Daily Archives: March 19, 2009

Blumenthal: “It wasn’t me, it was Eliot!”

blumenthal_painted_toenails Greenwich cops charge duo in tryst blackmail scheme.

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Even if you’re not Chris Dodd, maybe you’ll be able to afford a house soon

San Francisco area house prices fall to 1999 levels. Coming east?

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Details of Countrywide’s special loan program for politicians

Chris Dodd was among them. How long since he promised to release the relevant loan documents? I think it’s nine months, but go ask him.

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Washington moves on Wall Street

Nancy Pelosi, congratulating herself and her colleagues for imposing a 100% on anyone on Wall Street earning more than $250,000, declared that  “The public interest knows no date, the authority to look into these bonuses or in our case today to tax them exists if the public interests is not served and nobody can hide behind a contract, or a date, or a conversation, that may or may not have taken place.” Maybe it’s the lawyer in me, or my respect for the Constitution that once protected the sanctity of contracts, but this statement by the Speaker of the House of Representatives is the scariest thing to come out of the bog in a long time. We’re witnessing the destruction of the rule of law in this country and the country is whooping in glee. The mob has arrived. 

So what happens to Wall Street? People down there smell disaster and they’re probably right. If they are, I’ll ask again, who’s going to buy Greenwich real estate?

Finance executives scrambled Thursday to react to a bill that would gut the current Wall Street compensation system.

Many bank officials were caught off-guard by the depth of public ire against Wall Street bonuses, and the passage of a bill by the House that would tax many of those bonuses by 90% at firms that received at least $5 billion in federal bailout funds. No brokerage firms or banks were immediately willing to go on the record with a view on the measure.

A leading finance group, the Securities Industry and Financial Markets Association, was in consultation with a constitutional-law expert about the bill’s legality, according to a person familiar with the matter. But it, too, chose not to make a statement.

One banker said the news was already having an impact. “I am starting to feel the onset of a sudden heart attack,” he said.

Many firms have already cut the bonuses of top executives, in part to mollify lawmakers demanding cuts in pay for companies that take government money. But the current bill would also severely restrict the pay of traders, bankers and possibly brokers who produce millions of dollars in revenue.

“This is about vengeance, not about saving money,” said Alan Johnson, a New York compensation consultant. “The American people are furious, and Congress is terrified they won’t get re-elected. But it’s a shame. The best people will leave and the American taxpayer will pay” because the bill would make the firms more “unstable.”

Banks have thousands of employees who make more than $250,000 per household, the level at which the tax would take effect, pay experts say. Most major U.S. investment banks accepted federal bailout funds last fall.

If the bill becomes law, the flow of bankers and traders from U.S. banks to foreign firms, hedge funds and smaller boutique companies could accelerate, said people in the industry. The bill “creates an unfair advantage for any major player who is not subject” to the restrictions imposed on companies receiving federal funds, said Alan Guarino, a managing director at recruitment firm Korn/Ferry International.

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Can Obama pick anyone who is straight?

If he can, why doesn’t he? Via Instapundit and HotAir comes this story of shady dealings by our newly nominated Secretary of Health and Human Services:

Kansas lawmakers want to know whether a Johnson County nonprofit used its political connections to Gov. Kathleen Sebelius to get a special funding increase last fall.

But a hearing into the matter Wednesday left lawmakers with more questions than answers.

Lenexa-based Community Living Opportunities was awarded nearly $713,000 in extra Medicaid funds. The group serves developmentally disabled Kansans, primarily in Johnson and Douglas counties.

At the time, the agency’s board of directors included Kansas Democratic Party Chairman Larry Gates, a Sebelius confidant, and his former law partner, Dan Biles, whom Sebelius appointed to the state Supreme Court this year. Lew Perkins, the University of Kansas athletic director, also serves on the board. Biles has since stepped down from the board.

The allegations come as Sebelius, a Democrat, awaits U.S. Senate confirmation to lead the U.S. Department of Health and Human Services, which administers Medicaid.

CLO pleaded poverty, bypassing the normal request process and going directly to the Secretary of Social and Rehabilitation Services.  They got the extra money, which puzzled other service providers in Kansas.  They had requested extra funding through normal channels and had been told that Kansas didn’t have any extra funding.  Imagine their surprise when the outfit that has Sebelius allies on its board got extra Medicaid cash.

The poverty plea looks weak in retrospect as well.  They spent $400,000 on a ten-acre ranch as a therapeutic retreat.  They bought horses and installed a swimming pool while building a house.  Those may be good ideas for therapy, but the money spent on those activities hardly makes it look as though they had run out of cash for actual and ongoing therapies for their patients.

Now Sebelius will, if confirmed, handle Medicaid payments for the entire nation.  How many more recipients have Sebelius pals on their boards?  I guess we’ll find out, because it’s become clear after two short months of the Obama administration that we’re not in Kansas any more, Toto.

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Richard Blumenthal, toadstool

Get off my beard, ya big oaf or I'll sue ya!

Get off my beard, ya big oaf or I'll sue ya!

