Falling income security prices are all the buzz in the financial media these days, but why does this translate into such fear and confusion? I saw a news report the other day that encouraged investors to abandon their income ship and sail away on a stock market steamer that has been cruising steadily higher for twenty months — the IGVSI equaled its September 2007 high on December 8th. 

And Lest we forget, the over-riding purpose of investing in income securities is, after all, the generation of income. That’s income, Alice, not growth in market value. Just income.

 Income securities, as measured by an index of high quality closed end funds (CEFs), remain roughly 50% above where they were at the bottom of the financial crisis and, more importantly, precisely within their normal price range of the past ten years. The most conservative CEFs are yielding from 6% tax-free to 8% taxable.

 There are at least eight reasonable explanations for recent price weakness — there are at least eight excellent reasons why investors should be viewing this weakness as a buying opportunity. Clearly, the financial press has not attended any of my seminars on income investing. Lower prices and higher yields are good news for income investors!

 One: Income security prices vary inversely with interest rate expectations (IRE) — eighth grade finance. After nearly two years of historical (hysterical) lows, the world expects interest rates to rise.

 Two: Rising IRE, regardless of its impact on the price of fixed income securities, has absolutely no impact whatsoever on the income generated by existing securities. In fact, in CEFs, it will eventually lead to higher payout levels when managers have access to higher yielding instruments.

 Three: The surging stock market has outsmarted most mutual fund managers, and rather than look stupid by holding income securities, they are taking losses in that area and “window dressing” their portfolios with equities that MCIM (Market Cycle Investment Management) investors are taking profits on. Inexperienced investors too, and too often, move from income to equity at precisely the wrong time.

 Four: Rumors about the weakness of individual state treasuries may lead to some downgrading of their bond offerings, and this certainly has added some pressure to municipal bond pricing — but there hasn’t been a significant Municipal Bond default since the WHOOPS fiasco of the early 1980s.

 CEFs contain hundreds of different issues, and defaults are not likely to occur when so many other fiscal alternatives are available. Perhaps the state employee unions will be forced to weaken their stranglehold on private sector worker pocketbooks.

 Five: As any MCIM practitioner would explain, income CEFs have been a bountiful landscape for profit taking as they rebounded from the price “haircut” of the financial crisis. By adding to positions during the 24-month decline, profits were quick to appear as prices rose to normal levels very quickly — profit taking has been replaced by other investors’ irrational loss taking, as CEF income continues unabated.

 Think of it like a sale at Target, but with bargain prices still 50% above where they were less than two years ago!

 Six: Recent speculation that Congress would raise income taxes led to increased demand for tax-free securities. Now, with that specter less likely, demand has lessened. As an aside, do you think they know (arguably) that every major tax cut in history has led to increased government revenues?

 Concurrently, State and Municipal bodies have been taking advantage of a new Federal government taxpayer pocket-picking program by issuing, taxable “Build America” bonds. Although they are forced to pay investors a higher rate of interest, the Fed picks up a third of it.

 This program reduced the supply of tax-free bonds, just when the potential tax increase was increasing demand. With a republican controlled house, it is less likely that this program will be continued, increasing the supply and reducing prices once again.

 Seven: CEFs, and the securities they own, are much less liquid than equities. Consequently, when there are more sellers than buyers (for whatever reason), prices will fall more quickly — and the impact on income? Nadda.

 Eight: During December and January each year, most CEF managements disburse their accumulated capital gains. This welcomed “bump-up” in income to investors is recorded in the market as a reduction in price as the cash is distributed to shareholders.

 So now you know why closed-end income fund prices, particularly for tax-exempt issues, have weakened. I look at it as a double Holiday bonus (or “gelt”, for those of you who know). Whether it is profit taking by MCIM aficionados, or loss taking by window-dressers; whether it is irrational “priceaholism” or simple issues of supply and demand — history tells us what to do about it.

 When prices rise, we take our profits, reinvest and increase our cash flow. When prices fall, we reinvest our unaffected (even increased) earnings, reducing cost basis while increasing yield on investment. Double your holiday pleasure with increased distributions and lower priced shares to choose from.

