U.S. Economic/Financial News

Housing Construction Dives to Record Low

May 19 (EIRNS)—Construction of new houses plunged to the lowest level in 50 years, according to Commerce Department data released today. New construction of single-family homes and apartments dropped almost 13% in April, to a seasonally adjusted annual rate of 458,000—the lowest since 1959, when the Commerce Department started keeping such records. Construction of multi-family housing fell 46%, to a record low. Overall, housing starts are now almost 80% below their peak in January 2006.

The plunge was biggest in the Northeast (31%), and in the Midwest and the South (both down 21%).

Administration Helps Vultures Take Over BankUnited

May 22 (EIRNS)—BankUnited, Florida's biggest regional bank, was seized by regulators and sold to a consortium of private vulture firms yesterday, in the largest bank failure this year. The failure is the second costliest bank failure for the FDIC since IndyMac Bancorp in July 2008. The vulture firms that took over BankUnited include W.L. Ross & and Company, the investment firm led by Wilbur Ross; Carlyle Group, Blackstone Group, Centerbridge Partners, the LeFrak Organization, Wellcome Trust, Greenaap Investments, and Teast Rock endowment Fund. Under the deal, the buyers will inject only $900 million of new capital into the bank and assume $12.7 billion in assets and $8.3 billion in deposits, a pretty sweet deal. In addition, the FDIC has also agreed to absorb $4.9 billion in losses. It is a win-win situation for the vultures.

On May 22, Sen. Jack Reed (D-R.I.) wrote to regulators, including Treasury Secretary Timothy Geithner, raising concerns about private-equity firms buying banks: "These activities represent another, particularly dangerous example of regulatory arbitrage whereby institutions and firms are shopping around a potentially risky activity until they find a regulator who will allow it." Reed leads a Senate banking subcommittee that oversees the securities industry.

With this deal, the Obama Administration is essentially paying vulture funds to devour a federally chartered bank as if it were road kill.

Lack of Funds Forces Local Law Enforcement To Merge, Close

May 18 (EIRNS)—The Obama Administration's stimulus plan allocates about $4 billion to local law enforcement, including $1 billion to hire and retain officers. But the hiring money has not been distributed, and local governments, already hurting for lack of revenue, are closing police precincts, merging police departments with others, and even shutting some down.

"For the first time, because of the economy, police departments ... may have to change how they do business," Chuck Wexler, executive director of the Police Executive Research Forum, a law enforcement think tank, told USA Today. "People will see a change in the basic delivery of services," from longer police response times to a dramatically reduced police presence in some communities.

Harlan Johnson, executive director of the Minnesota Chiefs of Police Association, said political leaders are "choosing whether they keep the streets open or the police on patrol."

Recent cuts include:

* In Pennsylvania, 19 suburban and rural police agencies have closed in the past 15 months, and 7 others have cut patrols. State police, already stretched, are trying to fill the gaps.

* In Minnesota, nine small police agencies have closed in the past five months, leaving sheriffs' departments to protect the public.

* In Portland, Ore., police are eliminating two of five patrol precincts.

* In southern California, Indio, Palm Springs, Desert Hot Springs, Cathedral City, and Beaumont have merged some functions, including dispatch operations.