Higher FHA loan limits reinstated for high-cost housing markets

Uncle Sam has thrown California and other high-priced housing markets a lifeline.

President Obama on Friday signed into law a bill that will reinstate higher limits for Federal Housing Administration-backed mortgages in high-cost areas. In expensive housing areas such as Los Angeles and Orange counties, the limit for these FHA-backed loans had dropped to $625,500 from $729,750 on Oct. 1. The change became effective Friday.

Similar ceilings applying to loans that can be backed by Fannie Mae and Freddie Mac will not increase. The California Assn. of Realtors and its larger national partner association had lobbied for all of the loan limits to be reinstated.

The group is “pleased the Senate and House were able to come to a reasonable compromise,” LeFrancis Arnold, president of the group, said in a statement Friday. “However, we are disappointed that the Senate and House could not agree on increasing the loan limits for Fannie Mae- and Freddie Mac-insured loans.”

A bipartisan group of California lawmakers had sought the increase of all of the old limits, but the House Appropriations Committee had raised concern that Fannie and Freddie, which have received more than $150 billion in financial rescue money from taxpayers, have received public scrutiny for “questionable business practices,” The Times previously reported.

The FHA has also come under increased scrutiny as that agency said in a report to Congress this week that it could be headed for its own taxpayer bailout.

Rep. Brad Sherman (D-Sherman Oaks), in a statement said the passage of the higher FHA loan limits would help “prevent a collapse of housing prices in high-cost areas like Los Angeles.”

Indeed, sales of properties in Orange and Los Angeles counties with loans between $625,500 from $729,750 fell sharply, to 102 last month, according to San Diego real estate firm DataQuick. That was a 71% decline from 350 in September and down 71.5% from 358 sales in October 2010.

But the Obama Administration warned this week that it is important for the federal government to get out of the mortgage business.

“We believe that lowering the limits is a step to ensuring that private capital will return to the market,” Carol Galante, the acting FHA commissioner, said during a congressional confirmation hearing Thursday. “We understand at the present time FHA is playing a somewhat outsized role in the market.”

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-- Alejandro Lazo

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Photo: Simon Salloom, a Coldwell Banker real estate agent, walks through a condominium in Santa Monica. Credit: Mel Melcon/Los Angeles Times

Consumer Confidential: The skinny on Black Friday; Keds recall

Here's your feelin'-stronger-every-day Friday roundup of cosnumer news from around the Web:

-- Getting all excited about Black Friday? Maybe you'll want to rethink things. Here are a few reasons why the Black Friday hoopla is overblown: Most "door busters" are second-tier products offered by less-prominent brands. Many of the same deals you'll find in the store can be found online. Layaway may not be available until after Black Friday ends. Return policies are often stricter for discounted goods. And more importantly, you're likely to overspend after lining up in the middle of the night to get a shot at some bargain-basement product. The stores know this, which is why they go through all this fuss in the first place. Just saying. (MoneyWatch)

-- Heinz wants to make a little ketchup go a long way. The world's biggest ketchup maker's second-quarter profit fell as it focused on fast-growing emerging markets. But in struggling developed markets such as the U.S. and Europe, the company is shrinking product sizes and selling lower-priced products such as ketchup for 99 cents and beans for around a dollar to appeal to budget-stretched shoppers. Many people are living paycheck to paycheck, buying only what they can afford rather than bigger bottles or cans of food that might be more cost-effective. Heinz says that to meet consumers' needs, it is selling pouches instead of bottles of some of its condiments, reintroducing bean products to the U.S. and selling a bag of french fries for family dinners at $1.99. (Associated Press)

-- Heads up: Keds is recalling about 45,000 Know It All girls' shoes. Ornamental stars on the heel of the shoe may loosen, posing a laceration hazard. The company has received 27 reports of cuts and scratches resulting from metal stars that loosened from the heel of the shoe. This recall involves Keds girls' rubber-soled shoes. The shoes are black and pink, with white trim and a pink loop on the heel. The Chinese-made shoes were sold in girls' sizes 12 to 5 at various department stores and online retailers. Consumers should take them away from children immediately and contact Collective Brands to receive a gift card for $30 redeemable at Stride Rite stores or striderite.com. (ConsumerAffairs.com)

-- David Lazarus

Photo: Black Friday may be more hassle than it's worth. Credit: Al Seib / Los Angeles Times

 

California unemployment rate edges downward in October

California's unemployment rate fell by two-tenths of a percentage point to 11.7% in October as the state created 25,700 new jobs, the Employment Development Department reported. The agency also reported Friday that it had revised job growth in September upward, to 39,200.

