Case-Shiller Housing Index To Hit New Low

Housing is in for a new, serious shock.

The Case-Shiller report coming out Tuesday morning is expected to show the housing index at a new recession low, lower than the previous low and indicating that housing has retraced any prior gains (which one suspects will now prove to be as illusory as they were temporary).

In addition to a new proposal circulating in Congress mandating 20% minimum down payments on new purchases that threatens to plunge the housing market back to the Stone Age, the housing market is under dark clouds from a glut of unsold homes, a large pipeline of foreclosures, a larger specter of potential foreclosures which banks have yet to act upon, possible appraisal fraud and mortgage fraud investigations which may make banks even more risk-averse and less willing to grant mortgages on any terms, tightening credit, worsening bank balance sheets and the very real likelihood of sharply increasing interest rates causing mortgage holders with adjustable rate loans to sustain higher monthly payments.

Eric Dixon is a New York lawyer, independent energy consultant and strategic analyst for businesses and political candidates.  Mr. Dixon is available for comment at edixon@NYBusinessCounsel.com.

 

Best-Selling Author Claims Obama's Birth Certificate A Fraud

On Tuesday, best-selling author Jerome Corsi will begin presenting evidence that the birth certificate for President Barack Obama released to the news media earlier this month was a forgery.  (A recent report from the noteworthy internet news site WorldNetDaily, for which Corsi writes often, may be accessed here.)

The question of the President's eligibility to serve does not originate from his birthplace.  Rather, the controversy arises because of the concept of birthright citizenship, which is generally accepted (but not universally believed) to derive from the Fourteenth Amendment to our Constitution.  Without the principle of birthright citizenship, citizenship would be decided on a different basis.  On that basis, Mr. Obama might still be "eligible" to be President. 

I have previously written about the logistical problems that would arise if birthright citizenship were replaced by a different means of determining citizenship.  There would be a huge issue about how citizenship is decided, and more importantly, who does the deciding.  One can imagine the need for a huge new bureaucracy, a citizen registry, just to do the sifting.  And then there would be an outgrowth of new litigation, spawned by these bureaucratic citizenship determinations.

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Ah, more work for lawyers like me...who could do this work 24/7...and charge very high rates from clients desperate to save their citizenship and remain in the country.

(And in any regard, were Mr. Obama to be ruled ineligible to serve, it is quite likely that his replacement would be a more formidable candidate in 2012. Obama's opponents should be careful what they wish for. But this is a topic for a future column.)

Eric Dixon is a New York lawyer, independent energy consultant and strategic analyst.  Mr. Dixon consults for the fastest-growing privately-held company in the United States, which offers guaranteed savings on electricity and natural gas for New York State customers and, starting in September 2011, New Jersey customers.

Housing Going To Zero: 20% Down Payment Will Cause New Housing Crash

Democrats in Congress have figured out who caused the housing crash:  greedy homeowners.

Both houses of Congress are debating whether to require higher down payments, something that will guarantee housing prices will plunge and from which recovery may take perhaps decades.  Congress is debating a proposal that Federal Home Administration (FHA) loans require homebuyers have a 20 percent downpayment (i.e., upfront cash equal to 20 percent of the purchase price) for qualifying mortgages.  This will cause a new housing price crash.

Should this pass, what will it mean for you?

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If you are a struggling wannabe first-time buyer, it means you will need at least $60-75,000 for a modest house in a "marginal" or far-away suburb.  This means Putnam, New London and Somerset counties...and if you have no idea where these places are...well, that's the point.  

Easily, this will depress the number of prospective buyers, at all price points.  A new, and sharp, depression in demand will cause another plunge in prices, independent of the other factors like rising interest rates, a foreclosure glut, oversupply of vacant and never-sold homes and the shadow inventory of homes ready to be dumped on the market. 


Such a 20% requirement could be catastrophic.  Real estate prices will plunge -- although I am sure the government will find a way to artificially prop them up.  Just like in 2010 with the short-lived tax break.  But that only delayed the real price drop (which is a function of buyer interest, affordability and access to credit, none of which were helped or addressed).  

It would also do nothing to stop a repeat of the abuses of the mortgage/housing boom.  Democrats in Congress want to argue (because they cannot honestly believe) that the housing bubble and ensuing foreclosure wave, evictions and home equity erosion were caused by homeowners not putting down enough money up front at purchase.  This approach blames the buyers, when the fault lies with the banks' risky underwriting practices.  