Connecticut’s Attorney General seems determined to change our motto to “The Me Too State”. He has, after the big boys have shown him how to do it, sued Microsoft, tobacco companies, George Foreman’s Grill Master and the Girl Scouts of America.  Now he’s subpoenaed AIG for the names of the bonus babies, never mind that  Congress and that other despicable AG, Andrew Cuomo, already have them. Dick wants his own list, I suppose to demonstrate that he’s on the job. Little men should shut up and sit down, so that no one notices how small they are.

And here’s a scary thought: if, by some miracle, the Demmerkrats get rid of Dodd before next year’s election, this hungry, ambitious snake will be climbing over the bodies of his children to snatch the nomination.  And Connecticut being the foolish state that it is, he’d win.

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Attn., Goldman boys: there’s always Cos Cob!

10 Kent Place

10 Kent Place

After disappearing from the real estate market for awhile, Cos Cob is back and tearing up the pea patch. Seems as though we see a contract from there at least once a week now, which makes up about half our volume. Here’s a house that’s going to a newly-chastened Goldman Sachs partner for an undisclosed price. It was for sale for almost a year but finally dropped from $699 to $650,000 and the Wall Streeter grabbed it. Here’s his new kitchen:

Thank you, Dean Witter!

Thank you, Dean Witter!

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Goldman Sachs partners won’t be buying your spec house today

IB’r sent me this link to a New York Times story about Goldman Sachs having to loan money to its partners and employees. Do you remember when, long ago (maybe 2002) attaining partnership at Goldman was an instant ticket to becoming a millionaire? No longer. I heard recently that 56 current Goldman partners are in bankruptcy, a figure I didn’t believe until IB’r sent me this story. Now I do.

Working at Goldman has long been regarded as a sure path to riches. But Goldman’s employees are losing money on their personal investments — particularly in Goldman’s own elite investment funds, which have been considered one of the perks of working at the bank.

Now these funds have stumbled, and some Goldman employees who financed their gilded lifestyles by borrowing in good times are suddenly short on cash needed to meet commitments to their personal investments in the funds. “It’s a problem with the culture of spending,” said Gustavo Dolfino, the president of Whiterock Group, a Wall Street recruitment firm. “No matter how much you have, you spend like you have a lot more.”

[snip]

But one former Goldman partner estimated that a quarter of the bank’s roughly 100 partners are now worth $5 million or less because of losses on their company stock and other investments. Last year, the bank’s seven top executives received no bonuses. One of them, Jon A. Winkelried, resigned from his position as co-president a few weeks ago, saying he wanted to spend more time with his family. His estate on Nantucket is on the market.

Beyond the drop in the stock market, there are various reasons cash is tight for some Goldman employees. Some traders, for instance, are facing tax bills for bonuses paid in early 2008. They already spent that money, and their bonuses early this year were too small to foot the bill.

Others who borrowed against their stock holdings have been forced to sell at losses or put up more collateral against their loan. Goldman is one of many banks that has issued margin calls on its employees.

[snip]

To some, the development underscores how many wealthy Wall Streeters got in over their heads.

“Most people investing in Whitehall thought this was a sound and probably even a conservative investment,” said Janet Hanson, a former Goldman employee who is the founder of 85 Broads, an organization for women that takes its name from the address of Goldman’s headquarters. “No one saw the entire thing collapsing.”

I don’t think anyone with a net worth less than $5 million will be buying that $25 million spec house on Round Hill any time soon. Or at least, I fit in (well within) that category, and I’m not planning on it.

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Dinosaurs still at large

dinosaurHeard recently from a broker, in response to comment that the cap rate for her multi-family listing was completely unworkable: “This is Greenwich – no one worries about formulas here!”

I’ve never known an investor who wasn’t concerned about making money on his investment but to the extent that any of them ever paid more than a property’s income would support in the belief that inflation would cure it, those days are past. Brokers who still cling to the idea that “it’s Greenwich” will justify any inane price are doing themselves and their clients a disservice. I suspect that most of these people know that; it just drives them crazy to admit it because it’s how they’ve sold real estate for so many years and they don’t know what else to do.

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Old Greenwich

6-park-avenueIn 2005, this house at 6 Park Avenue, Old Greenwich, sold in 11 days for full asking price: $1.275 million. The buyers “renovated” it since then (I haven’t been inside to see if that’s dust bunny sweeping or real changes) and relisted it today for $1.250. That may be too high – depends on those renovations, I suppose – but it’s refreshing to see home sellers who understand that the market does not owe them a profit these days.

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Want less of something? Regulate it.

Sure worked in New York City where rent regulation has slowed the creation of housing. Now the same folks you brought you Fannie Mae and the sub-prime mortgage want to regulate the interest on credit cards. Chris Dodd’s in favor of the plan, so how bad can it be?