The state's unemployment rate one year ago was 12.5%.

The total of net new hirings in 2011 so far was 192,900, a substantial number but still a long ways off for compensating for the 1.3 million jobs lost in the recession of 2007-2009.

The national unemployment rate for October was 9%.

Seven categories of employment showed growth in October: construction, information, financial activities, professional and business services, educational and health services and leisure and hospitality.

The number of jobs decreased in manufacturing, trade and transportation, government and mining and logging, the EDD said.

Unemployment in Los Angeles County also fell by 0.2% to 12.2% in October, the EDD said.

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Photo: Job-seeker at Career Partners center in Rosemead. Credit: Los Angeles Times

Two O.C. loan officers indicted in Las Vegas foreclosures case

In what appear to be the first criminal charges to stem from the fracas over improper foreclosures last year, two Southern California title loan officers have been indicted by a Nevada grand jury for allegedly filing tens of thousands of improper documents related to Las Vegas-area foreclosures.

The Clark County grand jury charged Gary Trafford, 49, of Irvine and Geraldine Sheppard, 62, of Santa Ana on 606 counts, alleging that the two headed up a vast “robo-signing” operation that resulted in the filing of tens of thousands of fraudulent foreclosure documents.

The documents were filed with the Clark County recorder’s office between 2005 and 2008, according to the indictment. The two title loan officers worked for the firm Lender Processing Services, a foreclosure processing company based in Florida that has been used by most of the largest banks in the nation to process home repossessions.

"I am not allowed to speak with you. I have no comment at this time," Sheppard said when reached by phone. Trafford could not be reached for comment.

The two have not been arrested, a spokeswoman for Nevada Atty. Gen. Catherine Cortez Masto told The Associated Press. LPS said in a statement that it is working with the authorities.

The company, in its statement, acknowledged that some of its documents were flawed but said the documents did not result in wrongful foreclosures.

“I am deeply committed to ensuring that LPS meets rigorous standards of professional conduct and operating excellence,” LPS Chief Executive Hugh Harris said in the statement. “I have full confidence in the ability of our leadership team and over 8,000 dedicated employees to deliver on that commitment."

Trafford is charged with 102 counts of offering false instruments for recording, a felony; false certification on certain instrument, a felony; and notarization of the signature of a person not in the presence of a notary public, a misdemeanor.

Sheppard is charged with 100 counts of offering false instruments for recording, a felony; false certification on certain instruments, a felony; and notarization of the signature of a person not in the presence of a notary public, a misdemeanor.

The indictment says that two title loan officers directed the fraudulent notarization and filing of paperwork used to initiate foreclosure on homeowners in the Las Vegas area. Nevada alleges that the two directed their employees to forge foreclosure documents, notarize the signatures on the documents they had forged and then file the fraudulent paperwork with the Clark County recorder's office in order to begin foreclosures on homes throughout the county.

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Photo: A foreclosure sign in front of a bank-owned home for sale in Las Vegas. Credit: Robyn Beck / AFP/Getty Images

Construction of new homes increases, except in West

Construction of single-family U.S. homes appeared to pick up last month, but not in the West.

Single-family homes were started at a rate of 434,000, a 5.1% increase over the prior month.

The increase follows news of an increase builder sentiment. Economists called the jump in new single-family-home starts a positive sign, as the nation's beleaguered real estate market was at least showing life.

"This was a good report," Patrick Newport, U.S. economist with IHS Global Insight, wrote in a note Thursday. "It has supporting evidence that the single-family market is finally getting off the mat and that the multi-family segment is continuing to make small strides, and that we should expect good housing starts numbers the rest of this year."