 Have you ever had so much fun? Who says income investing is boring!

 Steve Selengut

http://www.marketcycleinvestmentmanagement.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

The investment planning stage is too often ignored by the young and the new, and too often over cooked by the older and beaten up. Most of the confused indecisiveness is due to constant media hype and an endless bombardment of data, news, software solutions, electronic tools, and expert opinions. But most actual investment errors are caused by invalid expectations, fear, greed, and lack of discipline.

Here’s an overview, and it is expected to provide structure and provoke thinking while skimming over most of the detail and explanation that can be found in the “Brainwashing” book.

For the rest of the story:  http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/18351

Steve Selengut

http://www.marketcycleinvestmentmanagement.com

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

The re-election of a center-right Swedish government for the first time in modern history and the entry of a hard-right anti-immigrant party into parliament show how far the times have changed, even in social democracy’s north European heartland.

How the center-left should respond, and whether it can regain the ascendancy in Europe at a time when loyalties are shifting across the political spectrum, are now being fought out in internal party tussles in Britain and France in particular.

In Sweden as in Germany, France, Denmark or the Netherlands, the main party of the center-left has hemorrhaged votes in all directions — to the hard left, the ecologist Greens, the populist far right but also to mainstream conservatives.

“Social democracy comes across as a victim of the crisis, when it should appear as a refuge or a hope after years of neo-liberal excess,” French political scientist Laurent Bouvet wrote earlier this year.

Technological change and globalization have shrunk the traditional industrial working class and the trade unions, made jobs more precarious and thrown up new issues such as climate change, population aging, immigration, obesity and drugs.

The mainstream left is torn between trying to reconnect with a lost popular electorate and reaching out to an aspiring new class in the knowledge economy.

Swedish Social Democratic leader Mona Sahlin alienated some centrist supporters by agreeing to a formal coalition with the ex-communist Left party — a move that the German Social Democratic Party (SPD) continues to eschew.

ACCOMPLICE?

In countries such as Britain, France and Germany, where the center-left was in government in the early 2000s, it is regarded by many voters as having been a zealous accomplice in financial deregulation and economic liberalism.

Rising income inequality gave a hollow ring to the left’s proclaimed ambition to redistribute wealth.

Now that most European countries are burdened with high deficits and debt mountains due to the financial crisis, the “big government” left is not seen as offering a credible answer to the question of where and how to shrink the state.

In many countries, public employees are the biggest bloc of socialist party members and constitute a brake on reform.

Socialists’ long-standing support for European unification, religious tolerance and integrating immigrants has made them vulnerable to right-wing populists like the Sweden Democrats, Geert Wilders’ Dutch Freedom Party or France’s National Front.

These dilemmas are the backdrop to the choice of a new leader by Britain’s opposition Labor Party this week, and of a presidential candidate by the French Socialist party next year.

In Britain, the choice is between sticking to the market-friendly New Labor ideology that marked Tony Blair’s decade in office from 1997, or shifting to the left to try to win back disenchanted working class and public sector voters.

“We need to become ‘effective state’ social democrats, not ‘big state’ social democrats,” Roger Liddle, one of the thinkers behind the New Labor project, said in a speech last week.

Former foreign secretary David Miliband embodies Blairite continuity, while his younger brother Ed, former cabinet minister Ed Balls and left-wing stalwart Diane Abbott offer varying degrees of the latter approach.

GREENS RISING

In France, the Socialists face a potential three-way choice between a social-liberal (International Monetary Fund chief Dominique Strauss-Kahn), an old-style socialist (current party leader Martine Aubry), and a left-populist (defeated 2007 presidential candidate Segolene Royal).

Aubry and Royal have vowed to reverse President Nicolas Sarkozy’s pension reform, which pushes back the retirement age from 60 to 62 and makes many work until 67 for a full pension. Strauss-Kahn says retirement at 60 cannot be a “dogma” when people are living ever longer.