You will not hear that argument...because that requires blaming the bankers.

While the size of a down payment is predictive of default risk -- and it is believed that homeowners will be less likely to abandon homes when their own money is at stake -- the hard reality is that the size of down payments had nothing to do with the housing bubble and other abuses.


It was the banking industry which altered its underwriting practices, abandoning risk control in order to gain market share and capture lucrative fees by throwing mortgages at bad credit risks.  In fact, the mortgage products which became popular in the last decade were not by themselves the problem.  These products, loans like the no-income, no-asset mortgage (the so-called "liar's loan"), the negative amortizing mortgage, and the interest-only loan offering a teaser of lower monthly payments to homeowners, were by themselves not risky.  

The risk was in presenting, pushing and underwriting such loans to people who had no business being offered -- or taking -- any mortgage, of any amount and at any terms. 

There were homebuyers whose income could not support any reasonable mortgage.  These were the people who would have defaulted even if they made a 20% down payment and had the safest loan out there -- a 30-year fixed rate conforming loan.  (Arguably, a shorter loan period like 15 years would be even safer.)

Horribly bad credit risks were given mortgages in the last decade.  Illegal immigrants got mortgages as banks issued large loans to people with an individual taxpayer identification number ("ITIN"), not a social security number.  The banks made money on each loan and then sold the loans to investors, shedding the default risk.  The banks made money then...and now the Democrats in Congress want to shield them from all blame for the banks' bad business decisions of the past.  

Banning certain mortgage products and requiring higher mortgage rates is just a deceptive, Machiavellian way to give the banks a pass. 

Small down payments were not a cause of a bubble.  But increasing required down payments will cause a new housing price crash. 

Eric Dixon is a New York lawyer, strategic analyst and business consultant.  Mr. Dixon can be reached for comment or consultation at 917-696-2442 and by e-mail at edixon@NYBusinessCounsel.com.
   

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Freddy Gets Fingered? Mets Sale Hints That Wilpon Expects To Be Prosecuted

Might New York Mets principal owner Fred Wilpon be expecting to be indicted on federal criminal charges in connection with his alleged role in the Bernard Madoff investment fraud?

New York Mets' owners Fred Wilpon and Saul Katz have reportedly agreed to sell "less than 49 percent" (now reported to be one-third, see below) of the franchise (but excluding coveted cable television channel SNY) to hedge fund executive David Einhorn for $200 million.  The deal is not final and final terms may ultimately be different than reported or contingent on additional details not yet revealed or negotiated.

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UPDATE 5/28:  The business logic behind the investment may be getting clearer. The New York Times reports in its upcoming Sunday edition that Einhorn will receive a one-third stake in the Mets for $200 million, and has an option to purchase up to 60 percent of the Mets franchise in three years, at a price to be determined.  Moreover, current ownership can block the purchase of this controlling stake by essentially refunding Einhorn his $200 million purchase price, although in such an event Einhorn would retain his approximate one-third stake.  This means that for Sterling LP (the entity through which Wilpon owns the club) to retain majority control of the Mets franchise, Sterling/Wilpon must, in essence, repay Einhorn's interest-free loan, and in that case Einhorn would receive one-third of the team for "free" but having put at risk his "loan" amount of $200 million.

Now do you see how this deal makes sense for Einhorn?

And, do you now see how this deal makes sense for Wilpon, Katz and Sterling LP?  After all, if a meteorite hits the Earth...or you are indicted and expect to plead or be found guilty...will you really care about paying back that loan?   

Do you see now how Wilpon's deal is all about getting cash now and hardly caring about the consequences in a few years...when Freddy gets fingered...? 

Should these reports prove accurate (wait until the actual terms are released), they suggest a strong drop in asserted valuation for the franchise; the purchase price implies a possible total franchise valuation -- if Einhorn's stake approaches 49% -- of somewhere around $400-450 million. This is far below the asserted "ask price" valuation of $800 million given this winter when Wilpon first revealed ownership's interest in selling a minority stake in the club. Then again, remember the Mets are saddled with hundreds of millions of dollars in debt (the Wall Street Journal reports the total debt is about $425 million), are predicted (by Wilpon himself, in his infamous interview in The New Yorker) to lose $70 million in 2011, needed Major League Baseball to make an emergency loan to meet payroll earlier this year and are close (at least) to being insolvent. These are the classic signs of a distress sale, in which Wilpon grabbed what he could before the value declined further (before even more fans mutined and stayed away)...or before some other event?