Overall housing starts -- including the volatile apartment building sector -- fell in October 0.3% over the prior month, to a seasonally adjusted annual rate of 628,000. The decline was attributed to a drop in apartment building construction.

The West was the only region that did not see an increase, falling 16.5%. Starts were up 17.2% in the Northeast, 9.7% in the Midwest and 1.6% in the South.

Another measure of housing activity considered less volatile than starts, permits issued, also showed new building gaining ground last month. New permits in October were at a seasonally adjusted annual rate of 653,000, 10.9% above September and 17.7% above October 2010.

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Victims of improper foreclosure practices can submit claims

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-- Alejandro Lazo

Photo:  Suburban homes under construction in Rancho Cucamonga. Credit: Getty Images

 

Fewer home loans going bad but foreclosures on rise

Far fewer borrowers are delinquent on their home loans these days, a Mortgage Bankers Assn. report shows, but new foreclosure actions are on the rise in states like California, showing the nation still has much pain to endure before the housing crisis subsides.

Private analysts say the nation is only halfway through the wrenching grip of the foreclosure epidemic. And that's reflected in the housing market, where home sales and prices continue to sag in many areas despite record low interest rates.

Five years into the crisis, 7.99% of all U.S. home loans were behind by at least one payment in the third quarter but not yet in foreclosure, the mortgage trade group said Thursday. That's down by nearly half a percentage point from the second quarter and more than a percentage point from a year earlier.

But the group's statistics showed how banks are reasserting themselves against troubled borrowers after slowing the process for nearly a year amid increased scrutiny from regulators.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.08%, up from 0.96% in the second quarter. California had the nation's fifth-highest rate of new foreclosures: nearly 1.5% in the latest quarter.

The percentage of U.S.loans somewhere in the foreclosure process at the end of the third quarter was 4.43%, up slightly from a year earlier. The rate of homes in foreclosure was highest in Eastern and Midwestern states that route all home repossessions through the courts, with Florida at more than 14% and New Jersey at 8%.

California, which for years had one of the highest rates of loans in foreclosure, has fallen to 19th on the list because its foreclosure process doesn't normally require court action and is among the most streamlined in the nation. In other words, even as the rate of new foreclosures increases, the repossessions are being handled quickly.

Of states that handle foreclosures without going through court procedures, Nevada was the only one high on the total foreclosure-rate list, with nearly 8% of its mortgages in foreclosure.  

In a separate report Thursday, mortgage finance giant Freddie Mac said the typical rate on a 30-year fixed-rate home loan early this week was an even 4.0%, a statistically insignificant rise from 3.99% a week earlier. The 15-year fixed loan rates rose to 3.31% from 3.30%.

Expressing some optimism, Frank Nothaft, an economist for the trade group, said the economy "is showing potential for further gains in the near term" as the near-record low mortgage rates persist.

Retail sales rose for the fifth straight month in October, consumer confidence rose for the third straight month in early November to the highest reading since June, and home-builder confidence exhibited a back-to-back monthly increase in November to the strongest level since May 2010, Nothaft said, citing various surveys.

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Photo: San Jose protesters target Bank of America. Credit: Paul Sakuma / Associated Press

Consumer Confidential: Retail sales, reliable cars, Whole Foods

Here's your takin'-it-to-the-streets Tuesday roundup of consumer news from around the Web:

--We're shopping, and that's good for the economy, but we're in danger of living beyond our means. Retail sales rose in October, suggesting the economy started the fourth quarter with some zip to its stride. Another report showed wholesale prices fell during October as gas prices dropped, signaling a cooling of fuel-driven inflation pressures that have hit consumers' pocketbooks. But analysts say Europe's debt crisis could push the United States back into recession early next year. Moreover, consumer spending is rising faster than incomes, which can't be sustained. What do we need? Jobs. Lot of them. (Reuters)

--Getting a great deal on a set of wheels is one thing. Keeping those wheels running is another. So which cars are cheapest to maintain? Toyota gets the top spot for reliability, followed by Hyundai. The rankings were compiled by auto diagnostic and repair website CarMD, which collects repair data from its network of 3,000 U.S. mechanics. Rounding out the top 5 were Honda, Ford and General Motors, followed by Mitsubishi, Nissan, Kia, Volkswagen and Chrysler. Now you know. (MoneyWatch)