An ecologist list ran neck-and-neck with the French Socialist party in last year’s European Parliament elections, siphoning off so-called Bobo voters (the bohemian bourgeois), while ex-communists and Trotskyists split another 10 percent.

In Germany, the Greens are snapping at the heels of the opposition SPD in opinion polls and may get a chance to lead a regional state government for the first time next year.

But the SPD has also lost support to the hardline Left party among working class and elderly voters who felt betrayed by its reduction of unemployment benefits and extension of the retirement age while in government over the last decade.

Where socialists are still in office, in Spain, Portugal and Greece, they risk alienating their core electorate by having to implement austerity measures mandated by the IMF and the European Union in exchange for financial support.

Only Greek Prime Minister George Papandreou has managed to retain his lead in opinion polls so far despite eye-watering spending cuts — perhaps because his conservative opponents made such a shambles of running public finances until last year.

But it’s not nearly large enough to pay the bills, reduce the national debt, grow the economy, and come to the aid of all of the people in the world who need us. Why, because nearly half of us (some legally, some not so) pay little or no federal income taxes at all— and because our elected representatives have no financial management skills.

The only taxes that always get paid are those that reduce the amount of spending money in our pockets and which raise the cost of the goods and services we purchase — thus retarding economic growth.

First KISS: Create Jobs Right Now

Create jobs immediately by eliminating the corporate income tax (and all other fees, local taxes, assessments, ad nauseum) for any corporation that adds 10% to its permanent workforce and/or 20% to its total workforce.

Second KISS: Lower and Eliminate Taxes

Third KISS: Produce Sustainable Economic Growth

“The Rest of the Story”: http://kiawahgolfinvestmentseminars.net/Inv/index.cfm/6942

Connect With Me On Linked In

Steve Selengut

http://www.kiawahgolfinvestmentseminars.com/

http://www.sancoservices.com

Professional Portfolio Management since 1979

Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”

Nobel-award winning economist Paul Krugman can’t figure it out.

So, I doubt that he or any of the other hot-shot business and academic experts at Pres. Obama’s jobs summit Thursday will bring up the fact that hundreds of thousands additional Americans could be working a year from now by changing immigration quotas (FOR FREE).

I’m just an humble former newspaperman, but if Obama had invited me, I would have made the suggestions shown below..

SUPER-SMART ECONOMIST KRUGMAN IS CLUELESS

But first, a word about Paul Krugman’s myopia as displayed in his recent New York Times column.

Failure to act on unemployment isn’t just cruel, it’s short-sighted. So it’s time for an emergency jobs program.– Paul Krugman

I agree entirely! This is an emergency. In an emergency, you consider suspending even things you love. And I don’t care how much the President or Krugman love immigration, they need to set that love aside in favor of their greater love (and concern) for the 16 million Americans actively looking for a job who can’t find even a part-time job.

Krugman recommended a number of ways to drive the U-3 unemployment rate well below its current 10.2% level.

All of this would cost money, probably several hundred billion dollars, and raise the budget deficit in the short run.– Paul Krugman

But there is no other way, Krugman said.

Well, there ARE other ways. I do not have the expertise to say whether any of Krugman’s expensive proposals are a good idea.

But I DO have the expertise to know that there other ways.

I would offer Pres. Obama the same testimony I gave to the House of Representatives before Thanksgiving and tell him that he could make sure that hundreds of thousands of additional Americans could be working a year from now at zero or near-zero cost to the government, the taxpayers or the swelling deficits.

All Congress has to do is cut immigration quotas. My suggestions would be virtually free to implement.

In addition, I would recommend (as found at the beginning of my testimony below) some relatively inexpensive ways to drive millions of illegal aliens out of their jobs over the next few years. If my suggestions were followed, there could easily be yet another half-million or more segment of Americans with jobs a year from — and far more than that two or three years down the line.

Before Thanksgiving, I blogged about the opening part of my testimony that focused on a few key numbers that demand immigration reduction now.

Today, I give you the rest of the testimony that offered my proposed solutions.

