Posts Tagged ‘Housing’

>Foreign firms continue to come to Switzerland despite problems in "paradise"

30/03/2011 in Business, Hedge Funds, Housing, Living, News, Switzerland
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SWITZERLAND – A MAGNET FOR FOREIGN FIRMS

Mar 24, 2011 – 21:27


Cracks showing in business oasis Switzerland

There are not many empty flats left in Swiss cities

There are not many empty flats left in Swiss cities (Keystone)


by Matthew Allen, swissinfo.ch

A shortage of affordable homes and international schools, along with a prolonged row over tax, threatens to weaken Switzerland’s magnetic pull for foreign firms.

Lured by low tax rates and a high standard of living, a steady stream of overseas companies have set up operations in Switzerland in recent years. But there are signs of growing discontent from new arrivals.


Top of the grumble list is the astronomic rise in house prices in Geneva, Zurich and Zug – a trend that has already priced many locals out of the market, and threatens to do the same for foreign workers.

“The new Eldorado has become even more of a magnet and there is a risk that this could result in a social crisis,” Emmanuel Fragnière of Geneva’s HEG School of Business Administration told swissinfo.ch earlier this month.

“Politicians are very happy to collect the new taxes, but they need a coherent policy to promote the location that takes into account structural difficulties.”

Problems are also showing up in Zug and in Rolle, situated between Geneva and Lausanne.


Noise control

“No one imagined what would happen with so many people from outside Switzerland coming here to work,” Rolle Social Democrat politician Patrick Bréchon told swissinfo.ch.

“They are not really creating local jobs. The housing market is like a jungle. House prices have shot up unbelievably and infrastructure – transport, roads and schools – is really behind.”

Local complaints have also been matched with anecdotal evidence of foreign workers finding it tough going in their newly adopted country. The British magazine, the Economist, interviewed newcomers complaining of boredom and a lack of places in international schools.

“You need muscle to get kids in international schools,” said one financier named only as Alex. “Otherwise it’s a Swiss school, where your kids will find it hard to settle.”

Others experienced problems adapting to stricter Swiss regulations on noise and refuse collection than they were used to at home.

Geneva-based relocation expert Francois Micheloud acknowledged that the huge influx of foreign firms and workers had created some structural problems, made worse by slow planning and construction rules.


Tax uncertainty

But he firmly believed that solutions could be found to ease the pressures, such as developing rural areas north of Lausanne or in canton Vaud.

“We are not like Monaco – a small piece of rock where you cannot build any more,” he told swissinfo.ch. “Bottlenecks will be resolved by companies spreading out to areas that are still within reach of Geneva airport.”

Switzerland’s vaunted tax competitiveness is also coming under sustained pressure from the European Union. The Swiss authorities have made noises that the corporate tax system could be revamped to meet some EU demands, but nobody knows how this could be done.

“Companies interested in relocation to Switzerland should know what the tax rules will be like in future,” tax expert Stephan Kuhn of Ernst & Young told swissinfo.ch. “They would not come to Switzerland if the tax system is unpredictable and subject to major increases.”

British-based companies, on the other hand, received a boost from Wednesday’s budget announcement that tax rates would be cut by two per cent in the next three years, a full percentage point more than previously thought.


Incentives remain

This prompted advertising giant WPP to consider relocating its tax base back to Britain from Ireland, where it had recently moved.

In a recent interview in the British Observer newspaper, the chief executive of pharmaceutical giant GlaxoSmithKline, Andrew Witty, chided British firms for heading to cheaper tax regimes, saying they had broken their bond with society.

“We could go, in theory, anywhere for a low tax rate. But first of all, how do you know that country isn’t going to change its tax rate in ten minutes?” he said.

However, Britain’s new 23 per cent rate would still be higher than the Swiss burden. Depending on where a company is based, combined effective federal and cantonal rates vary between 24.5 and 14 per cent.

Francois Micheloud is convinced that the relocation of foreign firms to Switzerland will continue “for many years to come”.

“The incentives for companies to come to Switzerland remain the same as before: competitive tax rates, excellent transport links, a central European location, access to a highly skilled work force, clusters of business competence and flexible labour laws,” he told swissinfo.ch.

“And Switzerland is still a delightful place in which to live.”


