Here’s a sneaky new wrinkle – FDIC going into the lending business

By statute, the FDIC is limited to $30 billion, yet it’s now putting us taxpayers at risk for a trillion dollars.

In the fine print of Treasury Secretary Timothy F. Geithner’s plan to lend as much as $1 trillion to private investors to help them buy toxic assets from our nation’s banks, you’ll find some details of how the F.D.I.C is trying to stabilize the system by adding more risk, not less, to the system.

It’s going to be insuring 85 percent of the debt, provided by the Treasury, that private investors will use to subsidize their acquisitions of toxic assets. The program, extraordinary in its size and scope, is the equivalent of TARP 2.0. Only this time, Congress didn’t get a chance to vote.

These loans, while controversial, were given a warm welcome by the market when they were first announced. And why not? The terms are hard to beat. They are, for example, “nonrecourse,” which means that if an investor loses money, he owes taxpayers nothing. It’s the closest thing to risk-free investing — with leverage! — around.

But, as we’ve learned the hard way these last couple of years, risk-free investing is an oxymoron.

So where did the risk go this time?

To the F.D.I.C., and ultimately, to us taxpayers. A close reading of the F.D.I.C.’s statute suggests the agency is using a unique — some might call it plain wrong — reading of its own rule book to accomplish this high-wire act.

Somehow, in the name of solving the financial crisis, the F.D.I.C. has seemingly been given a blank check, with virtually no oversight by Congress.

“Nobody is paying any attention to how they’re pulling this off,” said a prominent securities lawyer who has done work for the government. Not surprisingly, he, along with others I asked to review the program, declined to be quoted by name. “They may not be breaking the letter of the law, but they’re sure disregarding its spirit.”

The F.D.I.C. is insuring the program, called the Public-Private Investment Program, by using a special provision in its charter that allows it to take extraordinary steps when an “emergency determination by secretary of the Treasury” is made to mitigate “systemic risk.”

Simple enough, but that language seems to bump up against another, perhaps more important provision. That provision clearly limits its ability to borrow, guarantee or take on obligations of more than $30 billion.

The exact legalistic language says that it “may not issue or incur any obligation” over that limit. (You can read a highlighted version of the F.D.I.C.’s charter atnytimes.com/dealbook.)

So how is the F.D.I.C. planning to insure more than $1 trillion in new obligations? This is where things get complicated and questions are being raised.

The plan hinges on the unique, and somewhat perverse, way the F.D.I.C. values the loans. It considers their value not as the total obligation, but as “contingent liabilities” — meaning what it expects it could possibly lose. As the F.D.I.C’s charter dictates: “The corporation shall value any contingent liability at its expected cost to the corporation.”

So how much does the F.D.I.C. think it might lose?

“We project no losses,” Sheila Bair, the chairwoman, told me in an interview. 

What threat? No threat here!

Iran plot to smuggle nuclear weapon material thwarted, for now.

Officials plan to unseal a 118-count indictment Tuesday accusing a Chinese national of setting up a handful of fake companies to hide that he was selling millions of dollars in potential nuclear materials to Tehran.

“This case will cut off a major source of supply to Iran and it shows how they are going ahead full steam to get a nuclear bomb. Long-range missiles they pretty much have already,” a law enforcement source close to the case said.

The indictment will outline the financial conspiracy behind 58 different transactions, including shipments of various banned materials from China to Iran between 2006 and late 2008.

Among them:

• 33,000 pounds of a specialized aluminum alloy used almost exclusively in long-range missile production.
• 66,000 pounds of tungsten copper plate, which is used in missile guidance systems.
• 53,900 pounds of maraging steel rods, a superhard metal used in uranium enrichment and to make the casings for nuclear bombs.

The suspect, who is not believed to be in the U.S., set up four bogus import-export companies that did business with six Iranian shell firms, one source said.

“They took elaborate steps to conceal the identity of the shipper and the recipient,” the source said.

The recipient is believed to have been a subsidiary of the Iranian Defense Ministry.

Russia: Iran no threat to U.S.

Biden: Israel would be -ill advised” to attack Iran. 

Seems to me that ie won’t, we’d better pray that they will.

