Florida Skips Offshore Oil Binge but Still Pays

June 12, 2010

By DAMIEN CAVE

KEY LARGO, Fla. — When rigs first started drilling for oil off Louisiana’s coast in the 1940s, Floridians scanned their shoreline, with its resorts and talcum-white beaches, and said, No thanks. Go ahead and drill, they told other Gulf Coast states; we’ll stick with tourism.

Now that invisible wall separating Florida from its neighbors has been breached. The spreading BP oil spill has already reached the Panhandle, and if it rides currents to the renowned reefs and fishing holes on both Florida coasts, the Sunshine State could become a vacation destination with the rules of a museum: Look, but don’t touch.

All because other states decided to rely on oil and gas, angry Floridians say; all because, in the water, there are no borders — only currents that can carry catastrophes hundreds of miles.

“There’s nothing we can do,” said Mike McLaughlin, 42, while stretching tanned shark skin on a dock here in the Keys. “We’re just sitting here, waiting for it all to disappear.”

Many Floridians, of course, say they are heartbroken for Louisiana, and they still reserve their most caustic criticism for BP and government regulators.

But with oil continuing to gush from a well off Louisiana, Florida has grown angrier at its oil-friendly neighbors. Gov. Charlie Crist said in an interview last week that “there’s a certain level of frustration” with the fact that Florida gets little if any financial benefit from offshore drilling, even though it shares the environmental risks.

On docks and beaches, many Floridians are less measured, and compare Louisiana to a neighbor with a bonfire that has set their block ablaze.

To some extent, it is a conflict set up by history. Louisiana and Florida may share the Gulf of Mexico, but they are essentially oil opposites.

Ever since World War II, when tar balls washed ashore across the gulf after German U-boats sank Allied oil tankers, Florida officials have held drilling at bay with state laws and lobbying in Washington to protect their state’s bustling tourism industry.

Louisiana, meanwhile, is an oil state through and through that discovered its first commercial deposits in 1901 and started drilling offshore in 1947.

State officials have never looked back, and the resulting divide between the two states is now economic as well as cultural: oil and gas contribute about $65 billion a year to the Louisiana economy, according to the state’s oil and gas association, while in Florida, tourism accounts for about $60 billion.

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Tapping The New [Extended] Home-Buyer Tax Credit

November 16, 2009

By Amy Hoak
DOW JONES

House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather.

This winter, however, might be different, thanks to the extended–and expanded–first-time home-buyer tax credit.

“We’re going to see far more interest in the fourth quarter than we generally do because of the tax credit,” said Heather Fernandez, vice president of Trulia.com, a real estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she said.

The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers.

All buyers must have a binding contract on a house in place on or before April 30. The sale must close on or before June 30.

To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.

Income limits have risen as well. According to the IRS, the home-buyer tax credit now phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

Will Credit Spur More Buyers?

The inclusion of move-up buyers might inspire homeowners to take action and list their house if they’ve been putting it off, said Carolyn Warren, a Seattle, Wash.-based mortgage broker and banker and author of the book “Homebuyers Beware.”

“If somebody loves their home, it’s not going to entice them to sell. If they’ve had it in the back of their minds and really would like to move up, it might push them into doing it sooner than later,” Warren said.

The credit isn’t expected to have as large of an effect on move-up buyers as it has on first-time buyers, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The maximum tax credit is about 4% of the average purchase price for first-time buyers, but about 2% of the average purchase price for move-up buyers.

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U.S. clears 10 big banks to repay bailout funds

June 9, 2009

Tue Jun 9, 2009 6:09pm EDT
By Glenn Somerville

WASHINGTON (Reuters) – JPMorgan (JPM), Goldman Sachs (GS) and eight other top U.S. banks won clearance on Tuesday to repay $68 billion in taxpayer money given to them during the credit crisis, a step that may help them escape government curbs on executive pay.

Many banks had chafed at restrictions on pay that accompanied the capital injections. The U.S. Treasury Department’s announcement that some will be permitted to repay funds from the Troubled Asset Relief Program, or TARP, begins to separate the stronger banks from weaker ones as the financial sector heals.

Treasury didn’t name the banks, but all quickly stepped forward to say they were cleared to return money the government had pumped into them to try to ensure the banking system was well capitalized

Stock prices gained initially after the Treasury announcement but later shed most of the gains on concern the money could be better used for lending to boost the economy rather than paying it back to Treasury.