Matthew Allen, swissinfo

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EF, Switzerland
@Rene. What about the greed of the swiss communities???? I have lived here for 6 years and whenever foreigners complain (which often involves simply asking a question) they are hit with absolute vitriol from the Swiss who constantly want to proclaim that people don’t integrate or that people are filth because they don’t blindly accept the “CH is perfect” mantra. Why can’t the Swiss take responsibility for offering up their country to foreign companies for the sake of receiving more tax revenue and more consumption (especially with regard to real estate)??? Where are the Swiss peoples vitriol about that? I’ve known many educated foreigners who came with the goal of integrating– but the reality is that the Swiss are often inhospitable and downright unwilling to invite others into their coveted world. So foreigners are forced to rely on each other. Why do you Swiss want to create a society that is so fragmented– with different groups staying in different ghettos????? You will pay for it in the end. And it is all due to your own GREED. Companies and expats can’t come here without your approval– you have been courting these companies to come here. You had better start thinking ahead as to the human and social consequences of your greed and stop blaming others.

Lisa, Switzerland
We’ve lived here for 4 years. In that time we have had a bike and a scooter stolen right from our locked apartment building to which our managers replied “Shouldn’t have left them there” even though everyone else does. My husband had his backpack stolen off the train. He had placed it behind him rather than on a seat which then takes up a seat someone else could have used. When the train stopped in Bern a man pulled it out and took off. At the next stop when my husband went to get up and noticed it missing, the woman sitting next to him said a man took it at the previous stop. When my husband asked her why she didn’t say something she just shrugged her shoulders. That was certainly being helpful (not). A good portion of the kids here act more like thugs than decent human beings. I could go on and on. The truth is there is crime here just like everywhere else, what bothers me is that the Swiss act so much more superior than everyone else, when the truth is they are no better or worse than the rest of civilization.

Rene, Switzerland
@ EF, Switzerland: Your concluding question: “But then again, why don’t the companies ask more questions so they understand more than just what the tax situation will look like?” The answer is: Corporations couldn’t care less about the consequences about moving their operations (operations, headquarters or P.O. Box?) to Switzerland other than the “low tax haven”, fringe benefits in the name of higher net profits, share holder values and most of all greed by the corporate leadership (CEO’s & CFO’s), Board of Directors, and major share holders of these corporations.

DOYLE, Switzerland
My goodness, no wonder the Aussies refer to us as “Whinging Poms”. Nowhere is perfect. We’re all here for a reason, so just chill out and enjoy!

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>Tchenguizes arrested in Kaupthing probe

12/03/2011 in Banking, Housing, London, News, UK
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Tchenguizes arrested in Kaupthing probe

By Brooke Masters in London and Daniel Thomas in Cannes
Published: March 9 2011 10:09 | Last updated: March 9 2011 21:22

Robert and Vincent Tchenguiz

Vincent (left) and Robert Tchenguiz 
Robert and Vincent Tchenguiz, the high-flying UK property entrepreneurs, and seven other people were arrested as the Serious Fraud Office extended its probe into the 2008 collapse of Kaupthing, the Icelandic bank.
More than 130 investigators and City of London police officers on Wednesday staged dawn raids on eight homes and two London businesses, including the Mayfair offices of Rotch Property, the investment vehicle that controls the brothers’ property portfolio. In a co-ordinated action, Icelandic police also arrested two men and searched two properties. No charges have been filed.

FT.com / Companies / Property – Tchenguizes arrested in Kaupthing probe

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As Dade, Broward market values plummet, tax bills still rise

13/09/2010 in Finance, Housing, News, United States
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The Miami Herald

As Dade, Broward market values plummet, tax bills still rise

BY DANIEL CHANG
dchang@MiamiHerald.com
Albert Jones, 81, and his wife Suzanne, 77, stand in front of their home in Pinecrest. The Joneses have lived in their home since the 1960s and could see a $1,000 tax increase this year even though property values have plunged.
AL DIAZ / MIAMI HERALD STAFF
Albert Jones, 81, and his wife Suzanne, 77, stand in front of their home in Pinecrest. The Joneses have lived in their home since the 1960s and could see a $1,000 tax increase this year even though property values have plunged. 
 