Traitors in our midst

Black Congressional Caucus members embrace, praise Castro. Someday a liberal will explain why, exactly, hatred of America excuses all sins, including repression of free speech, imprisonment, torture and execution of dissidents, flogging of women and acts of terrorism. I assume it’s the old, “my enemy’s enemy is my friend”, but why do American liberals consider America the enemy?

“The fifty-year embargo just hasn’t worked,” CBC Chairwoman Barbara Lee (D-Ca.) told reporters this evening at a Capitol press conference after returning from a congressional delegation visit to Cuba. “The bottom line is that we believe its time to open dialogue with Cuba.” 

Lee and others heaped praise on Castro, calling him warm and receptive during their discussion. But the lawmakers disputed Castro’s later statement that members of the congressional delegation said American society is still racist. 

“It was quite a moment to behold,” Lee said, recalling her moments with Castro. 

“It was almost like listening to an old friend,” said Rep. Bobby Rush (D-Il.), adding that he found Castro’s home to be modest and Castro’s wife to be particularly hospitable. 

“In my household I told Castro he is known as the ultimate survivor,” Rush said. 

Rep. Laura Richardson (D-Ca.) said Castro was receptive to President Obama’s message of turning the page in American foreign policy. 

“He listened. He said the exact same thing” about turning the page “as President Obama said,” said Richardson.

Richardson said Castro knew her name and district. “He looked right into my eyes and he said, ‘How can we help? How can we help President Obama?'” 

More on Nielsen’s

Wow. Google “Nielsen’s ice cream Greenwich” and you find lots of interesting stuff, including this remembrance by George Davol:

Greenwich Avenue had the most places to find “youth” foods. I recall the following, starting at the top of the Avenue and working down. One of the very first stores at the top on the left was Nielsen’s Ice Cream (the building torn down when the Pickwick Arms was torn down). Unlike the Nielsen’s, we hung out at near the high school, this was strictly a place to get ice cream and buy candies such as chocolates. It was a real ice cream parlor which had great and gooey sundaes, cones, banana splits, and the always hard to finish “belly buster”. A little ways down on the right was Mark’s Brothers for the candy and for comics. Still further down was Vaudry’s Drug which had a lunch counter and a few stores away was Greenwich Drug which had a luncheon/soda fountain. It was a place of employment later on for me, Clark Sorensen, George Lamonica, Rey Redington, and many others. Across the street during my younger years was Whelan’s Drug Store (I think it later became the Sport Shop). It too had a lunch counter, but the best part was the Root Beer Floats, the Root Beer coming out of a big Hire’s Root Beer barrel – one of my all-time favorites. Back across the street near Greenwich Drug in later high school years was a place called Garden Poultry, a 60s version of Boston Chicken, but much better! After that there were no “snack” places until you got just past Mead’s Stationary. It was a local pre-Nielsen’s hangout for earlier GHS classes called the Green Witch. It wasn’t fancy but served the usual hamburgers, sodas, ice cream etc. Further down on the left hand side at the corner across from Town Hall was Finch’s Drug which also had a lunch/soda counter.

About half way down on the same side and right near or in front of the “Big Clock” was perhaps the oldest “step-back-in-time” I don’t recall the name but it was a real old-time ice cream soda fountain, complete with the marble counter, fountain equipment, etc. It must have gone out of business by around 1950 or 1951 as I only remember going there once or twice. On the other side of the Avenue across the corner

from the Greenwich Theater was the Star Restaurant. It was owned and run by 61′ classmate Ed Nicosia’s family. Not fancy, but a local favorite that had good food.

Along Putnam Ave there were not many places, the exception being another Finch’s Drug Store, and, of course, The White Diner, the only place I recall that was open 24 hours in Greenwich. Dining out at restaurants with the family was infrequent, but when we did, the choice was usually The Clam Box, Manero’s and (I think it was called) The Homestead in Byram for Pizza – one of the very few places in the early years that you could buy a pizza in Greenwich. Later on other places to eat became popular. Nielsen’s, was of course a favorite of many GHS students before and after high school, but because I and other friends lived near it we made it a regular hang out