--Whole Foods wants to protect your little fingers while also doing some good for people abroad. The company's new initiative with Comfort the Children and Allegro Coffee allows shoppers to make a direct, positive influence on Kenyan women and special needs children through products called LIFE Jackets. LIFE (Livelihood, Investment, Financials and Empowerment) Jackets are reusable canvas cup sleeves that protect the environment as well as your hands from hot beverages. The total 99-cent cost of each cup sleeve goes straight to Comfort the Children, a nonprofit that helps poor Kenyan mothers with special needs children. Nice. (DailyFinance)

-- David Lazarus

Photo: Shoppers are coming out in force as the holidays approach. Credit: Gary Friedman/Los Angeles Times

 

Bond yields jump in France, Belgium, Austria as crisis spreads

More dominos may be about to fall in Europe.

A new selling wave swamped government bond markets on the continent Tuesday, driving yields sharply higher in France, Belgium, Austria and Spain, among others.

Despite its AAA-credit rating, France’s 10-year bond yield soared to 3.68%, up from 3.42% on Monday and the highest since April. The yield has surged from 2.50% in early September.

Belgian 10-year bond yields rose to 4.91% from 4.59% on Monday.

The jump in interest rates signals a further spreading of the debt-crisis contagion from Italy to other countries, as investors grow increasingly fearful about governments’ abilities to pay their debts.

“The respite from Eurozone issues was ephemeral at best as changes in leadership in Italy and Greece [last week] were not enough to convince markets that the debt issues were any closer to resolution,” George Goncalves, interest rate strategist at Nomura Securities, wrote in a note to clients.

Making matters worse: A new European recession seems increasingly likely, which will only make it more difficult for governments to dig out of their debt holes.

Rocketing yields on Italian bonds over the last two months opened a new and more dangerous chapter in the debt crisis. Italy’s woes led to the departure of Prime Minister Silvio Berlusconi over the weekend.

On Monday Italy paid a yield of 6.29% to issue $4 billion in new five-year bonds. The rate was the highest in 14 years. By contrast, the U.S. Treasury pays just 0.90% on five-year debt.

Financial markets have been looking to the European Central Bank to halt the contagion. In theory, the ECB could commit to buying unlimited quantities of bonds to try to hold rates down. But the ECB has seemed reluctant to act aggressively.

“In the prophetic words of Sting, the market is sending out an SOS to ECB policymakers,” Goncalves said. “However, a good response from the ECB does not seem forthcoming.”

European stock markets ended mostly lower for a second straight session. The Italian market fell 1.1%. French shares slid 1.9%. But stocks remain above their September lows.

The euro currency slipped 0.6% to a one-week low of $1.355.

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Photo: A six-meter-high depiction of Belgian cartoon hero Tintin and his dog Snowy is seen atop the Lombard Building, backdropped by the Brussels' skyline. Credit: Geert Vanden Wijngaert / Associated Press

Home prices fall in October as mortgage changes take hold

Uncle Sam’s steps to exit the mortgage market took a toll on Southern California’s housing market in October as fewer higher-cost homes sold.

The median price, the point at which half the properties sold for more and half for less, dropped because sales of more expensive homes took a dive with government-backed financing for those homes scaling back last month.

The region’s median sale price was $270,000 in October, according to real estate market tracker DataQuick. That was the lowest since January, a 3.6% decline from September and a 4.6% drop from October 2010.

“For a few months now, lower prices and amazingly low mortgage rates have kept resale activity slightly ahead of last year,” John Walsh, DataQuick president, said in a statement. “Of course, that’s not saying a lot when you consider sales were 25% to 30% below average.”

With 16,829 new and previously owned homes sold, October’s sales pace was 29.3% below the average for that month going back to 1988, when DataQuick records start. Sales were down 7.3% from September and up 0.5% from October 2010.

One big change to the market last month was the federal government's first step to reduce its role in the mortgage business by lowering the size of home loans it will guarantee.

The government currently supports about 90% of new mortgages — essentially propping up the home loan market after credit dried up and home sales plunged in the wake of the subprime mortgage crisis. The loan limit determines the maximum size of a mortgage that the Federal Housing Administration, Fannie Mae and Freddie Mac can buy or guarantee.