Wilpon, who may fairly be suspected of being an unindicted co-conspirator of Bernie Madoff, made some horrible strategic blunders by publicly denigrating some of the Mets' top ballplayers. The move reminds one of what deadbeat homeowners do on the eve of eviction: they trash the place, rip out everything of value and leave.

In fact, the public comments seem to indicate that Wilpon was resigned to the fact, not just of losing control of the baseball club, but that he is about to be indicted in connection with the Madoff fraud.

At the very best, Wilpon has hinted he would accept making a nine-figure settlement of the civil case filed by Madoff bankruptcy trustee Irving Picard, with the figure of $300 million as a "go-away" amount being reported. The sale of the Mets may be necessary to fund that settlement. But the real legal consequences for Wilpon may just be unfolding, and those consequences cannot be made to go away by writing a check.

Eric Dixon is a New York lawyer, strategic analyst and business consultant.  Mr. Dixon counsels people undergoing investigation or prosecution how to mentally prepare for the emotional ordeal of trials, investigations and related tribulations.  Mr. Dixon also works with a pre-prison consultant who counsels people on how to survive prison life, readjust to civilian life after prison and avoid returning to a life of crime. He may be reached at edixon@NYBusinessCounsel.com.
 

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Home Sellers Wait For Rapture As Unsold Home Glut Shadows Market

A glut of unsold homes means there will be no rebound in the residential real estate market any time soon. 

As knowledgeable people -- myself and about five others -- have been warning since about 2004, there are a ton of houses, in all regions, in all price levels, waiting to be put on the market once the anticipated-but-likely-never-to-occur home price recovery (aka the Real Estate Rapture) occurs.

Many of these houses are vacant, and there is a glut of them.

In addition, the failure of the real estate market to revive in the face of historically low mortgage rates (but also increasing down payment requirements) indicates that the market could tumble when mortgage rates rise substantially to closer to the more historic norms of eight to ten percent. Check out what is happening now in Hong Kong for an example of the effect of rising mortgage rates on home prices.   

The glut of vacant homes represents unsold units (and often, on the market and left on the shelf for long periods of time), unoccupied homes in foreclosure (often in disrepair from neglect or vandalism), as well as many homes with reluctant sellers.  The reluctant sellers are often people who have the wherewithal to pay two (or more) mortgages and are waiting for the "right time" to sell. 

The cause?  This is not tongue-in-cheek commentary -- but  it's more often the men in couples who are waiting for Real Estate Rapture.  Women should take the bull by its horns; after all, women -- alright, most women --know that when a man says it's not the "right time," there will never be a "right time" and it's time to walk out the door. 

This goes to the related issue of investing psychology.  There is a time to be patient...and a time to acknowledge a loss on an investment and bail. 

Wait -- it gets worse.  That's for the next article.

Congress is debating a proposal to require that Federal Home Administration (FHA) loans require homebuyers have a 20 percent downpayment (i.e., upfront cash equal to 20 percent of the purchase price) for qualifying mortgages.  Should this pass, it means a New York-area homebuyer would need at least $60-75,000 for a modest house in a "marginal" or far-away suburb.  Easily, this will depress the number of prospective buyers, at all price points.  A new, and sharp, depression in demand will cause another plunge in prices, independent of the other factors like rising interest rates, a foreclosure glut, oversupply of vacant and never-sold homes and the shadow inventory of homes ready to be dumped on the market. 

Such a 20% requirement could be calamitious.  

It would also do nothing to stop a repeat of the abuses of the mortgage/housing boom.  The bubble was caused, first and foremost, by the government's easing of the money supply to drive down interest rates after the September 11th attacks.   

Real estate is not going to improve any time soon.  

Eric Dixon is a New York lawyer, strategic analyst and business consultant.  Mr. Dixon is available fo further comment or consultation at edixon@NYBusinessCounsel.com.

In-house Lawyers: Enemies of the State?