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I said hang ’em, don’t tax them

Congress passes the confiscatory tax on AIG bonus babies and folks are wondering, who’s next on the Congressional pique list? Every day is anger day in Washington, where the crooks, desperate to divert voters’ attention from the sordid mess of corruption and incompetence that is our government, drag new villains before the cameras on the hour and spout nonsense while preening and posturing. Today it’s AIG – next week it will be someone else’s turn.

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Jailed Iranian blogger dies in prison

Twenty-five-years old. Well just wait til Obama extends that open hand.

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Democrats are the party of the people and people don’t pay taxes – rich folks do

California Democrat Pete Stark, no doubt following the lead of his boss on the Ways and Means Committee, Charles Rangel, claims a Maryland shorefront home as his principal residence for tax credit relief. But at least he didn’t collect a bonus. That would be wrong.

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Get a realtor going on happy news and she’s impossible to stop!

Here’s still another trenchent observation from the real estate agent quoted below:

There is some good news.

Twelve months ago, Moscow, Russia [thanks for locating Moscow for us – Ed], overtook New York [and where’s that? Ed] as the billionaire capital of the world, with 74 tycoons as compared to New York’s 71. Today there are 27 tycoons in Moscow and 55 in New York. According to Forbes: “The U.S. is regaining its dominance as a repository of wealth. Americans account for 44% of the money and 45% of the Forbes list’s slots, up seven and three percentage points from last year, respectively.”

New York’s wealthiest can still purchase properties, and Greenwich has a nice selection.

Pessimists might look at Russia losing 47 “tycoons” in one year to the collapse of its economy and the siren call of Siberia as bad news, at least in so far as some of those bloated crooks paid top dollar for Greenwich mansions. And if New York dropped 18 from its own tycoon roll why that, too, might seem discouraging. But that’s because you’re a glass-half-empty sort, which only proves that you’re unfit and unqualified to peddle spec homes in Greenwich.

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Happy News on spec homes, finally!

Let's pretend we still have phone service!

Let's pretend we still have phone service!

A local real estate agent tells us today that we’re not to worry about spec builders; they’re just fine.

[T]hese properties were built by different, successful developers who have sold many homes in Greenwich. The developer who built 1 Meadowcroft Lane and 8 Dairy Road [different builders, but never mind – Ed] has built more than a dozen quality homes in Greenwich for clients and for speculation.

How long does it take to sell a home with an asking price in excess of $25 million? [ Yet another builder – Ed.] Since 2003, it was not uncommon for properties listed at more than $25 million in Greenwich to take two to three years to sell even in more favorable economic times. So why is it noteworthy for a home priced at $25 million to still be on the market after being listed 10 months ago? [possibly because only two houses larger than 20,000 sq.ft. have ever sold in Greenwich, each at half their original price, and this yoyo has built 22,000 sq. ft and offered it for sale in the deadest market to hit Greenwich since the Depression? Ed]

There are about 39 new homes built since 2007 [ 51, in fact – Ed] on the market asking $5 million or more; and another seven homes under construction for sale. Some of the new construction homes have received offers, and for whatever reason, they did not convert to sales. Prior to October 2008, you could better recover from a non-performing buyer.

Developers with successful, established track records are able to adjust their prices in this market and support the extended lead time to sell. Some developers are withdrawing their properties and others are slowing construction and/or selling land parcels they are holding. These strategies will reduce new construction inventory in the coming months. Builders are also preserving their properties’ values by creatively structuring deals with buyers (i.e. extending closings so that buyers may first sell their existing homes). Other builders are renting or occupying the homes until the economy improves.

Well, as long as these guys can move into homes they expected to sell, or can rent them for $10,000 a month no worries, right? It was silly of me to suggest otherwise.

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So we give him TARP money – isn’t he a pal of Dodd’s?

"How much for a barrel? Shoot!"

"How much for a barrel? Shoot!"

Hugo Chavez’s nationalization drive is slowed, socialism failing as oil revenues plummet. Couldn’t happen to a nicer guy. Chris Dodd mourns.

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Sex in the City

Did naked short sellers bring down Lehman and Bear Stearns? Looks like they might have. Various folks quoted in this Bloomberg story are yelling “fraud” but I find it hard to sympathise – seems to me that Lehman and Bear were big boys who did this stuff themselves. It’s a rough world down there on Wall Street.

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Mortgage rates will fall

That’s the prediction here. I said the same thing to my pal Nancy just yesterday, when the Fed moves were announced. Of course, you want to make sure to get a fixed rate because after this drops rates to WWII levels, the elevator is going straight up, I fear.

But still, if rates go into the low 4s, that can’t hurt sales.

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Albany Times Union and Hearst

Folks up north are upset with Hearst,parent company of the Albany Times Union and Greenwich Time. Seems that Hearst just tried firing the Albany workers they could no longer afford whereas here in the Nutmeg state they offered buy outs. My advice to anyone still at Hearst is to grab a buyout if proffered; the paper seems to be declining. The Greenwich Time fired its local ad rep, an unusual step for an organization intending to stay in business, and the rep still there seems awfully anxious to book ads before April. Maybe as an ad salesman you don’t get paid for ads running after you’ve gone?

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