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(WASHINGTON) Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke yesterday waged a stout defence of their management of a US$700 billion financial bailout just one week after the administration abandoned the original strategy behind the rescue.

Focusing the programme on infusing billions into banks - and possibly other types of companies - to pump up their capital and bolster lending to customers was deemed a faster and more effective approach to stabilising the financial system than buying rotten assets from financial institutions, the centrepiece of the original plan, Mr Paulson said.

Buying those toxic debts would have required a ‘massive commitment’ of the bailout money, Mr Paulson said in testimony before the House Financial Services Committee. As economic and financial conditions quickly worsened, it became clear that the first instalment of the money - US$350 billion - for that purpose ’simply isn’t enough firepower,’ he said.

It’s crucial that the administration be nimble in assessing changing conditions and adapt the bailout strategy accordingly, the Treasury chief said. ‘If we have learned anything throughout this year, we have learned that this financial crisis is unpredictable and difficult to counteract,’ Mr Paulson said.

Last week, Mr Paulson changed course and said the government would not use any of the US$700 billion to buy bad assets from banks. That had been the focus of the plan Mr Paulson and Mr Bernanke originally pitched to lawmakers.

Going forward, the ability of Treasury to use the bailout programme for capital injections and to take other steps to stabilise the financial system - including any actions needed to prevent the disorderly failure of a major financial institution - ‘will be critical for restoring confidence and promoting the return of credit markets to more normal functioning,’ Mr Bernanke told the panel.

Mr Paulson said the department will focus on rolling out a capital injection programme to pour US$250 billion into banks in return for partial ownership stakes in them. Treasury on Monday confirmed that it supplied US$33.56 billion to 21 banks in a second round of payments.

That followed the initial US$125 billion allocated to nine of the country’s largest banks, and brought the total earmarked payments to US$158.56 billion.

Treasury also will search for new ways to boost the availability of car loans, student loans and credit cards, which have been become harder to get due to the credit crisis.

Specifically, the department along with the Federal Reserve, is exploring using some of the bailout money to bankroll a new loan facility designed to help companies that issue credit cards, make student loans and finance car purchases.

Mr Paulson said he expected putting up only a ‘relatively modest share’ of the bailout money for this facility.

He rejected using the government’s financial-rescue programme as a ‘panacea’ for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners and carmakers.

‘The rescue package was not intended to be an economic stimulus or an economic recovery package,’ Mr Paulson said.

The US$700 billion Troubled Asset Relief Program was designed to stabilise financial markets and the flow of credit and ‘is not a panacea for all our economic difficulties.’ - AP, Bloomberg

Source : Business Times - 19 Nov 2008

CASINO operator Las Vegas Sands announced yesterday that it had raised the additional US$2.1 billion (S$3.2 billion) required to complete its development commitments, including Singapore’s integrated resort in Marina Bay.

Its ability to do so also prompted its auditor PricewaterhouseCoopers (PwC) to remove a warning that there was ’substantial doubt’ the company could continue operating.

The fate of the Marina Bay integrated resort came into question after PwC, in a regulatory filing last week, said Las Vegas Sands could go bust.

The news had Singapore worried that the casino operator would not be able to complete the US$4.5 billion project as promised.

However, Sands’ top executives affirmed last week that the Marina Bay Sands IR remained its ‘top priority’.

To ensure that it could complete the Singapore development, it has suspended projects in Macau and Las Vegas. It also went on a drive to raise new capital through selling of stocks and warrants. The latest amount raised will be used as collateral for Sands to draw on its loan for the local project, among others.

On Monday , Senior Minister of State for Trade and Industry

S. Iswaran assured Parliament that the project was still going ahead, and that the authorities were working with the company to complete it.

He also stressed that there was no concession from the Government in allowing the number of gaming tables to be upped from 600 to 1,000. The restriction on the casino remains at 15,000 sq m.

Source : Straits Times - 19 Nov 2008

MPs suggest using Govt buildings as interim housing, more levels of rental subsidies

IF WE can make space for foreign workers in disused schools, why can’t we do the same for Singaporeans in desperate need of housing, suggested a Member of Parliament yesterday. Why not use unoccupied Government buildings as interim housing for the “homeless”, asked MP for Sembawang GRC Lim Wee Kiak.

He was referring to Singaporeans who, because of extreme financial difficulty, find themselves with negative equity after selling their flats. They do not have the means to buy another flat, nor qualify for rental housing because their household income is more than $1,500 and renting a Housing and Development Board (HDB) flat on the open market would be too expensive.

Parliamentary Secretary for National Development Maliki Osman acknowledged that the issue of HDB mortgage arrears has surfaced in many meet-the-people sessions due to the uncertain economic outlook, but clarified that “compulsory acquisition is a last resort, after all other avenues have been exhausted”.

As of last month, there were 33,000 flat owners with arrears of three months or more, making up less than 8 per cent of the 420,000 households with outstanding loans. This number has remained stable over the past year, said Dr Maliki.

He explained that home owners who have problems financing their mortgages can turn to HDB’s reduced re-payment scheme. “We can offer between 25 and 50 per cent reduced payment for six months, and sometimes we go all the way to two years,” he said.

But, he added, the reduced repayment scheme is only a short-term solution. For those with “difficulties in the longer term”, they would be better off selling their flats.

