migrants.
Grupo Santander, thelargest Spanish bank, offers 40-year mortgages with a five-year grace period on capital repayments. Some banks offer loans for buying houses in their customers' home countries, such as Morocco or Ecuador.
Asprima, a property developers' association, estimates that one in three new homes was sold to an immigrant last year. But because immigrants earn less than Spaniards, their debt burden is greater. Asprima estimates that an immigrant family borrows on average eight times its annual income to buy a home in Spain, compared with six times for a Spanish family.
Posted by dan at 04:59 PM
There's lots of press attention being paid to the increasing focus of utilities and energy companies on global warming and emissions. But the two industries that are most freaked out about the short-term impact of global warming/emissions are insurance companies and ski resorts. Jim Carlton reports in the Wall Street Journal on the latter:
Snow has been hard to come by here in the Sierra Nevadas this winter. Last year, the Berkshires and the southern Rockies went wanting. And the year before that, the Cascades.No one is quite sure why each has suffered its low-snow season of discontent, but as the warmest winter on record winds down, the ski industry has settled on a suspect: It has stepped up its efforts to combat global warming. After all, few businesses stand to lose as much from climate change.
"Put it this way: If we don't start reacting now we may not have a ski season," says Rachael Woods, spokeswoman for Alpine Meadows, a privately owned Lake Tahoe ski area near here.
trying everything from educational presentations for guests to investing in renewable energy and soliciting skiers to contribute to those projects, too.For example, Sugar Bowl Ski Resort here in 2004 launched a "Start Global Cooling" campaign with Clif Bar & Co., a maker of protein bars in Berkeley, Calif. Under the program, Sugar Bowl -- privately owned by a consortium composed of some of the San Francisco Bay Area's wealthiest residents, including House Speaker Nancy Pelosi -- invests about $25,000 to $30,000 a year in wind farms and other renewable energy sources, says Greg Murtha, the resort's marketing director. The amount is calculated by multiplying the amount of energy Sugar Bowl uses by the cost per kilowatt hour of the renewable power it's investing in.
Posted by dan at 04:42 PM
A fascinating dynamic is developing in the subprime sector. Wall Street -- and here I'm talking about the vast global financial complex -- is reluctant to see them fail en masse, in part because they provided so much in the way of fees, and the raw material to securitize and trade. And yet, as always happens in the aftermath of a burst bubble, they're not quite convinced that the companies can make it. And so the offers to help bail out the subprime lenders are frequently more like a shark extending a lifeline to a struggling swimmer.
Witness Accredited Home Lenders Holding. Yesterday, the struggling lender got a loan from Farrallon Capital Management: $200 million, five years, and an interest rate of 13 percent.
13 percent! In this liquidity-suffused environment? That's sub, sub, subprime.
Posted by dan at 03:49 PM
My latest experiment in user-generated content in Slate, on even more zombie brands.
Posted by dan at 03:47 PM
Now look at the latest group of capitalist-hating, progress-loathing, growth-killing hippies who are urging a cap on emission. Why, it's a group of investors that manage about $4 trillion in assets. Edward Luce reports in the Financial Times:
Leading US financial investors have joined hands with some of America's largest companies and urged Capitol Hill to follow Europe by setting mandatory targets to reduce America's carbon emissions.Together they constitute the largest array of US private-sector leaders that has so far come together to call for radical action on global warming.
The group, which represents more than $4,000bn worth of investor capital, including funds managed by Merrill Lynch, Calpers, Allianz and Calvert, said Washington should put an end to investor uncertainty by establishing "sizeable, sensible long-term cuts" to US carbon emissions.
The group - Investors and Business for US Climate Action - which includes the chief executives of Alcoa, BP America, DuPont, Sun Microsystems and PG&E Corp, said Congress should also establish an economy-wide carbon price to stimulate the creation of a US "cap and trade" regime.
It also called on the Securities and Exchange Commission, the chief US financial regulator, to issue guidelines on the level of detail that businesses should disclose about climate change risk in their financial reports.
"In the absence of strong federal leadership, there is a risk that US businesses may get left behind, losing ground against competitors in the rapidly growing global market for low-carbon solutions," it said.