Longtime South Florida homeowners likely will see their tax bills rise this year even as the value of their homes plummet — while those who bought similar-sized homes during the housing bubble will almost certainly see their tax bills drop.
What’s going on here?
It’s called the Recapture Rule. And if it seems like unequal treatment, that’s by design.
Longtime homeowners can think of it as payback for the years when their property taxes stayed low even as market values skyrocketed.
Newer homeowners can think of it as payback, too, for the high property taxes they paid on homes with inflated prices.
Tax assessors just think of it as an evening of accounts.
Here’s what’s going on:
In simplest terms, the tax you pay on your home is determined by two factors — the assessed (taxable) value of the home; and the tax (or millage) rate set by local governments, such as counties, cities, school boards and hospital districts.
The assessed value is set at the time you buy your house, pegged roughly to the price you and others paid for a similar home in a similar neighborhood. In subsequent years, the taxable value is adjusted by the tax assessor.
TAX TABLES TURN
But since 1992, the Save Our Homes constitutional amendment has capped increases in the assessed value of a homesteaded property at the inflation rate or 3 percent, whichever is lower, regardless of whether market values rise or fall.
This year, taxable value can rise only 2.7 percent — the inflation rate as calculated by the Florida Department of Revenue according to state law.
The idea, during bubble times, was to keep homeowners from being taxed out of their rapidly appreciating homes — essentially taxing them at less than market value.
The law gave an advantage to those who bought before the housing bubble inflated (roughly from 2003 to 2007), while bubble-era buyers, who paid much more for their homes, received higher assessments as a result.
But in a post-bubble market, where home prices have fallen more than 40 percent, the tax tables have turned.
Now, the bubble-era buyers will almost certainly see their market value drop and their assessments follow suit.
Because the law states that the taxable value of a home cannot exceed the market value, the property appraiser must lower the assessment and, consequently, their tax bills.
Not so for most who bought before the run-up of prices starting around 2003. The assessed value of their homes is likely still below the market value, because Save Our Homes kept their assessments from rising more than 3 percent annually.
That means longtime homeowners will continue to see assessments rise until the assessed value equals the market value — exactly as prescribed by the Recapture Rule, which was adopted in 1995 by the governor and Cabinet.
The little-noticed provision is “a double-edged sword,” said Dominic M. Calabro, president of the nonprofit and nonpartisan Florida TaxWatch research group.
In the current housing market, that sword is cutting longtime homeowners, who are being jolted by the seeming incongruity of rising assessments in a down-trend market.
“It was so effective in helping people not see their taxable value rise, it lulled them into artificially lower taxes,” Calabro said.
WHO GETS ZINGED
How many South Florida homeowners were lulled into this false sense of security?
Hundreds of thousands.
The Miami-Dade Property Appraiser’s Office estimates that 250,000 homeowners — or more than half of the estimated 450,000 homesteaded properties — will see increased assessments and, consequently, higher tax bills.
In Broward, the property appraiser’s office estimates that 177,00 homeowners — or about 42 percent of the estimated 417,000 homesteaded properties — will see increases.
But wait, there’s more.
Depending on where local governments set their millage rates, longtime homeowners may see even more tax increases.
They’re called millage because the rate is multiplied by each $1,000 of a home’s assessed value to determine the tax a homeowner pays.
So, if a city’s millage rate is $5.68 and a home is assessed for tax purposes at $250,000 — and a homeowner qualifies for the $50,000 homestead exemption — that sets the city tax bill at $1,136.
County commissions, school boards, hospital districts and water management boards also tack on millage rates.
And nearly all government bodies are facing a budget crunch — meaning they cannot generate the same revenue in 2010 as they did in 2009 using the same rate.
That’s because the South Florida tax roll — the sum total of taxable property — has fallen 13.4 percent in Miami-Dade and 11.7 percent in Broward.
MOVING TARGET
Sagging tax rolls reflect lower home-sale prices, which depress assessments, and dropping commercial property values, which are not affected by Save Our Homes.
A lower tax roll means proportionally less revenue for a city, a county or a school board — and the only way to make up the difference is to jack up the millage rate or drastically reduce spending.
Guess which choice most government bodies have proposed for 2010?
In Broward, nearly all — except for the School Board — have proposed to increase rates or keep the millage flat, though most will still collect less than they did in 2009, meaning they will have to reduce spending.
In Miami-Dade, most cities have proposed increasing the rates, with only Indian Creek reducing its rate. Eight Miami-Dade cities, including Hialeah, Homestead and Aventura, have proposed keeping their rates flat.
Still, when all proposed millages by local taxing authorities are added up, every city in Miami-Dade will see an increase in total millage, according to preliminary assumptions.
To be sure, the housing market is a moving target, and it’s difficult to predict what will happen to the assessments of South Florida homeowners in 2011, which will be affected in part by home-sale prices this year.
Broward Property Appraiser Lori Parrish will not hazard a forecast.
“In my business,” she said, “I don’t guess. It’s sheer numbers.”
Mike Postell, a senior property appraiser supervisor for Miami-Dade, cautiously projects some improvement — or at least a slowing of the slide.
© 2010 Miami Herald Media Company. All Rights Reserved.
http://www.miamiherald.com 