An alarming prosecution of a GlaxoSmithKline in-house lawyer ended somewhat satisfactorily with a dismissal of the case by a federal district court judge. 

(Somewhat satisfactorily?  This is someone who should never have been investigated, much less prosecuted...so a dismissal merely returns her to the state she should have been in all along...but after disparaging her reputation and threatening her freedom!  Status quo ante?  That would be a pipe dream.)

This is the type of prosecution which makes one wonder whether there is a deep, institutionalized contempt for -- or envy of -- private sector lawyers within the Justice Department.

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Freddy Gets Fingered?: Mets Sale Hints At Wilpon Prosecution

Might New York Mets principal owner Fred Wilpon be expecting to be indicted on federal criminal charges in connection with his alleged role in the Bernard Madoff investment fraud?

New York Mets' owners Fred Wilpon and Saul Katz have reportedly agreed to sell "less than 49 percent" (now reported to be one-third, see below) of the franchise (but excluding coveted cable television channel SNY) to hedge fund executive David Einhorn for $200 million.  The deal is not final and final terms may ultimately be different than reported or contingent on additional details not yet revealed or negotiated.

UPDATE 5/28:  The business logic behind the investment may be getting clearer. The New York Times reports in its upcoming Sunday edition that Einhorn will receive a one-third stake in the Mets for $200 million, and has an option to purchase up to 60 percent of the Mets franchise in three years, at a price to be determined.  Moreover, current ownership can block the purchase of this controlling stake by essentially refunding Einhorn his $200 million purchase price, although in such an event Einhorn would retain his approximate one-third stake.  This means that for Sterling LP (the entity through which Wilpon owns the club) to retain majority control of the Mets franchise, Sterling/Wilpon must, in essence, repay Einhorn's interest-free loan, and in that case Einhorn would receive one-third of the team for "free" but having put at risk his "loan" amount of $200 million.

Now do you see how this deal makes sense for Einhorn?

And, do you now see how this deal makes sense for Wilpon, Katz and Sterling LP?  After all, if a meteorite hits the Earth...or you are indicted and expect to plead or be found guilty...will you really care about paying back that loan?   

Do you see now how Wilpon's deal is all about getting cash now and hardly caring about the consequences in a few years...when Freddy gets fingered...? 

Should these reports prove accurate (wait until the actual terms are released), they suggest a strong drop in asserted valuation for the franchise; the purchase price implies a possible total franchise valuation -- if Einhorn's stake approaches 49% -- of somewhere around $400-450 million. This is far below the asserted "ask price" valuation of $800 million given this winter when Wilpon first revealed ownership's interest in selling a minority stake in the club. Then again, remember the Mets are saddled with hundreds of millions of dollars in debt (the Wall Street Journal reports the total debt is about $425 million), are predicted (by Wilpon himself, in his infamous interview in The New Yorker) to lose $70 million in 2011, needed Major League Baseball to make an emergency loan to meet payroll earlier this year and are close (at least) to being insolvent. These are the classic signs of a distress sale, in which Wilpon grabbed what he could before the value declined further (before even more fans mutined and stayed away)...or before some other event?

Wilpon, who may fairly be suspected of being an unindicted co-conspirator of Bernie Madoff, made some horrible strategic blunders by publicly denigrating some of the Mets' top ballplayers. The move reminds one of what deadbeat homeowners do on the eve of eviction: they trash the place, rip out everything of value and leave.

In fact, the public comments seem to indicate that Wilpon was resigned to the fact, not just of losing control of the baseball club, but that he is about to be indicted in connection with the Madoff fraud.

At the very best, Wilpon has hinted he would accept making a nine-figure settlement of the civil case filed by Madoff bankruptcy trustee Irving Picard, with the figure of $300 million as a "go-away" amount being reported. The sale of the Mets may be necessary to fund that settlement. But the real legal consequences for Wilpon may just be unfolding, and those consequences cannot be made to go away by writing a check.

Eric Dixon is a New York lawyer, strategic analyst and business consultant.  Mr. Dixon counsels people undergoing investigation or prosecution how to mentally prepare for the emotional ordeal of trials, investigations and related tribulations.  Mr. Dixon also works with a pre-prison consultant who counsels people on how to survive prison life, readjust to civilian life after prison and avoid returning to a life of crime. He may be reached at edixon@NYBusinessCounsel.com.