THE SOLUTIONS PART OF MY TESTIMONY TO THE U.S. HOUSE OF REPRESENTATIVES

(Testimony of Roy Beck at “American Jobs in Peril: The Impact of Uncontrolled Immigration” Forum on Nov. 19, 2009.)

Let me offer a broad outline of what Congress could do in the next month to change immigration policy so it would no longer be an enemy of U.S. workers and their families.

There are six easy changes in immigration law, and one that would be a little more complex, that could result in one million additional Americans having a job a year from now.

All of these changes would have broad public support and probably would seem quite reasonable during a good economy and certainly so in a time of an unemployment crisis.

The cost should be nominal, especially in comparison to $350,000 per job (White House estimate of cost per job saved/created under Stimulus and Tax Relief measures this year.)

• 3 Easy Changes to Keep Illegal Foreign Workers Out of U.S. Jobs

An immigration policy that puts unemployed Americans first would immediately begin opening up hundreds of thousands of jobs currently held by illegal foreign workers.

We know from the few major worksite enforcement actions of this year that legal workers will quickly come forward to fill meatpacking, janitorial, service and construction jobs that have been vacated by illegal aliens.¹²

You can begin reducing unemployment in the first month and accelerate the benefit through the year with just three changes in enforcement law:

No. 1 – Allow all employers to voluntarily run their entire workforce through E-Verify.

Many of the 160,000 employers¹³ currently using E-Verify chose the program because they learned that they previously had been hiring a lot of illegal aliens and decided to clean up their act. But under current law, they aren’t allowed to use E-Verify to clean up the results of their past hires.

Give companies that want to ensure they have a 100% legal workforce the ability to use E-Verify on the pre-existing workforce. This will open up thousands of jobs quickly for unemployed Americans.

No. 2 – Immediately begin the roll-out of mandatory E-Verify.

The system is in place. It is proven. It already is expanding rapidly because of the new Obama Administration mandate on federal contractors. USCIS has shown itself quite capable of rapid expansion of use of E-Verify.

To ease the number of new businesses signing up in the first few months but to maximize the likelihood of opening up the jobs most likely to be taken by illegal workers, begin the mandate for employers of more than 25 in the top 10 industries with illegal-alien workforces (excluding agriculture). ¹⁴

All of those businesses should be mandated to be using E-Verify for their new hires within 6 months.

Because there tends to be rapid turnover in these illegal-alien-prone industries, a lot of extra jobs can be opened up for jobless Americans in a hurry.

Provide the nominal amount of extra funds needed for this expansion.

Thousands of jobs will open up for the less-educated Americans who are suffering the highest rates of unemployment.

Set a 12-month deadline for all other businesses with more than 100 employees, plus all governments.

Establish a deadline schedule for the remaining employers.

Agree to set aside the question of amnesties and legalizations. For now, Congress should just concentrate on moving U.S. citizens and legal immigrants already here to the front of the jobs line.

Are there really many Members of Congress who would look their voters in the eyes and argue that illegal workers should be at the front of the jobs line ahead of unemployed citizens of the District?

And if Congress is really serious about helping unemployed Americans, it will require every business in America to run all existing employees through E-Verify during the next year, or a perhaps a somewhat longer time.

When I testified before the House Subcommittee on Immigration in 2007, I suggested that it might be best to phase in total E-Verify over a few years to give illegal-alien-dependent companies more time to create channels of recruitment and to transition to a legal workforce. But during this time of huge unemployment, experience is showing that businesses will have no trouble finding legal workers to replace their illegal ones.

No. 3 – Provide full funding so that DHS can quickly train as many local and state police forces as desire to enter into the 287(g) program.

Empower the local governments that desire to assist the federal government to work within the limits of the 287(g) program to deter illegal foreign workers from settling or remaining in their jurisdiction.

Some localities have found that the illegal worker population decreased merely from the announcement that the local government was PLANNING to enter into a 287(g) arrangement.

• 3 More Easy Changes to Reduce LEGAL Foreign Worker Competitors

Reducing the flow of legal permanent foreign workers means that unemployed Americans will have less competition for jobs as they open up during the economic recovery. In general, they will get a job faster with less competition from the foreign workers.