I thought you’d like this article: As Dade, Broward market values plummet, tax bills still rise http://www.miamiherald.com/2010/09/11/1820505/as-dade-broward-market-values.html#story_link=email_msg

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Richard Russell’s Daily Letter

10/08/2010 in Bailout, Banks, Debt, Dollar, fannieMae, Finance, Freddie Mac, Hedge Funds, Housing, News, Obama, United States
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Richard Russell’s Daily Letter

August 9, 2010 — Headline from page one, New York Times, Aug. 7: “Nation Lost 131,000 Jobs As Governments Cut Back. Hiring By Private Sector Anemic in July.”

Headline from the Weekend Investor section of the August 7 Wall Street Journal: “How To Beat Deflation. Strategies to Protect Your Portfolio From and Take Advantage of the — Dreaded ‘D’ word.”

The specter of deflation is cropping up in many media outlets today. In fact, I’d say that deflation talk has almost become popular. The key question is this — Fed Chief Bernanke is obviously reading and hearing all about the “coming deflation.” What will Bernanke do about it? I think he will fight deflation with all the weapons at his command. And Bennie has a lot of weapons, least of which is printing “money.”
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The air is filled with rumors and contrary opinions, so many that it is literally impossible to follow them all. Some of the opinions and views have such earth-shaking implications that it’s difficult to ignore them. But as my subscribers know, we’re not a news site, and we don’t invest or divest based on the news of the day.

A few examples — I just finished my friend, John Mauldin’s always excellent column (how does he travel continuously and write the column?). Rather than paraphrase what John is writing, I’m including an actual segment from John’s latest column —“Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages are implicated.”
Russell Comment. Would Obama actually do this? My answer is that Obama and his buddies are so frantic to get the economy moving again that they would be willing to try anything.
Beyond mortgages, Americans are so loaded with debt that maybe the next Obama step would be to forgive ALL personal debts in the US. Better still, why not return to the year of Jubilee and cancel out ALL world debts (I don’t think holders of US Treasuries would go for that one).
The current issue of Barron’s is fascinating. The inimitable Alan Abelson notes that stocks are not cheap. Alan asks, “Where is it written that a market that in a not too distant-past values stocks at 60 time earnings, can’t value them, if the outlook sours, at six to eight times earnings?”
Russell Comment — Yes, I have noted that the big booster in bull markets and the big killer in bear market is the change in price/earning ratios, rather than the actual change in earnings.
But here’s what I really want to talk about. From the cover page of Barron’s — “Why the Fed Will Soon Print $2 Trillion.” The related major article is entitled, “Time to Print, Print, Print,” and is written by Jonathan R. Laing. The author believes that the Fed has only one way to go, “Quantitative easing,” and maybe printing another $2 trillion of fed notes (dollars). Laing concludes, “so it’s more than likely that the big artillery of quantitative easing will be unleashed to push the economy out of its despond. It’s high time to get out the money-printing machines. Damn the risks of triggering a bit of inflation and some modest investment bubbles. The alternatives are far worse.”
Then (believe it or not) in the same issue of Barron’s we see an article by my old friend, Robert Prechter, the guru of the Elliott Wave thesis. Robert explains how a great contraction in credit and debt will bring about deflation. Robert notes that the amount of dollar-denominated debt worldwide is some $57 trillion. . . The already-issued debt and potential debt is poised to overwhelm the possibility of management monetization. The Fed’s assets amount to $2.3 trillion, a drop in the global debt bucket.”
Robert concludes his frightening article as follows — “If you are positioned for more inflation — as the vast majority of investors are — you are likely to find yourself on the wrong side of the monetary bet. Positioning for deflation simply means avoiding traditional investments, especially risky debt, and maintaining maximum safety in cash equivalents, held in the safest institutions. If you shed market and institutional risk, you can sail through deflationary times unscathed.” 