for all times. I think it was built around 1957 and lasted until about the mid 70s until it was torn down to make a parking lot (pave paradise and put up a parking lot, as the song goes). Once we discovered “wheels” our range expanded (no, Port Chester is a later story). There was the Cos Cobber in Cos Cob, our first taste of fast food in Greenwich, and of course, Dirty Lou’s in Cos Cob (pave paradise and put up a car dealership). Lou’s always got a knock as being a greasy-spoon, but that award really had to go to the Oasis. It was run by a couple of Greek Brothers. It lasted for many years as did the grease on the walls, windows, and everywhere! At Dirty Lou’s, Lou was no dapper-Dan and the waitress (I forget her name) always seemed annoyed at taking your order, but this mattered little as the burgers and wedges were great. In fact, Lou purchased all the hamburger meat at Manero’s, not from some no-name supplier. I know many of us miss “Dirty Lou’s”

Hit us again, hit us again, harder, harder!

Al-Qaeda moves into Yemen as government loses control.

Bloomberg:

Yemen’s own government says it doesn’t control enough territory to crack down on al-Qaeda bases in the hinterland. That is raising U.S. concerns that the repatriation of as many as 100 Yemeni inmates after the closure of the Guantanamo Bay detention facility in Cuba will increase the ranks of al-Qaeda.

“Its aim is not only to attack Yemen and Saudi Arabia, but also to hit U.S. and Western targets elsewhere,” said Rohan Gunaratna, head of the Singapore-based International Center for Political Violence and Terrorism Research. “Unless this epicenter is neutralized, there will be a sustained and continuous threat.”

But by closing down Guantanamo we will ensure that the world loves us again so no fear, mate, eh?

Twisting in the wind

A house showed up today with a new, lower price and because I’ve seen it for sale seemingly forever I thought I’d look up its history. Interesting. Built in 1996, it was put up for sale in 1998 for $1.2. It didn’t sell and the builder either moved in or rented it out for awhile and then brought it back in 2003 at $2.475. That didn’t fly so he gradually dropped the price to $1.950 but it expired unsold in 2004. After another hiatus he tried again last year and it’s been for sale ever since, starting at $2.5 and now down to just about $2 million. According to the town, it was worth $2.1 million in 2005, so today’s value would be, if you play the game I’ve been playing with these numbers, 70 % of that, or $1.470,000. That seems about right to me – I hope the owner perseveres this time and finally sells the place because I’m curious to see how the 70% rule works out on this one.

Move over, Teixeira, John Gochnaur’s coming to town!

41 Birchwood Drive

This spec house on Birchwood sat unsold for a year but never dropped its price from $5.995 and now it’s gone to contract. There’s a house and a street for everyone, I suppose (I should make you look up John Gochnaur, but here you go).

Walter, have you been emailing us from abroad?

From a reader, this interesting tidbit:

Apparently the Noels have been to 4 countries in 3 weeks  Switzerland, England Brazil and ?? wonder why. Where are they hiding there $ and can the lawyers here freeze it  but first of all find it??
xoxo

I could be wrong but heard this from a reliable source!! 

If I were Walt, I’d not only be off out of the country visiting my money, I’d stay there with it. Switzerland protects against extradition against tax evasion (so does a contribution to Bill Clinton) but I don’t know about money laundering, which seems likely to be the criminal hurdle Walt may trip over. I’m sure the Noels have lawyers to advise them on  this sort of thing but for us little people, there ought to be a handy Internet guide for countries you can hide in, for specific crimes. Perhaps there is – I’ll go look.

UPDATE: this lawyer seems to have a great website with lots of informative stuff.

Bring back Nielsen’s!

GreenwichRoundup reports that Balducci’s in Riverside may be closing. The chain’s already shuttered a number of other shops in the area, Riverside may be next. I think I’ve bought some apple cider from them, but it might have been when Hay Day occupied that space. Good cider. Other than that, it’s been downhill at that location since Nielsen’s closed (there was another branch on Field Point Road, across from Greenwich Library, too). If I have it right, that diner was followed by a Burger King, a Steak and Ale, then Hay Days, but there might have been some other iterations while I was out of town at school.

New listing prices

Someone’s out of whack here, me or my peers, but I’m watching listings come on at prices I find astonishingly out of touch with where I see the market. Houses on negligible streets asking $1.1, $1.2 and $900,000 + when, using the 70% assessed value tool (which I do think is particularly helpful in lower end houses) they should be at $650,00 – $675,000 tops. Those are the numbers I supplied mentally, by the way, before I checked assessed value.