 

Rielle Hunter: Cougar Jailbait?

(HUMOR ALERT!)

Former homewrecker-turned-second-wife Rielle Hunter must be one hell of a woman.

First this woman gets involved -- sexually -- with married Presidential candidate, Senator John Edwards (D-NC). This involvement leads to Edwards' divorce from cancer sufferer Elizabeth Edwards.

But according to the Justice Department, it led to more. A federal grand jury is reportedly prepared to indict Edwards for trying to circumvent campaign finance laws to hide the affair. 

Was Rielle Hunter worth going to jail for?

Former President Bill Clinton is probably smirking and saying of fellow lawyer and Southerner Edwards: "Amateur!"

Former IMF head Dominique Strauss-Kahn is probably saying: "I wish I had thought of that."

Former New York Governor Eliot Spitzer (code name: client 9) is probably saying: "I paid for sex too! But get a hooker...its cheaper!"

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Keeping Investigations Private Serves the Public

Sometimes the public's "right to know" -- piously invoked by the news media as a passive-aggressive way to disarm obstacles in its way -- can be counterproductive to the legitimate objectives of law enforcement.

The revelations of certain details as to the subject matter of an investigation, its methodology or even its very existence can all defeat the purpose of the investigation, which most often is to protect the public.

The Senate Finance Committee is investigating certain trading and other business activity of SAC Capital, the hedge fund family of Steven A. Cohen.  It is reported -- and appropriately, not confirmed --  that SAC is under federal investigation.

One wonders if investigations would go more smoothly if they were kept under wraps.  Such secrecy would serve the public (by making for more effective and productive investigations that would not be compromised, interrupted or disrupted by leaks).  However, the secrecy would also benefit the subjects and targets, who many times are completely innocent and whose reputations would be undamaged if investigations were kept confidential and out of the hands of the news media.  

As for the public's right to know, there would be plenty of time to achieve that when criminal charges or guilty pleas are announced, or when civil charges are filed or settlements announced.

Eric Dixon is a New York lawyer who handles complex investigative matters including regulatory enforcement and "white-collar" matters, and has substantial experience with the federal securities laws.   Mr. Dixon may be reached for further inquiry at edixon@NYBusinessCounsel.com.

Housing Going To Zero: Foreclosure Tsunami Approaches

A report in Monday's New York Times details how our nation's banks are sitting on a mountain of residential real estate from foreclosures. 

This largesse, combined with foreclosures in the pipeline or reasonably anticipated, is almost sure to depress housing prices -- if it does not spark a renewed plunge.

Anticipated foreclosure-caused price declines should not be viewed in isolation, however; other factors such as sharp increases in mortgage rates (currently at or near historic lows) and continued requirements for large (20% or more) downpayments should also depress would-be buyers' purchasing power (which, crucially, is measured as the ability to afford a particular level of monthly payment, adding in increasing property taxes and homeowners' insurance).

The article does not address one other issue: what effect does this wave of foreclosures threaten to have on banks' balance sheets?  At some point banks will realize losses on their real estate and this will cause their balance sheet assets to shrink.  There may be serious effects on banks' stock prices, if this analysis is correct.

Raising Cain?

Atlanta-area talk radio host and apparent Tea Party rank-and-file favorite Herman Cain is the latest to formally announce he is seeking the Republican presidential nomination in 2012.

Cain is a former business executive who appears "in his element" before audiences.  This is an advantage no doubt gleaned from his latest talk radio experience.

The Republican field needs to "take shape" soon, because of the dual realities of fundraising for a compressed primary season and the ballot access requirements in many states which often require a "ground operation" in place by the autumn of 2011.  New York is one such state.

Meanwhile, the incumbent President's "1967" disaster -- or a Machiavellian ploy -- could be the hoped-for impetus for some progressive activists, greatly disappointed in the Obama presidency from the left, to attract the previously-unthinkable: a primary challenge within the Democratic Party against a sitting President.

Eric Dixon is a New York election lawyer, political strategist and independent energy consultant. 

Driving While Drowsy Risks Criminal Charges For Accidents

The public grows more aware of the dangers of driving while drowsy.  As we approach the summer driving season (which will be dampened somewhat by $4.00-to-$5.00-per-gallon gasoline), it is useful to remember that drowsiness can be a deadly threat to all drivers. 