Russell Comment — Whew, how’s that for a scary contrary opinion? Robert believes that way to safety in a deflation is to have cash, and lots of it. My concern with this approach is that I question the safety of the US dollar (and all fiat money, for that matter). So in an all-out deflation, Robert Prechter will be sitting in all cash or US Federal Reserve notes. But the dollar is collapsing, and with a US that is deflating, none of our foreign creditors will want dollars (in fact, they will be trying to get rid of dollars). With fiat money in retreat all over the world — and currencies devaluing against each other, the world’s peoples will turn to the only money they can trust — gold. I’m aware that Prechter believes gold will be heading down in a deflation, I disagree.

I was there during the Great Depression, and I can tell you nobody at that time had dollars. But if you did have dollars they were trusted and they were considered as good as gold. Today, it’s different. The very validity of the dollar is in question.

By the way, Prechter believes the Dow will end its bear market at a value of 400. If so, Prechter is looking for a calamity comparable to the Great Depression of the 1930s. 

Russell response — I distrust all scenarios and predictions, although I read ’em all and find many of them fascinating. In the end, I only trust the wisdom of the stock market. I haven’t liked the recent action of the stock market, and I’ve advised my subscribers to get out of stocks. From our standpoint, when it comes to news events, our main interest is not in the news, but in the stock market’s reaction to the news.

The stock market will tell its story as we go along and in its own good time. Our job is to ignore all opinions and forecasts and to follow the stock market and believe what it’s telling us.

Gold has advanced seven days in a row, and should be ready to back off a bit. The many arguments and rumors regarding gold are almost deafening. I don’t give a damn what the gold bulls or the gold bears say, I follow the price action as best I can. Often, the best test — is what an item can or can’t do. On the latest correction, gold held 1100 — bullish. Can Dec. gold climb into the 1300s, which would be a record high? That’s what I’m waiting to see. By the way, gold may be forming a head-and-shoulders bottom. More technicals — the 200-day moving average for Dec.gold is at 1155.10. The 50-day MA for Dec. gold is at 1215.90, which is bullishly above the 200-day MA. If Dec. gold can close above 1215.90, that would be a bullish development.

The Federal Open Market Committee meets tomorrow. Will they hold interest rates at zero and will they accelerate their printing? If they do, it will put pressure on the dollar and it will be bullish for gold. If they boost interest rates, expect gold to correct.

TODAY’S MARKET ACTION:

My PTI was up 7 at 6117. The moving average at 6095, so my PTI is bullish by 22.
The Dow was up 45.19 to 10698.75.
Transports were up 59.09 at 4516.35.

Utilities were up 1.30 to 395.02.

NASDAQ was up 17.22 to 2305.69.

S&P was up 6.15 to 1127.79.

September crude was up 0.78 at 81.48.
Total Volume on the NYSE and associated exchanges was 3.43 bn.

There were 2199 advances and 830 declines on the NYSE.

There were 305 new highs and 15 new lows. 
The Big Money Breadth Index was up 4 at 807.

Dollar Index was up 0.26 at 80.67. Euro was down 0.49 at 132.25. Yen was down 0.60 to 116.48. Currency prices as of 1 PM Pacific Time.

Bonds: Yield on the 10 year T-note was 2.82. Yield on the long T-bond was 4.01. Yield of the 91 day T-bill was 0.14%.

December gold was down 2.70 to 1202.60. September silver was down 0.23 to 18.24.

My Most Active Stocks Index was up 2 to 200.

GDX was up 0.02 to 50.19.

HUI was down 0.22 to 459.72.

CRB Commodity Index was down 0.12 at 274.59.

The VIX was up 0.40 to 22.14.

Late Notes — Dow up 45, Trannies up 59, Utes up almost 2. It’s increasingly more difficult to be bearish on this market when my PTI remains bullish. It was up 7 today to 6117, making my PTI bullish by 22 points. As for the “internals,” well you heard the PTI report. NYSE breadth was good, 2199 issues higher, only 830 down, 305 new highs and 15 new lows. Up volume on the NYSE was an impressive 71% of up + down volume. 