11 Green Lane

One house I feel free to use as an example because it’s now owned by a bank and I don’t worry about injuring a corporation’s feelings is 11 Green Lane, in western Greenwich. It sold for $700,000 in ’04, the owner ran into trouble and it was put up for sale last year, starting at $895 and dropping as low as $515,000 before the bank took it. Now the bank wants $569,000 for it. If it didn’t sell at $515,000 why would it sell for more? Assessed value is $483,000, which might be about right.

A cautionary tale about remodelling

WaMu spent a billion dollars last year redesigning their lobbies to make them warm, fuzzy places. Now their new owner is spending just as much to undo those changes.

By ROBIN SIDEL

DALLAS — Before it collapsed last September, Washington Mutual Inc. spent roughly $1 billion on a branch-building binge that replaced bank-teller windows with free-standing counters and cash-dispensing machines.

New owner J.P. Morgan Chase& Co. is now dismantling it all, right down to the signs that promise “free checking, free smiles,” and basically dragging the former WaMu branches back to the past.

Traditional branches “are superior in every way,” said Charles Scharf, who runs the Chase unit of J.P. Morgan. “They might be boring, but they’re practical.”

Unless you’re Russian, you’re probably not contemplating spending a billion bucks fixing up the old mansion for resale, but the point’s still valid: your changes may not suit the taste or needs of the next owner, and your expensive changes will be at best wasted and worse, a hindrance to selling. Nothing wrong with some fresh paint and even replacing a cracked, leaking fiberglass shower stall but I wouldn’t add that new kitchen or master bath unless I were planning to stick around a few years to enjoy them.

Looks as though GM will go bankrupt

They’re getting ready to pull the plug, which is fine with me. The announcement today of a joint venture with Segway Scooters is about as asinine as the whole concept of GM as a going concern in the first place. But riddle me this, Batman: weren’t lots of intelligent people suggesting bankruptcy for this hopeless company last November? Didn’t we just give them something like a kazillion billion dollars to avoid bankruptcy? What did that money achieve? Where did it go? When do we get it back? (Okay, that last question was a joke). Are we doing anything different with the banks than we did with GM? What? Aren’t lots of intelligent people saying that the banks are worthless? Bankrupt in all essential ways except the term?

Waiting for your price

22 Sundance

The owners of this house on Sundance Rd listed it for $1.895 million in April, 2005, kept it on the market for a year with a couple of price reductions and then let it expire, no doubt hoping that they’d get their price in a few years when the market had climbed higher. Well it’s back on today, asking $1.399. And frankly, that seems high.

For Sale

Thanks to reader Chimney, here’s a picture of Bernie’s Shelter Island 38 Runabout, taken in happier times.  Myself, I like the looks of the green one I posted yesterday, better.

Not my lookout

Here’s a pundit who blames Obama’s success on his appeal to the “free stuff generation”.

Nothing more clearly states the subliminal, if not explicit, essence of Obama’s “change” than the promise of more free stuff. From health care to amnesty for illegal immigrants to pure wealth redistribution to bailouts, the Obama multi-trillion-dollar budget is nothing more than the old tactic of buying its way out of difficulties — regardless of principle. Much of the over-thirty crowd (which, in total, voted for McCain) tries to get a grip on what is now happening with formulaic discussion of socialist and capitalist merits. Embracing the patented Obama “cool” and “calm,” these dull attempts to simplify backfire as these words tend to mean very different things to different people. The young, however, do not have this difficulty as the international language of “free stuff” is easy to comprehend.

My sense of gloom about this is lightened by the knowledge that the bill for all this free stuff will arrive after I have gone. My generation will have milked the country dry with our Social Security and Medicare and our children will have endorsed tax policies that kill initiative and productivity, so when that bill arrives, the kids are going to be looking around in befuddlement wondering who to hand it to. It won’t be me – I’ll regret leaving the mess to my own children to deal with but perhaps they’ll help lead the revolution that starts the country back on course.