Posted by dan at 03:15 PM
On today's Wall Street Journal editorial page, Peter Wallison (ex-Treasury Dept. currently at the American Enterprise Institute)has a long op-ed that argues that (surprise!) class-cation lawsuits are killing America's capital markets:
If the financial pre-eminence of the U.S. is eroding, as several recent reports contend, what's really to blame?Sarbanes-Oxley surely hasn't helped, and an SEC that advertises itself as a prosecutor is no drawing card. But when you listen closely to what foreign and U.S. business and finance people are saying, there's one central cause -- private class-action enforcement of the SEC's Rule 10b-5. This rule, which forbids untrue statements of material fact and schemes to defraud, was originally laid down as the centerpiece of the SEC's market-monitoring responsibilities. It has, however, because of private class actions, become like an accelerant poured on a flame: The possibility that a company will face a class-action lawsuit if its stock price falls makes all the other problems worse.
Really? He must not have read the report from Cornerstone Research, which found that
Class action securities fraud filings plunged to a record low in 2006, a year characterized by a strong stock market that exhibited lower volatility, and an increased focus on corporate controls. The 110 class actions filings in 2006 represent the smallest number of filings in a calendar year since the adoption of the Public Securities Litigation Reform Act in 1995. Filings are down by 38 percent from the 178 filed in 2005 and are 43 percent lower than the ten-year historical average of 193.1 The decline from historical average is statistically significant. This sharp decline in the number of companies sued in class action securities litigation began in the second half of 2005 and has now continued for 18 months.
Elsewhere in the Journal, we read that a big investor class-action lawsuit against the banks that enabled, allowed, or helped (take your pick of verbs) Enron to defraud investors has been thrown out:
In a big victory for Wall Street, a federal appeals court ruled that Enron Corp. shareholders can't proceed with a class-action securities-fraud lawsuit against banks and securities firms for their alleged role in the accounting fraud that led to Enron's collapse.The decision by a three-judge panel of the Fifth U.S. Circuit Court of Appeals in New Orleans comes less than a month before a trial was set to begin in a federal court in Houston pitting Enron shareholders against Credit Suisse Group, Merrill Lynch & Co. and Barclays PLC
Posted by dan at 03:06 PM
Yet another example of government failure? Or yet another example of how the people running the government at this point in history just don't seem to be up to the task. Robert Pear reports in the New York Times on how Medicare is using taxpayer funds to make payments to health care providers who owe the government taxes.
Posted by dan at 02:52 PM
Why do contemporary right-wingers hate FDR and the New Deal so much? I mean, all he did was save capitalism and defeat fascism. Well, it could be that the really would like to tear down all that economy-hampering infrastructure built during the New Deal, like the George Washington Bridge. It could be that they don't know much about history and don't care to learn. Or it could be that, having supported so many politicians dedicated to proving that government can't work, at least when they're running it, they simply can't over the fact that Roosevelt presided over a government that managed to accomplish some of its stated goals.
How else to explain such lines as this one, which started a recent Wall Street Journal editorial:
Since the Great Depression, American labor markets have been bollixed by a statute called the Davis-Bacon Act, which requires any construction project receiving federal subsidies to pay "prevailing" wages -- meaning, union wages -- to its workers.
American labor markets bollixed? According to the Bureau of Labor Statistics, the number of payroll jobs rose from 29.4 million in February 1939 to 135.9 million in February 2007. That's 106.5 million jobs in 68 years. Bollixed? Bollocks.
Posted by dan at 10:45 AM
Isn't how funny (or ironic) that many of those who advocate scrapping employer-based insurance and employer-provided pensions (i.e. Congresspeople, think tank residents, university professors) are among the dwindling minority of Americans who receive employer-based insurance and employer-provided pensions?
In today's Wall Street Journal editorial page, the editors have a long article that essentially comes out in favor of encouraging employers to stop providing health insurance. (The editorial is an argument for President Bush's proposal to start treating employer-based insurance, like the insurance Dow Jones's employees get, as taxable income.)
The editorial is worth reading, if only for the comic aspects. They seem to think the "average" family could easily afford a $15,000 health plan, for example.
But the best line is this:
"We'd bet our pensions that, if Joint Tax had calculated that the Bush health plan added $333 billion or $526 billion to the deficit, Messrs. Conrad and Stark would have sprinted to the nearest TV cameras to denoucne its fiscal recklessness."
We'd bet our pensions? Shouldn't it be "we'd bet our 401(Ks)"? Or could it be that the Journal's editorialists advocates 401(K)s for everybody else while holding steadfastly to their cherished pensions? Of course, that would be hypocritical, like advocating health savings accounts while steadfastly holding on to your employer-provided health insurance.
Posted by dan at 10:35 AM
The Financial Times article on Conrad Black's trial reads:
"Black Trial to Focus on Directors' Ignorance."
Given that Hollinger's worst board ever included Richard Perle, Henry Kissinger, and former Illinois Governor Jim Thompson, this could be a very looooooooong trial.
Posted by dan at 10:31 AM