No. 4 — Suspend issuing Green Cards to visa lottery winners. ¹⁵

The lottery randomly selects workers from around the world to compete with U.S. workers without any regard to the immigrants’ education, skills or any other criteria, or how any of that matches the needs of our society.

Obviously, Congress would not openly state that these lottery winners are more deserving of U.S. jobs than unemployed U.S. citizens.

No. 5 — Suspend the chain migration categories of adult siblings and adult children of anchor immigrants.¹⁶

They fill up U.S. occupations without any regard for their effect on the U.S. workers competing there. And we have no control over which occupations they affect the most as they are accepted without regard to their education, skills or job preferences.

Anchor immigrants are chosen for their specific qualities. They are allowed to bring in their spouse and minor children but, in accepting the gift of a Green Card, freely make the decision to separate themselves from their extended family and communities in their home country.

Congress must choose to give job priority to U.S. citizens and the legal immigrants already here – rather than to extended families of immigrants.

No. 6 – Suspend issuing work permits to the parents of anchor immigrants.¹⁷

You can create renewable one-year Parent-Care Visitor Visas that allow anchor immigrants to care for their parents as long as they choose, if they provide proof of non-taxpayer supported health insurance coverage. Visitor Parents would not be given any kind of work permit and would not be allowed access to any taxpayer-supported social services. The cost of the care for foreign parents would be borne by the immigrants.

• Reduce Employment-Based Green Cards — A Little More Complex

This one will take a little more thought and some more administrative effort from the Department of Labor. But it should be possible to put the new criteria in place quickly. Until it is in place, perhaps it would be best to just suspend all issuance of employment-based Green Cards to make sure no American workers are hurt in the interim.

No. 7 – Dramatically reduce permanent work permits issued through employment-based categories to take jobs that Americans want.

Last year, 166,000 of these Green Cards were issued.¹⁸

Although there can be considerable red tape, there are not a lot of criteria to protect the jobs for U.S. workers.

You will need to wrestle with where to set the numerical cap during the Jobs Depression immigration suspension period.

But I believe that if you set the criteria for issuing these work permits so that they don’t hurt American workers, the number will end up at only a fraction of the current ceiling.

What should be the criteria for these permanent work permits that are sought for specific jobs?

I suggest that you start with the questions to which virtually any business lobbyist or organization would answer, “NO.”

• For example, if you asked if they were seeking foreign workers in order to avoid hiring qualified U.S. workers, they would emphatically answer NO.
• Do they want foreign workers so they can avoid having to recruit and hire from under-represented minorities in their field, such as disabled Americans or Black and Hispanic Americans – or an under-represented majority, women? I imagine businesses would answer NO.
• Do they want foreign workers in order to discourage American high school and college students from pursuing certain careers? NO
• Do they want foreign workers so they can hold down wages, benefits and working conditions? The answer surely would be NO.
• Do they want foreign workers because they will be more compliant if various labor and safety laws are violated? OF COURSE NOT.

Then, create criteria for employment-based permanent work permits that guarantee that all the aforementioned will NOT happen. Everything that follows merely serves this goal.

The criteria should leave room for the persons of truly exceptional world-class skills that peers would say exceed 95% of the Americans in the occupation.

But if our trade schools, colleges and corporations are capable of training Americans to do these jobs, meet temporary shortages with temporary visas until the Americans are ready to take the jobs. In this kind of economy, it surely will be a rare case to find true shortages in any occupations.

Surely during the Jobs Depression, the Labor Department would not want to issue a permanent work permit in any of its categories in which U-3 unemployment is above 5% or real wages have been stagnant or declining.

To give unemployed Americans full opportunities, all applications for foreign workers by an employer must be transparent to the public. That would mean posting of all non-proprietary information about the job on a national website and a record of the American applicants who applied and were rejected.

SUMMARY

There you are: 6 easy changes and one a little more complex that very well could save jobs for Americans at the same pace as all the other job creation programs underway and being considered.