So-called nonconforming jumbo loans that are offered on the private mortgage market typically require bigger down payments and carry a higher interest rate, resulting in higher monthly payments for borrowers. In Los Angeles and Orange counties, the limit for FHA, Fannie and Freddie loans dropped from $729,750 to $625,500.

According to DataQuick, sales of properties in those two counties with loans between those limits fell 71% from the month before and 71.5% from a year earlier.

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Photo: A home for sale in Altadena. Credit: Associated Press

Federal Housing Administration could require bailout, audit finds

There is a nearly 50% chance that the Federal Housing Administration will require a taxpayer bailout as the struggling housing market continues to eat away at the cash reserves of the agency, which insured about one in seven residential mortgages issued this year, according to a government audit released Tuesday.

The reserves, which are not supposed to be below 2% of projected losses, continued to fall this year, dropping to 0.24% from the already seriously low level of 0.5% last year, the report said. The drop was caused by the FHA's cash reserves falling by $2.1 billion, to just $2.6 billion.

But under the report's baseline projection for housing prices, which assumes they will drop 5.6% in 2011 before rebounding next year to 1.3% growth, the FHA would not need a bailout, the report said. In fact, the reserve fund would return to its mandated 2% level by 2014, slightly earlier than projected last year.

"It would take very significant declines in home prices in 2012 to create a situation in which the current portfolio would require any kind of additional support," said acting FHA Commissioner Carol Galante. She said the agency's reserve fund continues to be "actuarially sound."

But the report by an independent actuary found that if home prices continue to decline next year, the FHA probably would need a bailout. The size of the bailout would depend on how much housing prices drop.

If the FHA needs taxpayer money to keep it afloat, it does not have to seek approval from Congress or the White House. The agency has existing authority to tap the U.S. Treasury for funds.

The FHA, which was created during the Great Depression to help revive a devastated housing market, has never required taxpayer assistance. It has been playing a major role in the housing market since the subprime housing bubble burst, and most of the losses come from loans it guaranteed that were made before early 2009.

With its reserves dwindling because of losses on insurance for those loans, the FHA took steps in late 2009 to improve its finances. Those steps included requiring higher premiums and better credit scores from borrowers. Those moves have helped buffer the agency against the continued slide in housing prices, and the high average credit score of 700 for borrowers whose loans were insured last year set a record for the FHA, Galante said.

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-- Jim Puzzanghera in Washington

Photo: A house for sale in Glendale in September. Credit: Getty Images

All major global economies headed for slowdown: OECD report

Every major global economy, including China, Russia and the United States, is headed for a slowdown, according to a new report from the Organization for Economic Cooperation and Development.

The Paris-based group tracked composite leading indicators -– which predict economic turning points -– and found that growth levels around the world are set to drop for the seventh straight month.

The Eurozone has been plagued by a debt crisis and political upheaval. On Sunday, economist Mario Monti took over from Silvio Berlusconi as Italy's prime minister amid hopes that a new government will implement austerity measures encouraged by the European Union.

George Papandreou, stepped down as prime minister of Greece last week and was replaced days later by banker Lucas Papademos, who inherited an unpopular bailout plan designed to keep the country from teetering into default.

In such an unstable environment, the OECD's indicators hit their lowest overall level since 2009, slipping to 100.4 in September, from 100.9 in August. Any figure above 100 represents a long-term trend of economic activity.

Economic expansion in the U.S. is losing momentum, down to 101.2 from 101.5 a month earlier, according to the report. Germany is bound for the biggest slide, down to 99.1 from 100.4, it said
At 97.5, Italy has the report's lowest score in Europe, and worldwide, it is higher than only Brazil's 94 and India's 93.8.

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-- Tiffany Hsu

Photo: The flags of Italy, center, and the European Union, right, fly from the Quirinale palace, the office of Italy's president, in Rome. Credit: Alessia Pierdomenico / Bloomberg

Warren Buffet laments that Europe has no Bernanke or Paulson

 

 

Billionaire investor Warren Buffett said Europe lacks the type of strong government financial officials with broad powers who helped stabilize the U.S. economy in the fall of 2008, a deficiency that is prolonging the debt crisis caused by Greece and Italy.

