Bank of America CEO Kenneth Lewis announced he would resign at the end of the year. One analyst tells Bloomberg News that Lewis had become a "distraction" after taking over Merrill Lynch and buying subprime mortgage company Countrywide, "He’s drifting out to sea like a dying Eskimo, knowing the company can do better and thrive without him."
A former Credit Suisse broker who is accused of a $1 billion fraud has gone missing and the authorities are calling him a fugitive. This past Friday, federal prosecutors said that Julian Tozlov, 35, was last seen on May 9, leaving his 225 Fifth Avenue apartment. Tozlov had been on $3 million bail and was wearing an electronic monitoring device around his ankle.
What better time to go condo than during a credit crisis? The Real Deal reports that the owners of 36 Gramercy Park South, the landmarked and last rental building right on the private park, sent its tenants a "red herring" condo offering plan (red herring because it needs to be approved by the Attorney General's office first). And some details: "The 53 units at 36 Gramercy Park East are being offered for sale at an average price of $2,448 per square foot, though large units facing the park are going for much more. The most expensive apartment, a 2,078-square-foot, three-bedroom on the ninth floor facing the park that is currently rent-controlled, has been priced at $6,545,700, or roughly $3,150 per square foot. The least expensive, a 323-square-foot studio at the back of the building, has been priced at $484,500, or roughly $1,500 a square foot." At those prices, you'd think you'd be able to picnic in the park, but no.
The NY Times writes the obituary for NYC's building boom. The Building Trades Employers’ Association's data shows that $5 billion in projects, including "luxury high-rise buildings, office renovations for major banks and new hospital wings," has been canceled or delayed due to the credit crunch. Developers are having a hard time looking for loans—though some projects are still eagerly anticipated, like ones along the High Line from Jean Nouvel and Annabelle Selldorf—and others who do have loans are having trouble paying them back. One developer "who has built roughly 4,500 condos and moderate-income housing units in all five boroughs..is shifting his attention to projects like housing for the elderly on Staten Island, which the government seems willing to finance." Continue reading "NYC's Building Boom is Over"
In a sign of the times, real estate developer Rockrose is offering potential buyers of its EastCoast condo in Long Island City a money-back guarantee. The NY Times reports that Rockrose is promising ("at least to the next batch of buyers who step up to sign contracts...to buy back apartments in five years at 110 percent of the sales price." Rockrose executive Kevin Singleton explained, "I believe in the product, I believe in the marketplace, I believe that value will increase and I am willing to put my money where my opinions are." However, the buyer is responsible for closing costs and other fees and there's "no bond or other security" that guarantees the guarantee--buyers will have to trust Rockrose to make good. And another sign of the times: Some developers offers buyers battered by the credit crisis rent-to-buy options, with some rent money going towards the purchase price. One building owner said, "I’m happy to have renters and monthly income in lieu of a sale.”
Speaking at the European Central Bank Central Banking Conference, Federal Reserve Chairman Ben Bernanke said central banks are prepared to continue to work together and do more to help the global economy during the current credit crisis. In his speech, he noted, "The continuing volatility of markets and recent indicators of economic performance confirm that challenges remain. For this reason, policymakers will remain in close contact, monitor developments closely, and stand ready to take additional steps should conditions warrant." Back in the states, retail sales fell 2.8% in October--"the biggest since records began in 1992"--and stocks have dropped 1.6-2.65% this morning.
Credit card company American Express was approved to be a bank holding company, allowing it to access government funds, yesterday. The Federal Reserver released a statement saying it waived the usual 30-day waiting period due to "the unusual and exigent circumstances affecting the financial markets." AmEx said it's taking almost twice as long for credit-card holders to repay loans--D.A. Davidson & Co.'s chief market strategist Frederic Dickson told Bloomberg News, "That business has totally dried up. If I were a shareholder, it wouldn't send a very warm and fuzzy message to me." AmEx, which recently announced it would cut 10% of its workforce (equaling about 7,000 jobs), joins Goldman Sachs and Morgan Stanley as companies who recently became bank holding companies.
NYU's Furman Center for Real Estate and Urban Policy released a report (PDF) analyzing federal lending data, noting that mortgages in the city dropped 14% between 2006 and 2007 while they dropped 25% nationally. And statistics along racial lines are interesting, too: There were 44% less loans to black NYC residents and 34% less loans to Hispanics, while it was mostly unchanged for whites and Asian borrowers grew by 6%. The center's co-director Ingrid Gould Ellen said the data was troubling, since it "may indicate a reversal of the gains in homeownership that black and Hispanic communities have seen over the past few years.” The NY Times points out, "In 1996, only about one in four of all New York City home purchase loans were issued to black and Hispanic borrowers; by 2006, those loans accounted for nearly 40 percent, largely due to a disproportionate reliance on risky borrowing."
Stock markets around the world fell today, hours after the U.S.'s Dow Jones Industrial Average slid 668 points to end yesterday under 8,600. The NY Times says the "Global Markets Dive in a Relentless Selloff"--and a German equity strategist explained, "We are fighting really dire fundamentals. It will require restoring trust and confidence before a sustained rebound will be possible.” USA Today also emphasizes the lack of confidence is what is driving the crisis.
After stocks continued to slide yesterday amid worries over the credit crisis, the Treasury Department is thinking about buying stakes in U.S. banks to restore confidence. According to the NY Times, "Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it."
Today, it's expected that Citigroup will start firing around 10% of its investment banking group, which has 65,000 employees.
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