(In a previous column, I commented on a landmark medical study tracking cognitive impairment -- this means impaired judgment, something which plagues many midnight-oil-burning white-collar workers.  Sleep deprivation can have significant adverse effects on performance...in all sorts of contexts...and can be a leading cause of some legendary misstatements and other failures to communicate.)

One of this column's readers -- Fred from North Carolina, take a bow -- has pointed out that professional drivers such as long-haul truckers confront this problem on all levels.  First, he mentions, truckers have to deal with the amateur "Sunday drivers" who clog roads and often have no clue as to how to drive on an interstate highway (such as the drivers-from-hell who merge straight from an on-ramp to the fast lane while maintaining a speed at least 20-to-30 miles-per-hour less than the prevailing traffic).  Secondly, these drivers often are sleep-impaired and require additional attention from truckers, whose ability to stop is greatly compromised by the tremendous weight of their load.  (This is simple physics; the momentum of a moving large load requires a much longer lead time to stop or even slow down.)  Finally, the grind of a trucker's workday can push the healthiest of truckers to a point where fatigue becomes dangerous if not deadly.

These are lessons from professional drivers which we amateurs would do well to heed.

In the meantime, consider the growing trend to criminalize all sorts of actions.  An accident, including a potentially tragic automobile accident, can yield criminal liability as state legislators seek new ways to grab headlines and exploit popular outrage (of the moment) by thinking of new things that can be called "crimes" -- and which justify in the legislators' eyes punishment up to and including incarceration.

The lesson:  Use the proper due care.  But even if you do, an unfortunate accident can put you and your freedom at the mercy -- and subject to the malice -- of others.

Eric Dixon is a New York lawyer, political strategist and independent energy consultant.  Mr. Dixon can be reached at 917-696-2442 and by e-mail at edixon@NYBusinessCounsel.com.
 

Extremely Bad Housing News: Abandon All Hope!

Some horrible housing figures released this morning indicate the huge housing collapse will get even worse.  This validates my earlier prediction from October 2010 (see "Housing Going To Zero," October 6, 2010) that the housing market would continue to sustain a major price decline. 

First, here's the price news...since all anyone cares about is how much value their house has lost. Year over year sales prices (April 2011 vs. April 2010) are down five percent. That may be a conservative figure in many markets. In any event, have no illusions about a recovery...for a long time!

However, two other figures from the National Association of Realtors report released this morning really stand out. All-cash transactions accounted for 31 percent of all April 2011 sales (and 35 percent in March). This number before 2008 -- when anyone could and too often did get a mortgage (and these are the same people who first defaulted and got subsidized modifications on taxpayers' dime) -- was 10 percent. 

The high all-cash portion of sales indicates strongly that banks are very reluctant to grant mortgages (particularly to those of us who own our own businesses and file Schedules C and get Forms 1099). Remember this the next time you hear someone spinning the news of four percent mortgage rates.

Who's buying? Lots of foreign investors, who take advantage of our weak dollar and who cannot get a traditional mortgage. (In fairness, these investors often do not know the true value of American real estate. Hold your envy.)  Furthermore, "distressed sales" such as foreclosures and short sales were 37 percent (down from March's 40 percent).

There is some overlap in these figures (meaning some of the short sales are all-cash deals) but the picture I paint for you is clear: many fewer "ordinary" home sales are being done today as they were just a few years ago. The deals that are being done are at significantly lower price points. 

The real lack of access to mortgage financing is impairing buyers' actual affordability...and just wait until mortgage rates skyrocket when the Fed stops quantitative easing and no one will buy Treasury bonds at current prices.   

Of course, the NAR's Lawrence Yun blames the banks for a 15-20% depression in buyer demand.  However, the banks' newly-adopted practice of requiring a downpayment equal to at least 20% of the purchase price is also having a major effect on reducing the buyer pool.  Many first-time buyers do not have $30,000 to put down on even a modestly-priced home of $150,000.  And in major metropolitan areas like the New York-New Jersey area, it is hard to find anything under $300,000 -- requiring a $60,000 downpayment.

Crime, Politics and Policy holds true to its earlier prediction that average residential housing prices may fall one-third to one-half from current levels -- or between 50-70 percent from all-time highs.