Speaking on CNBC on Monday morning, Buffet said it's not clear who in Europe could play the role that Federal Reserve Chairman Ben S. Bernanke, former Treasury Secretary Henry M. Paulson and former President George W. Bush did in 2008 in assuring markets they would do whatever it took to stem that financial crisis.

The void has led to a run on European debt and investments, Buffett said.

"It’s very very tough to stop a run," said Buffet, whose Berkshire Hathaway Inc. sold all of its European sovereign debt more than a year ago and is not ready to jump back in. "It takes a … widespread belief that the people in authority will do whatever it takes to stop it and they have the ability to do whatever it takes."

"We believed Bernanke and Paulson and the president of the United States when they said that in September of 2008," Buffet said. "There's no one in comparable authority in Europe."

While he's encouraged by the new political leadership in Greece and Italy, Buffet said he's still concerned about the Eurozone's financial situation. Berkshire Hathaway owns no stock in any bank within the zone, he said.

But Buffet appeared confident that Europe eventually would overcome the crisis.

"Europe has all kinds of strengths. Europe is not going to go away," Buffet said. "Ten years from now, we will be selling more goods to Europe and buying more goods from Europe and they will have more GDP per capita. But getting from here to there may be a problem."

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-- Jim Puzzanghera in Washington

 

Entrepreneurship tough for young adults, poll says

The lagging economy is preventing many young adults from becoming entrepreneurs, according to a new poll released Thursday.

A survey of the millennial generation -– those ages 18 to 34 -– found that more than half of those polled either wanted to start a business or already had started one.  But 38% of the potential entrepreneurs said  he poor state of the economy has delayed the process, according to the Young Invincible, in conjunction with Lake Research Partners and Bellweather Research.

A higher percentage of minority youths -– 64% of Latinos and 63% of African Americans -– want to own their own companies. 

Despite a strong entrepreneurial desire, only 8% of the young adults are in business for themselves, the survey found.

Young people face many obstacles to entrepreneurship, including lack of knowledge, inability to access capital, few mentors and current debt burdens.

The poll was released before the third annual Globe Entrepreneurship Week, which runs from Nov. 14-20.  

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Stock plunge continues as European fears grow [Updated]

New unemployment claims fall again in positive sign for job growth

-- Angel Jennings

Photo: Entrepreneurs show their new men's clothing line EBO (Everything But Ordinary). Credit: Iris Schneider / Los Angeles Times

New unemployment claims fall again in positive sign for job growth

The number of people who filed for unemployment benefits last week dropped again to 390,000, the lowest level since April, continuing a trend that bodes well for job growth.

The number of initial jobless claims was down 10,000 from the previous week's revised figure of 400,000, the Labor Department reported Thursday. The initial figure for two weeks ago was 397,000, but was revised upward.

Still, over the last month, the average weekly number of jobless claims is right at 400,000 -- a key figure that economists say indicates a decrease in the unemployment rate.

"The wheels of the economy are spinning fast enough to put Americans back to work," said Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi in New York. "The unemployment rate could fall as much as one percentage point over the next year now if these claims data stick at this level."

The government data come after sluggish but steady job growth in October. The economy added 80,000 jobs and the unemployment rate dropped to 9% from 9.1% in September, the Bureau of Labor Statistics reported last week.

The weekly unemployment claims report helped give a bit of a boost to the stock market Thursday amid continued concerns about the European debt crisis. The Dow Jones industrial average was up about 40 points in early trading after Wednesday's big sell off.

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Unemployment falls; economy sluggish

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-- Jim Puzzanghera in Washington

Photo: People line up at a job fair in San Francisco on Wednesday. Credit: Getty Images

 

 

Bipartisan trio of U.S. senators to introduce federal sales tax collection bill

Congressional efforts to pass a nationwide law enabling all states to collect sales taxes on Internet purchases is gaining momentum.

A bipartisan trio of senators scheduled a Wednesday morning briefing with reporters to unveil legislation dubbed the Marketplace Fairness Bill.