Interim housing is, however, a “last option”, he said.

“We don’t envisage a situation where we have a large exodus of displaced individuals and families where we have to house them in temporary housing,” he said.

MP for Aljunied GRC Cynthia Phua disagreed, saying she still sees four to five people who are unable to meet their mortgages during her weekly meet-the-people sessions, pointing to a real need for “alternative housing” for this group.

“Most of the cases cannot afford to downgrade. Where do you want them to go?” she said. She asked if the National Development Ministry could implement different levels of subsidies for rental flats.

Dr Maliki said his ministry is working on “a multi-prong” approach to address the shortage of two- and three-room flats, with more units expected to be built over the next two years.

As for more subsidies, he said there was a limit to how much the Government could provide.

Source : Today - 19 Nov 2008

More businesses look set to benefit from changes to the Stamp Duties Act, which were passed in Parliament on Tuesday.

A stamp duty is a tax on commercial and legal documents and is payable on documents relating to immovable property.

Among the amendments is one that will allow other types of businesses to qualify for stamp duty relief as long as both parties are associated.

The change will benefit limited partnerships, unlimited companies and statutory boards.

Currently, only transfer of assets between associated companies and registered business trusts is eligible for such relief.

Senior Minister of State Lim Hwee Hua said another change to the Act means it will no longer be compulsory for taxpayers to go through mandatory adjudication for transfer of shares and immovable property by way of gift.

Source : Channel NewsAsia - 18 Nov 2008

But trend not likely to escalate as it was a month when bourses tanked

The number of private homes returned to developers shot up last month on the back of a sharp dive in confidence due to the stockmarket crash.

Homebuyers returned 50-odd units to developers in October, compared with 10-plus units each in the preceding month and in October last year. The figures were estimated by BT from statistics on developers’ sales released by the Urban Redevelopment Authority (URA) yesterday. The figures exclude executive condos.

October also saw developers launching and selling the lowest number of private homes since URA started making monthly housing sales data available in June last year. Developers sold 112 private homes in October, down about 70 per cent from 376 units in the preceding month and 80 per cent below the 566 units sold in October last year. The 159 private homes developers launched last month was also 79 per cent lower than September and 75 per cent below that in the same year-ago period.

Buyers who returned the 50-plus units last month probably did so before the options were due to be exercised, industry observers reckon. Buyers who walk away from a deal before the option is exercised forfeit a quarter of the 5 per cent option fee, equivalent to 1.25 per cent of the purchase price of the unit.

‘The stock market was at its worst in October. So some buyers may have got jittery and decided it was better to forego 1.25 per cent of the purchase price - that’s $12,500 for a $1 million property purchase - than to be saddled with uncertainty. They worry that property prices may drop much further in the next six months. So it’s a matter of weighing risks, even for people who can afford to take the hit,’ said a seasoned property agent.

Another industry observer said another factor for the forfeitures could be if buyers failed to secure the required quantum of housing loan from banks, which have become more cautious in lending. ‘Some buyers may also have observed developers trimming prices and got cold feet,’ he added.

On a brighter note, he does not expect the number of units returned to developers to keep rising in the months ahead. ‘Anybody who buys now must have done his homework. Things are a lot clearer now.’

Agreeing, DTZ executive director Ong Choon Fah said: ‘October was an exceptional month with so much stockmarket turmoil and fear all around. Hopefully, we won’t get a repeat of this. People will be much more considered when buying homes henceforth and therefore the number of units returned should revert to a more normal situation.’

October saw a total of 14 units returned at Concourse Skyline at Beach Road, 11 units at The Peak @ Balmeg in the Pasir Panjang area and five units each at Silversea at Amber Road, Tresalveo at Marymount Terrace and VIVA at Thomson Road/Suffolk Walk. Nonetheless, all these projects still saw units being sold in October.

CB Richard Ellis (CBRE) said, based on transacted prices, prices have ‘remained fairly stable for the past two months, with due consideration that factors such as floor height, orientation and liveable space affect prices’.

‘However, it is very likely that the persistent thin volume will have a downward effect on prices. The sluggish sales momentum is likely to remain for the rest of the year as macro factors such as the economic recession and retrenchment will erode consumer confidence,’ CBRE’s executive director Li Hiaw Ho added. He predicts Q4 may see sales volume of around 500 units, a level last seen in Q1 2003.

Knight Frank director Nicholas Mak said that homebuying sentiment is expected to weaken in the face of economic and job market uncertainties. ‘Launches are expected to be held back till at least after Chinese New Year 2009,’ he added. The lowest-priced apartment/condo sold in October was a unit at The Linear ($554 psf) while the highest-priced unit was an apartment at Orchard Scotts ($2,407 psf).

Savills Singapore’s Ku Swee Yong noted that despite a weak month, The Lakeshore in Jurong and Hillvista in the Hillview area crossed $1,000 psf. The $2,169 psf of land area achieved at Sandy Island on Sentosa Cove is probably the highest price for a landed home in Singapore, he added.

Around 63 per cent of the 112 units sold in October were in Outside Central Region. However, in terms of the 159 units launched in the month, the lion’s share (46.5 per cent) were in the Core Central Region.

Source : Business Times - 18 Nov 2008