Giving it the old college try

27 N. Hawthorne St

This Glenville listing expired today after a year on the market priced at $1.395 with nary a price cut in those 12 months. Its history provides a snapshot of what’s been going on in the market. Sold new in December 2005 for $1.15 million, the current owners bought it six months later for $1.295. In April ’08 they tried selling it again and priced it at $1.395, which was once a not-unreasonable expectation of appreciation. Except now days, it is unreasonable. I don’t fault the sellers for trying, but it must have become obvious months ago that they couldn’t sell it for what they wanted and I wonder why they kept it on the market? It’s a pain in the neck to keep a house ready to show, day after day, month after month. If you know you won’t get your price and you won’t lower that price, I think you’re better off yanking the house off the market and waiting five years to see what the economy brings. Save yourself the headache and frustration of trying to achieve the impossible.

So, how’s Brunswick doing?

We’ve been speculating here at least since the September market crash that Greenwich parents might be forced to pull their kids from private schools and send them off to mix with the great unwashed at Greenwich High. That speculation has been met with denials and assurances that all is fine on Maher Avenue, but now comes reader Krazy Kat with this story from England:

Parents are yanking their kids from private schools (okay, the English have “public” and “private” mixed up, but what do you expect from a nation that can’t keep on the right side of the road?) and dumping them into the public system. Things are so bad that schools are closing at the rate of “one per fortnight”. I speak neither Austrian nor Great Britain, but a fortnight’s not very long, huh? Drums along the Thames. Will we hear them here? We will see soon.

A builder’s frustration shows

There’s a great house at 9 Boulder Brook, built by one of the town’s best contractors, on land purchased for $2 million in 2007. Four months later, in October of that year, the land was offered for resale at $3.4 million, which happens so often in Greenwich that I’m beginning to believe that builders, at least, see some logic in the tactic. That logic escapes me, and in any event, the land didn’t sell so building commenced. The house started at $6.750 and over two years dropped down to $6.450, without success. Yesterday the listing was deleted and the house is back on today for $7.325 million. How did an extra million dollars of value appear overnight? Ask the builder. I’m guessing that he just got annoyed at no one buying the place and perhaps he’s received what he thinks are lowball offers and concluded, “if someone’s going to lowball me, I might as well make them start at a higher price.”

Or not – maybe a pool and five extra acres were flown in by helicopter yesterday.

UPDATE: Never mind! The Board has just corrected the price to $6.325 million (so why was it deleted yesterday?) and I assume the higher price was someone’s mistake. Of course, the listing now shows the house as being a million dollars cheaper than its “original asking price” of $7.325 when in fact, that price lasted just one hour, but that’s what your agent’s for – to keep you informed about such things.

GPD Crime Busters

"Ask yourself, Lance, what would Nancy Drew do?"

One of local finest has let go of his partner’s hand long enough to write and call me a jackass for suggesting that the GPD labelled Andrew Kissel’s murder a suicide. I understand his embarrassment – you don’t hear of many suicides where the victim handcuffs his hands behind his back and then stabs himself a dozen times but hey, I don’t have to make this stuff up – our cops do it for me:

Here you go, courtesy of the New York Post

March 28, 2008

It may have been a suicide-for-hire after all.

Greenwich cops today left open the possibility that millionaire real estate mogul Andrew Kissel paid his assistant and another man to kill him – leaving a $15 million life insurance policy to his family.

“If it ends up being the case, that’s fine,” said Police Chief David Ridberg, referring to the theory that was first reported by The Post shortly after the April 2006 murder.

An end to all that?

One of the brokerage firms in town – Prudential, I think – has been running some odd little campaign where their listings are priced so as to end with 876 dollars. I have no idea what the point is – didn’t get the memo, I guess – but I notice today that 62 N. Stone Bridge Rd, previously priced at $1,644,876 has been reduced to $1,640,000. I don’t believe a $4, 876  reduction is expected to flush buyers out of the shrubbery – certainly no such fortunate thing has happened since September, as this price was slowly reduced from $1.830 million – so perhaps the marketing campaign has ended and more traditional pricing is coming back.

Or not – I’m just guessing. I’m also guessing that a 10% cut from September ’til now won’t be enough to move a house in today’s market, but perhaps I’m wrong about that, too.