Eric Dixon
Eric Dixon LLC
World-Class Strategic Analysis
917-696-2442

Public Bailout of Hockey Teams Freezes Taxpayers

In this age of economic uncertainty and massive government insolvency, local governments propose that the two National Hockey League clubs -- with the lowest attendance in the league --  receive substantial taxpayer bailouts assistance in order to stay in their current markets.

Nassau County, NY, the home of the New York Islanders since that club's formation in 1972, will hold a public referendum on a rumored $400 million bond facility to fund a replacement for the outdated Nassau Coliseum.  Never mind that the Islanders are reported to perennially lose upwards of $20 million per year, have consistently suffered large financial losses and declining attendance for more than two decades and have sustained a greatly-eroded fan base and public profile as their old fan base has aged and newer fans were driven away by a persistent culture of losing.

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Click here to learn how to save right now. 

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Crime, Politics and Policy also previously speculated on the Islanders' owner, Charles Wang, using bankruptcy as a greenmail strategy to escape a money-losing situation.  In fact, should this referendum be voted down, one should expect more than ever that Wang will put the Islanders into bankruptcy.   

Meanwhile, the commissioners of the town of Glendale, AZ last night voted 5-2 to have taxpayers fund $25 million to offset the upcoming season's losses of the Phoenix Coyotes, another perennially money-losing franchise which has reported to be losing in excess of $30 million per year.  Crime, Politics and Policy detailed how bad these losses were; see this 2009 commentary which provides a link to actual Phoenix Coyotes financial statements contained within the club's bankruptcy court filing.

But one council member in Glendale got it right. Council member Norma Alvarez voted against the proposal, saying:

"We cannot use taxpayer's money to subsidize the team and neglect our community." 

The Coyotes' future in Arizona depends on completion of a sale to a hedge fund owner, who has agreed to purchase it only if a bond deal closes.  A threatened Goldwater Institute lawsuit charging that the bond offering is unconstitutional jeopardizes the bond deal (by making potential bond purchasers skittish) and by extension, the franchise's purchase and thus its remaining in Arizona.  

Many Tea Party organizations actively oppose public subsidies for private benefit on strong philosophical grounds including the aversion to government fiscal irresponsibility.  The bailouts of the Islanders and Coyotes qualify as such public subsidies.  Tea Party opposition to both bailouts may be expected.

Are the subsidies worthwhile to the fans? The Islanders' bailout, involving the construction of a new arena, would support the owner of a franchise which was dead last in NHL attendance this past season. The Coyotes were next to last in average attendance in the 30-team league.  Is this responsible to taxpayers in the slightest?
 
Eric Dixon is a New York lawyer and Yale Law School graduate with over 15 years of experience in corporate finance as well as handling complex investigative matters, election law disputes and sensitive negotiations.  Mr. Dixon is a former Islanders season ticket holder and specializes in legal and investigative matters, corporate due diligence and exposing corporate and political disinformation.  Mr. Dixon is available for comment at 917-696-2442 and by e-mail at edixon@NYBusinessCounsel.com. 

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Housing Double Dip Is No Surprise

 The mainstream media -- the business end of it -- has caught on to the continuing residential real estate decline, heralding a double dip in housing prices.   The real estate bubble, deflating since 2006 (generally) and even since 2005 in selected markets, continues to deflate.

Crime, Politics and Policy reasoned months ago that this would happen.  See this October 2010 article.  In fact, check out my January 2010 commentary proposing a unique solution that would prop up the residential housing market, reward responsible homeowners and support the supposedly-capital-starved banks...and all without a dime of suckers' taxpayers' government subsidies.

This should be no surprise at all.  There are looming foreclosures, as thousands of homeowners engage in strategic defaults and pocket that money to deploy elsewhere.  There is a large overhang of homes waiting to hit the market.  And all of this is occurring as mortgage rates are below five percent on conventional, fixed-rate 30-year loans.  One can imagine the effect on prices when foreign investors stop buying Treasuries and the interest rates skyrocket.

Eric Dixon is a New York lawyer, strategic analyst and litigation stress consultant.  Mr. Dixon is available for further comment at 917-696-2442.   

Indictments Loom For Albany Slush Fund?