The proposal is backed by Sens. Richard J. Durbin (D-Ill.), Lamar Alexander (R-Tenn.) and Michael B. Enzi (R-Wyo.).

The bill, one of at least three now in Congress, comes as California and other states battle with Internet retail giant Amazon.com over the sales tax. Amazon has agreed to start collecting sales taxes in California beginning in September 2012. The company fought an earlier state law by threatening to wage a referendum campaign to overturn the measure, calling it unconstitutional.

The new federal legislation gives states two ways to collect billions of dollars in unpaid sales taxes when consumers buy products from Internet sellers, such as Amazon, Overstock.com or EBay.com. States that become part of a multi-state legal agreement and bring their sales tax codes into conformity with other states can compel Internet retailers to charge and remit the sales tax.

But other states that don't sign the interstate compact still could collect the taxes if they adopt minimum standards to simplify the levies.

The Durbin-Alexander-Enzi bill would exempt all sellers with annual sales of less than $500,000 from collecting individual state sales taxes.

A fact sheet distributed by their offices stressed that the measure "does not create new taxes or increase existing taxes." 

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-- Marc Lifsher

Photo: An Amazon distribution center in Goodyear, Ariz. Credit: Ross D. Franklin / Associated Press

Californians pessimistic about economy, plan lighter holiday spending

The vast majority of California residents say the state is on the wrong track, with an economy that they consider to be just fair or poor with no signs of recovering.

Nearly 9 in 10 say that job opportunities aren’t good and almost half say that those living in California are worse off than people in other states, according to a new report from Citibank.

Still, 63% believe that the state is an excellent or at least good place to reside, according to the survey.

But that doesn’t mean they’re shielded from recessionary winds. Nearly 60% said they’ve forever changed their spending and saving habits. Nearly three-quarters are eating out at restaurants less, with two thirds avoiding premium foods and other gourmet offerings.

More than 70% have backed off credit card purchases, and nearly the same number are now using coupons. Four in 10 Californians have shaken up their living situation to save money.

During the holiday season, only 12% plan to spend more money than they did last year.

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-- Tiffany Hsu

Photo: Tim Boyle / Getty Images

California shifts unemployment insurance payments to debit cards

The unemployment insurance checks aren't in the mail.

But that doesn't mean that eligible out-of-work Californians don't get benefits.

On Tuesday, the Employment Development Department, the state government agency that runs the unemployment and disability insurance programs, announced that it's completed the process of issuing 1.8 million debit cards to people receiving benefits.

The cards, which can be used to draw cash from Bank of America and some other ATM machines, are more convenient and secure than old-fashioned paper checks, the agency said.

"This unprecedented transition to paperless benefits is one of the largest pre-paid card roll-outs in the country," said Employment Development Department Chief Deputy Director Pam Harris. "It modernizes the purchasing power of our customers and puts them on par with the rest of the buying public."

Since December of 2010, the agency has paid out $3.7 billion in benefits for the disability and unemployment insurance programs.

The agency's debit cards provide recipients and the state with a number of benefits:

- They have no ATM fees, if used carefully.

- Beneficiaries without bank accounts do not have to pay check-cashing fees.

- They can't be lost in the mail or not delivered in the event of natural disasters.

- They can be used for most purchases anywhere that Visa debit cards are accepted.

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Fewer Americans seek unemployment aid

-- Marc Lifsher

Photo: Unemployed people at the Westminster job center in Orange County. Credit: Jaec Hong/Associated Press

Fed official: Public deserves detailed policy road map

A top Federal Reserve official thinks the central bank should get very detailed about how it would change policy in the future, depending on what happens in the economy.

Narayana Kocherlakota, president of the Fed’s Minneapolis bank and a voting member of the Federal Open Market Committee, on Tuesday called for the Fed to provide a “public contingency plan” spelling out potential future moves.

In a speech in Sioux Falls, S.D., Kocherlakota said the idea of such a plan would be to “provide clear guidance on how [the Fed] will respond to a variety of relevant scenarios” -- for example, how much short-term interest rates would be raised if inflation were to rise above a certain level.