“If they were more concerned about the public, they would keep the cash and start loaning out money,” said Carl Birkelbach, chairman and chief executive of Birkelbach Investment Securities in Chicago.

Treasury Secretary Timothy Geithner told reporters the repayments were an encouraging sign of financial repair but said the United States and other key Group of Eight economies had to stay focused on instituting measures to boost recovery.

MUST KEEP LENDING

Earlier this year U.S. regulators put the 19 largest U.S. banks through “stress tests” to determine how much capital they might need to withstand a worsening recession. Ten of those banks were told to raise more capital, and regulators waited for their plans to do so before approving any bailout repayments.

As a condition of being allowed to repay, banks had to show they could raise money on their own from the private sector both by selling stock and by issuing debt without the help of Federal Deposit Insurance Corp guarantees. The Federal Reserve also had to agree that their capital levels were adequate to support continued lending.

American Express Co (AXP), Bank of New York Mellon Corp (BK), BB&T Corp (BBT), Capital One Financial Corp (COF), Goldman Sachs Group Inc, JPMorgan Chase & Co, Morgan Stanley (MS), Northern Trust Corp (NTRS), State Street Corp (STT) and U.S. Bancorp (USB) all said they had won approval to repay the bailout funds.

In contrast, neither Bank of America Corp (BAC) or Citigroup Inc (C), which each took $45 billion from the government, received a green light to pay back bailout money.

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Stress test results lift cloud of uncertainty

May 8, 2009

Results show 10 big banks need $75 billion in new capital; hope rises for economy’s recovery

Daniel Wagner and Jeannine Aversa, AP Business Writers
Friday May 8, 2009, 1:09 am EDT

WASHINGTON (AP) — Government exams of the biggest U.S. banks have helped lift a cloud of uncertainty that has hung over the economy.

The so-called stress tests — a key Obama administration effort to boost confidence in the financial system — showed nine of the 19 biggest banks have enough capital to withstand a deeper recession. Ten must raise a total of $75 billion in new capital to withstand possible future losses.

“The publication of the stress tests simply cleared the air of uncertainty,” said Allen Sinai, chief global economist at Decision Economics. “The results were not scary at all.”

He said it will take a long time for the banks to resume normal lending. But the test results didn’t alter his prediction that economy is headed for a recovery in October or November.

A key indicator of economic health will be released Friday morning, when the government announces how many more jobs were lost in April and how high the unemployment rate rose.

The stress tests have been criticized as a confidence-building exercise whose relatively rosy outcome was inevitable. But the information, which leaked out all week, was enough to cheer investors. They pushed bank stocks higher Wednesday, and rallied again in after-hours trading late Thursday once the results had been released.

Among the 10 banks that need to raise more capital, Bank of America Corp. (BAC) needs by far the most — $33.9 billion. Wells Fargo & Co. (WFC) needs $13.7 billion, GMAC LLC $11.5 billion, Citigroup Inc. (C) $5.5 billion and Morgan Stanley (MS) $1.8 billion.

The five other firms found to need more of a capital cushion are all regional banks — Regions Financial Corp. (RF) of Birmingham, Alabama; SunTrust Banks Inc. (STI) of Atlanta; KeyCorp (KEY) of Cleveland; Fifth Third Bancorp (FITB) of Cincinnati; and PNC Financial Services Group Inc. (PNC) of Pittsburgh.

The banks will have until June 8 to develop a plan and have it approved by their regulators. If they can’t raise the money on their own, the government said it’s prepared to dip further into its bailout fund.

The stress tests are a big part of the Obama administration’s plan to fortify the financial system. As home prices fell and foreclosures increased, banks took huge hits on mortgages and mortgage-related securities they were holding.

The government hopes the stress tests will restore investors’ confidence that not all banks are weak, and that even those that are can be strengthened. They have said none of the banks will be allowed to fail.

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Obama lifts Bush restrictions on stem cell research

March 9, 2009

Mon Mar 9, 2009 6:24pm EDT

By David Alexander

WASHINGTON (Reuters) – President Barack Obama lifted restrictions on federal funding of human embryonic stem cell research on Monday, angering abortion opponents but cheering those who believe the study could produce treatments for many diseases.