Voters in Queens -- all five of you, you know who you are -- should get ready for a special election to fill what I predict will be at least one  soon-to-open vacant State Senate seat.

As with the ongoing City Council slush fund investigations, both federal and state criminal probes of similar slush fund abuses are underway, as alluded to in this New York Post report.

The issuance of subpoenas by itself does not indicate criminality.  However, the report quotes one source as referring to multiple state senators being under investigation. 

As with many complex investigations, it is always possible that, behind the scenes and with no fanfare, some elected officials or members of their staffs have already been confronted with alleged evidence of their guilt and admitted (to authorities, but not in open court) their criminal complicity.

If this theory is correct, there could be many political players wearing wires and trying to catch others in some sort of criminal behavior or get them to admit to prior complicity.  Anything to reduce a sentence will do.

Therefore, this might not be a good idea to get together with your old buddies in Queens -- or anyplace else for that matter -- and reminisce about the good ol' times when you diverted those funds to your favorite (contributor's) non-profit.

Eric Dixon is a New York lawyer who specializes in complex investigative matters and election law.  Mr. Dixon also works with a pre-prison consultant who prepares future inmates for their transition to prison life.  Mr. Dixon can be reached at 917-696-2442 and via e-mail at edixon@NYBusinessCounsel.com.

Psycho Weather Anchor Claims No Miranda Warning

The formerly redhead strawberry blonde former ABC Good Morning America weather anchorwoman Heidi Jones claims she was not Mirandized (read her Miranda rights) when she came into a police station as the accuser for questioning about her own complaint.

Jones, who has since resigned (likely in front of a firing) from ABC, infamously claimed last fall that a Hispanic middle-aged man tried to sexually assault her while jogging in Central Park last September.  New York police officers claim that Jones admitted to them that her story was false and "made up to get attention" because of personal problems.

Jones, who should be the female equivalent -- the toxic bachelorette? -- to the "toxic bachelors" coined by Sex and the City column writer Candace Bushnell in the early 1990s, was arrested in December 2010 on criminal charges of making a false police report.  

A novel - if not entirely ideal nor civilized - punishment for Jones (should she eventually plead or be found guilty) would be to have her be forced to run the Fifth Avenue Mile in six-inch stillettos on the day of the Puerto Rican Day Parade.

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The Senate's Mortgage Fraud Report

A recent report on the residential mortgage crisis from the U.S. Senate's Permanent Subcommittee on Investigations, Committee on Homeland Security and Government Affairs makes for interesting reading.

This is a 650-page PDF file, so be warned, it is not an easy read. 

 

Osama Dead: The Battle is Not Over

The news that Osama bin Laden was killed, after more than a decade on the run (dating back to the 1990's), was greeted with near hysteria among that portion of the population that was awake at close to midnight Eastern time.

The news should have been met with a beclamed satisfaction (as I'll explain below) and trepidation.  But celebration somehow seems inappropriate, when we have merely meted out an appropriate -- and entirely necessary -- response to a brutal, civilian tragedy.

At most, Americans should take a cool -- and silent -- satisfaction in knowing that the persistence promised by President George W. Bush was in fact executed. The United States has shown that a dogged, tenacious determination will be engaged to back up rhetoric and sound bites when the need arises.


That fact, that accomplishment, has distinguished the United States on the world stage. And as with the greatest of accomplishments, this one needs little proclamation.


The battle is not over.  Not even close.  Due to 9/11, the American public consciousness sees terrorism as a major, everlasting threat, somewhat similar to that faced -- but on a much lesser scale -- by the Israeli public.

That threat has not abated.  We must recognize this, because as with Israel, our terrorism danger is the greatest from within.  Our society is at risk from domestic sources.  This is also why our immigration policy must be executed diligently.

If anything, bin Laden's death carries the risk of a public diminution in vigilance and calls for a redeployment of resources away from terrorism vigilance (which, I caution, is not the same as funding the Department of Homeland Security or any other federal agency).  Letting your guard go down is the time when one becomes most vulnerable.

Eric Dixon is a New York lawyer, political consultant and strategic analyst.  Mr. Dixon has been a practicing lawyer for 16 years since graduating from Yale Law School in 1994.  Mr. Dixon may be reached at edixon@NYBusinessCounsel.com and is available for comment at 917-696-2442.