The Fed has been talking a lot more lately, internally and publicly, about how best to communicate its views on the economy and possible policy changes. To that end, Chairman Ben S. Bernanke earlier this year agreed to hold periodic press conferences.

Some Fed officials, including Kocherlakota, want to push the central bank into laying out specific policy reactions to economic shifts.

From his speech:

For example, the Committee recently projected that in 2011, core inflation will be 1.9% and that it will fall back in 2012 and 2013 to around 1.7%. Suppose hypothetically that core inflation, and the outlook for core inflation, has risen to 3% by the end of 2013, while unemployment has fallen to between 8% and 8.5%. A public contingency plan would allow the public to know what the Committee intends to do in that eventuality.

Kocherlakota was one of three Fed officials who dissented at the central bank’s August and September meetings, when the majority of policymakers voted to offer more help to the economy. At the August meeting the Fed said it was likely to hold its benchmark short-term rate near zero for at least another two years.

Kocherlakota thought that was going overboard. He believes that laying out a specific plan of what the Fed would do, based on what actually happens in the economy, would allow businesses and consumers to make better decisions about spending, investing and hiring.

“I’ve heard from businesses that policy uncertainty is curbing their incentive to hire or invest,” Kocherlakota said. “Similarly, I’ve heard from consumers that policy uncertainty is curbing their incentive to spend. A public FOMC contingency plan can help reduce the level of policy uncertainty being created by the Fed.”

Other Fed officials, however, have raised concerns that such a plan could hamstring the central bank.

Kocherlakota doesn’t buy it:

No contingency plan can ever be definitive. Inevitably, the FOMC will learn things that it did not expect to learn, and events will occur that it did not expect to occur. And so there may be conditions that force the FOMC to deviate from a chosen plan. However, having a public plan, and couching its decisions against the backdrop of that plan, will enhance Federal Reserve transparency, credibility, accountability and consistency.

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Photo: Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis. Credit: Federal Reerve

Dick Bove is sick of all the bad news

Richard X. Bove is sick of all the bad news.

The widely quoted Rochdale Securities analyst –- who makes frequent appearances on cable news shows -- is now taking aim at what he views as the media's doomsday-like interpretation of financial events.

In an analyst's research note (a medium best-known for its staid commentary on specific companies or economic events) Bove on Tuesday delivered a sarcastic missive titled "Is It Possible That the World Is Not Ending?"

"Like most people every morning I wake up, look at the news on TV and scan three newspapers," he wrote. "The message is always the same. It is time to slit my throat and leave this morass of misery."

From the European debt crisis to the U.S. housing market, Bove laments, the focus is overwhelmingly negative.

Bove is known for being unusually frank in his commentary.

His point is that perhaps things are not as bad as “the media” would make them seem.

"The GDP figures for the third quarter were up by 2.5%. Just about every banking company that reported earnings beat their estimates and some had record revenues. Approximately 73% of the S&P companies reporting beat earnings estimates at last count,” he continued. “In October, the S&P 500 rose 10.8%; bank stocks were up by 13.4%."

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Photo: Richard X. Bove

 

Consumer Confidential: MyFord upgrade, wealth gap widens

Here's your I-melt-with-you Monday roundup of consumer news from around the Web:

— Ford is getting some upgrades. Ford Motor, stung by falling quality ratings because of its glitch-prone MyFord Touch system, is planning a major fix that it hopes will fix the problems. Early next year, Ford is sending flash drives with a software upgrade to approximately 250,000 U.S. customers with MyFord Touch and MyLincoln Touch, the equivalent system in Ford's luxury Lincoln brand. Owners can do the upgrade themselves in about 45 minutes, or dealers will do it for free. Ford is still deciding how it will offer the upgrade to 200,000 buyers outside of the U.S. MyFord Touch, which debuted last year on the Ford Edge, replaces traditional dashboard knobs and buttons with a touch screen. Drivers control climate, navigation, entertainment, phone calls and other functions using touch or voice commands.

— The wealth gap between young and old is widening. The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data. Although people typically accumulate assets as they age, that ratio is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago. The analysis reflects the impact of the economic downturn, which has hit young adults particularly hard. More are pursuing college or advanced degrees, taking on debt as they wait for the job market to recover.

— David Lazarus