“We will lift the ban on federal funding for promising embryonic stem cell research,” Obama said to vigorous applause at a White House gathering.

“We will also vigorously support scientists who pursue this research. And we will aim for America to lead the world in the discoveries it one day may yield.”

Shares of companies specializing in stem cell research burst upward on the news, with Geron Corp (GERN) up by as much as much as 35 percent and StemCells Inc (STEM) up 73 percent at one point. Other related company shares rose, too.

The decision was a clear repudiation of the approach taken by Obama’s predecessor, George W. Bush. U.S. law limits the use of federal money to make human stem cells, but Bush tightened the restrictions even further to include work using such cells.
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Mortgage woes no longer just a “subprime thing”

March 5, 2009

Thursday March 5, 6:37 pm ET
By J.W. Elphinstone, AP Real Estate Writer

Delinquencies, foreclosures climb to almost 12 percent of US home loans in 4th quarter

NEW YORK (AP) — Foreclosures are spreading by epidemic proportions, expanding beyond a handful of problem states and now affecting almost 1 in every 8 American homeowners.

It’s an economic role-reversal: The economy, driven down by the collapse of the housing bubble, is causing the housing crisis to spread.

Figures released Thursday show that nearly 12 percent of all Americans with a mortgage — a record 5.4 million homeowners — were at least one month late or in foreclosure at the end of last year.

That’s up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007. In addition, the numbers now include many once-qualified borrowers who took out fixed-rate loans.

Data from the Mortgage Bankers Association also showed that a stunning 48 percent of homeowners who have subprime, adjustable-rate mortgages are behind on their payments or in foreclosure.

The reckless lending and borrowing practices in states like Florida, California and Nevada that were the epicenter of the problem are no longer driving up the nation’s delinquency rate.

Instead, foreclosures are being fueled by a spike in defaults in places such as Louisiana, New York, Georgia and Texas, where the economy is rapidly deteriorating and unemployment is climbing.

“It’s jobs. People are losing their jobs left and right,” said Houston real estate agent Michael Weaster.

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Maybe the meltdown wasn’t what you think

March 5, 2009

By Peter Brimelow, MarketWatch
Last update: 1:03 a.m. EST Feb. 23, 2009

NEW YORK (MarketWatch) — Everyone knows the crash of 2008 was caused by financial deregulation except Thomas E. Woods, who blames financial regulation, in the shape of the Federal Reserve.

Wood’s new book, “Meltdown: A Free Market Look At Why the Stock Market Collapsed, the Economy Tanked and Government Bailouts Will Make Things Worse” (Regnery), has just made it to the New York Times best-seller list without the benefit of any major reviews.

That’s par for the course for Woods, a fellow of the Auburn, Ala.-based Ludwig von Mises Institute, advocates of “Austrian economics,” a particularly embattled faction of free market economists — all of whom are pretty embattled, or out of fashion, right now.

The Austrian school argues that business cycles are driven by central banks keeping interest rates too low, expanding credit and encouraging uneconomic investments, creating an unsustainable boom, inevitably followed by a bust.

That’s what happened here, says Woods, most recently with the Fed’s multiple interest rate cuts to stave off the 2000-2002 slowdown.

Certainly debt levels had reached historic highs before the crash.

Woods argues the crash of 2008 was a perfect storm. Other elements included immense government pressure on mortgage lenders to loosen standards and make loans to questionably credit-worthy but politically favored demographic groups; and securitization, which spread the effects of bad mortgage lending around the world.

Recovery from even serious business cycle downturns can be swift, says Woods, citing the almost-forgotten 1920-1921 slump. But that’s because the federal government did not step in. It allowed excesses to correct themselves. In contrast, the federal government did step in after 1929, as Japan’s government did in a similar downturn after 1990. Result, according to Woods: the Great Depression in the U.S.; 18 years of stagnation in Japan.

If Woods is right, public policy is on exactly the wrong course right now in trying to sustain demand and asset prices, just as it was in the early years of the Depression. Ironically, this wrong course is bipartisan. Both Hebert Hoover and George W. Bush, Woods notes, were highly interventionist presidents just like their successors, contrary to myth.

Woods’ cheerful prediction: prolonged stagnation, eventual inflation and an even bigger collapse.

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