Dollar Index was up 0.26 to 80.67. Are there too many bears on the dollar. When the shorts overdo it, you know what happens — the item goes UP. Bonds were slightly lower. Dec. gold was down 2.70 to 1202.60, but still holding above 1200. Tomorrow Bernanke and the gang meet for the Fed Open Market Committee, and everybody is waiting breathlessly to hear what the gang comes up with. 

My pen-pal, the one and only Dennis Gartman notes that the M-2 is diving and that the adjusted monetary base has gone nowhere for the last nine months. John Williams reconstructs the broad M-3 money supply and shows that it is diving. So what’s going on — is the Fed playing games with us? Can the market and the economy go up without a rising money supply?

Never mind, we go by the action of the market, and so far, the action has been OK, although a bit ragged. 

See you tomorrow, with diamonds hidden in my hair — wait, Faye just cut most of my hair off. I’m walking around with a buzz cut, can this be me?

Adios,

Russell

Expensive stones, most of them over one billion years old.

With the advent of GIA (Gemological Institute of America) certificates, diamonds are becoming a leading safe-haven item. You can send a diamond to the GIA and get a recognized certificate showing the cut, carat, color and clarity of your diamond. Seasoned buyers will not buy a diamond without a GIA “cert.” These certs have finally put diamonds in a different category. You can now buy a diamond a receive (with a cert) a close approximation of what the stone is worth.

India is fast becoming the center of diamond cutting and trading. The best diamonds have come from the Golconda area of India. The Golconda diamonds were “whiter than white.” By the way, the Golconda mines are exhausted. The lower the nitrogen content of a diamond, the whiter the stone is. Golconda diamonds have a nitrogen content of 2% to down to 1%, making them the whitest of all diamonds. Actually, a few other diamonds sport this low nitrogen content, and despite the fact that they don’t come from India, they are still called Golconda diamonds. Only about 1% of all diamonds are classified as Type IIA or Golconda diamonds. These special diamond bring huge prices. For instance, a well-cut internally flawless Type IIA diamond of 5 carats may sell for over one million dollars. 

As a rule, white diamonds are judged on their whiteness — the whiter, the better. Colored stones are judged by the depth of their color and the evenness of their color throughout the stone. 

Diamonds as a safe haven have one big advantage over gold. Millions of dollars worth of stones can cross a border hidden in a tiny packet or sewed into the lining of your pants. And with the advent of GIA certs, you can be reasonably assured of what they are worth. High-grade stones are so hot today that dealers have been calling retailers and asking them if they have any overage in their diamond inventory. There is almost no bargain diamonds for sale today. The best deals are seen when a professional outfit buys a diamond from a private party, a party that knows nothing about the value of their diamond. 

Thus you see ads in the newspapers as follows: “We want your gold and jewelry and particularly your diamonds. Nobody pays higher prices than we do.”

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Goldman Sachs Agrees to Settle Fraud Case for $550 Million – CNBC

16/07/2010 in Goldman Sachs, Hedge Funds, Housing, News, Paulson, SEC
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Goldman Sachs Will Settle Fraud Case for $550 Million

