Credit Crunch Deepens Municipal-Level Struggles [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Macro Effects of the Housing Slump

Financial Crisis Takes a Toll on Already-Squeezed Cities. “Tax receipts from retail sales and property values [are] plummeting as unemployment rises along with fuel costs… Add to that the abrupt and unexpected loss over the last several weeks of usually sound investments and credit in the municipal bond markets — the place to which local governments turn for relatively cheap, fast money… Los Angeles and Chicago are each facing shortfalls in the $400 million range. New York’s Mayor Michael R. Bloomberg last month ordered $1.5 billion in cuts over two fiscal years, and the financial situation is worsening by the day as Wall Street continues to struggle.” (NY Times, Oct. 7) 

Look Who’s Hiring: Treasury Seeks Asset Managers. “The U.S. Department of the Treasury announced Monday that it plans to add new staff members to manage the troubled assets bought through the Emergency Economic Stabilization Act law… The Treasury will hire managers for mortgage securities separately from managers who will handle whole mortgage loans, the government said. Securities asset managers will deal with prime, Alt-A and subprime residential MBS as well as commercial MBS. Whole loan asset managers, on the other hand, will handle a range of products spanning residential first mortgages, home equity loans, second liens and commercial mortgage loans, according to the Treasury.” (Housing Wire, Oct. 6)

Economy Creates Surge In Homeless Mass. Families. “There's been a surge in the number of homeless families in Massachusetts -- a spike that has overwhelmed the state's shelter capacity… It's an increase driven by the sour economy, rising energy costs, escalating unemployment and shortage of affordable housing. For the first time, the state is tracking how many families are winding up homeless due to foreclosures… In just the past 12 months, the number of homeless families living in Massachusetts motels has skyrocketed from 17 in September 2007 to 550 in September 2008. That's on top of another 1,800 or so families in shelters.” (AP via Yahoo! Finance, Oct. 6)

Massachusetts Leads States, Cities Looking to Revive Debt Sales.  “Massachusetts plans to sell $750 million in short-term notes this week, leading state and local governments seeking to revive debt sales after financial turmoil inhibited their ability to borrow since mid-September. Massachusetts approached the U.S. Treasury about possible financing if it can't raise the money from private investors. California, seeking to borrow $7 billion next week, also has communicated with federal authorities, with officials saying they may run out of cash by month-end without the funding.” (Bloomberg, Oct. 6)

Jobless Financial Adviser Kills Family, Self Over Money Troubles. “An unemployed financial adviser shot and killed his wife, his mother-in-law and three children before taking his own life in a gated community in the San Fernando Valley region of Los Angeles. Their identities have not yet been released. The 45-year-old gunman had worked for Price Waterhouse and Sony Pictures.” (USA Today, Oct. 6)

                                                       

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Comments

[whidbey:]

The municipalities are probably not good credit risks for any lender. California has no interest in solvency and its legislature is completely controlled by left leaning members who feel that debt obligations can be walked away from hurting only the property owners, not ordinary people. It is the attitude risk that keeps California out of the CP market and everyone knows that. Other cities have usually got revenue bonds to offer - with employment and home sales down no one wants that credit. Even FF&C GOs have little appeal when it is clear cities are living beyond their income. NO, the problem of solvency is a mile wide and a mile deep.

2008 Oct 07 12:00 PM