FINANCIAL SERVICES, GOLDMAN SACHS, SEC, SETTLEMENT,
CNBC staff and wire reports
| 15 Jul 2010 | 07:43 PM ET
Goldman Sachs agreed Thursday to pay a record $550 million to settle civil claims it misled investors about a subprime mortgage product it sold in 2007, resolving a major public relations nightmare for the Wall Street financial giant.
The settlement, first reported by CNBC, sent Goldman shares up sharply in after-hours trading.(Click here for an after-hours quote)
“This is a very favorable outcome for investors,” said Bill Fitzpatrick, equity analyst for Optique Capital Management.
“The dollar amount wasn’t really going to be the issue, particularly if it was under a billion dollars and this has put some closure around what was a black eye for Goldman Sachs.”
“They pay $550 million and they get an $800 million pop in their stock price—they got off easy,” said Kevin Caron, a market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.
The settlement came on the same day that the financial overhaul bill won final approval in the Senate, imposing the stiffest restrictions on banks and Wall Street since the Great Depression.
The deal calls for Goldman to pay the Securities and Exchange Commission fines of $300 million. The rest of the money will go to compensate those who lost money on their investments.
CNBC understands that the SEC was originally looking for a settlement near $750 million dollars and that management change within Goldman was not on the table during the negotiations. Goldman’s response over the complaint would have been due on Monday.
The fine was the largest against a financial company in SEC history. Goldman earned $3.3 billion in the first quarter of this year. It earned $13.4 billion in 2009.
The settlement also requires Goldman to review how it sells complex financial mortgage investments. Goldman acknowledged in a court filing that its marketing materials for the deal at the center of the charges omitted key information for buyers.
But Goldman did not admit any legal wrongdoing.
The investments were crafted with input from a Goldman client who was betting on them to fail. The securities cost investors close to $1 billion while helping a Goldman client—hedge fund billionaire John Paulson—capitalize on the housing bust.
The civil charges the SEC filed April 16 were the most significant legal action related to the mortgage meltdown that pushed the country into recession.
The SEC said its case continues against Fabrice Tourre, a Goldman vice president accused of shepherding the deal.
“This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing,” said Robert Khuzami, the SEC’s enforcement director.
The settlement is subject to approval by a federal judge in New York’s Southern District.
The Justice Department opened a criminal investigation of Goldman over the transactions in the spring, following a criminal referral by the SEC. Executives of the firm were grilled and publicly rebuked by senators at a politically charged hearing.
Of the $550 million Goldman agreed to pay, $250 million will go to the two big losers in the deal. German bank IKB Deutsche Industriebank will get $150 million. Royal Bank of Scotland, which bought ABN AMRO Bank, will receive $100 million.
Goldman will pay back $15 million in fees it collected for managing the deal. The remaining $535 million is considered a civil penalty.
Paulson was not charged by the SEC.
—The AP and Reuters contributed to this report.
© 2010 CNBC
.

© 2010 CNBC.com

Goldman Sachs Agrees to Settle Fraud Case for $550 Million – CNBC

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>Lifestyles of the Rich and Tyrannical – By Joshua E. Keating | Foreign Policy

15/07/2010 in Corruption, Housing, Living, News
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A tour of dictators’ cribs

At Kim’s Pyongyang residences, he’s known for throwing lavish, all-night drinking parties for his top officials, usually including a bevy of scantily clad young women. Just how trashed do North Korea’s best and brightest get at these events? According to the Hennessy company, the hard-partying leaderordered more than half a million dollars worth of cognac during the 1990s.

Lifestyles of the Rich and Tyrannical – By Joshua E. Keating | Foreign Policy

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NYTimes: Home Sales in April Top Expectations

24/05/2010 in fannieMae, Finance, Freddie Mac, Housing, United States
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From The New York Times:

Home Sales in April Top Expectations

Sales of previously owned homes rose 7.6 percent in April, aided by a tax credit for first-time buyers.

http://nyti.ms/cPuDiG


Home Sales in April Top Expectations
By THE ASSOCIATED PRESS
Published: 25 May 2010
WASHINGTON (AP) — Home sales in April surpassed expectations as government incentives provided a temporary lift to the housing market.
The National Association of Realtors said Monday that sales of previously owned homes rose 7.6 percent to a seasonally adjusted annual rate of 5.77 million. That was the best showing in five months and better than the 5.63 million units economists had expected.
The increase in sales ignited a rise in home prices. The median price for a new home rose to $173,100, up 4 percent from a year ago.
The federal government provided a lift to home sales this spring by offering first-time buyers a tax credit of up to $8,000. Homeowners looking to upgrade could qualify for a credit of up to $6,500. The deadline for getting a signed sales contract was April 30.
Sales were up in all parts of the country except the West. The gains were led by a 21.1 percent jump in the Northeast and a 9.9 percent rise in the Midwest. Sales also rose 8.6 percent in the South.
The only region of the country that saw sales decline was the West, where sales dropped 6.2 percent from March.
The big question facing the housing market is what happens now that the government’s tax credits have expired.
“No doubt there will be some temporary fallback in the months immediately after it expires,” said Lawrence Yun, chief economist at the Realtors.
But Mr. Yun said that the improving economy has led to an upswing in consumer confidence, which should help support sales in the months ahead.

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