Thank you for this opportunity to look at immigration policy, not in terms of how it affects special interests but in terms of how it affects the 16 million Americans who are looking for a job and cannot find one — and for the millions more Americans and their families who live in daily fear of losing their jobs.

===================================================================

¹²In October, 2009, approximately 1,200 illegal aliens were fired from a San Francisco-based company hired to clean buildings across Minneapolis-St. Paul. These jobs were quickly filled. http://minnesota.publicradio.org/display/web/2009/11/09/immigrants-fired/. After a House of Raeford poultry plant was raided in Columbia, South Carolina, the company quickly began to let illegal aliens go at their plant in Raeford, North Carolina. These jobs were quickly filled by unemployed American workers (mostly Black Americans). http://www.charlotteobserver.com/258/story/884790.html.

¹³ According to the Department of Homeland Security more than 159,000 employers utilize the E-Verify system (as of October 21, 2009). http://www.dhs.gov/files/programs/gc_1185221678150.shtm.

¹⁴I would suggest phasing in agriculture later. This is partly because such a high percentage of the workforce is illegal and because this is the one occupation that a legal local workforce might not be immediately available. Movement of illegal aliens out of the agricultural fields is not likely to put large numbers of Americans to work because there are so few lines of recruitment and networking channels into the American laborforce. The most likely short-term result of moving illegal aliens out of agriculture is that the jobs would be filled legally by agribusiness hiring foreign workers through the H-2A system. Thus, E-Verify in agriculture can be phased in over a few years without much loss of opportunity to legal American workers.

¹⁵Department of Homeland Security. “Yearbook of Immigration Statistics: 2008.” Green Cards in 2008 were issued to 41,761 persons through the Visa Lottery category. The Department of Homeland Security does not report an age breakdown for the category. However, it does report the age breakdown for all categories combined that gives us a ratio. Of the total Green Cards issued in 2008, 79.5% of them were issued to immigrants aged 15-65 (880,636 out of a total of 1,107,126). Applying the 79.5% ratio to the visa lottery category suggest that about 34,000 of visa lottery winners were of working age. http://www.dhs.gov/xlibrary/assets/statistics/yearbook/2008/table08.xls.

¹⁶Ibid., 124,305 Green Cards in 2008 were granted to unmarried sons/daughters of U.S. citizens and their children, to married sons/daughters of U.S. citizens and their spouses and children, and to the brothers/sisters of U.S. citizens (at least 21 years of age) and their spouses and children. While DHS does not issue age-specific data for these categories it is reasonable to apply the 79.5% ratio to estimate that around 99,000 of these Green Card recipients are of working age. http://www.dhs.gov/xlibrary/assets/statistics/yearbook/2008/table06d.xls.

¹⁷Ibid.,In 2008, 121,470 Green Cards went to the parents of U.S. citizens. DHS does not issue age-specific data for this category. Applying the 79.5% ratio would suggest that around 96,000 of these individuals are of working age. All of them are adults, but many are too old or infirm to take jobs. http://www.dhs.gov/xlibrary/assets/statistics/yearbook/2008/table06d.xls.

¹⁸Ibid., 166,511 aliens received legal permanent resident status in 2008 due to employment-based preferences. DHS doesn’t provide an age breakdown for this category. Applying the 79.50% ratio would suggest that about 133,000 were working age and the rest young dependents. http://www.dhs.gov/xlibrary/assets/statistics/yearbook/2008/table06d.xls.

ROY BECK is Founder & CEO of NumbersUSA

The commercial real estate market is on its last legs and unless drastic actions are taken, the effects on the broader economy will be catastrophic. The obvious problem is the excessive amount of debt placed on the properties and the amount of debt that has to be refinanced during a relatively short period of time.

Between now and 2013, at least $1.3 trillion of financing comes due, of which $160 billion was the result of securitizations. Unfortunately, as a result of the virtual disappearance of the secondary market, the weakened condition of the banks, and the amount of debt already held by insurance companies and pension funds, even under the best of circumstances, less than half of the outstanding debt can be refinanced. This is compounded by the collapse of the commercial rental market in the last 18 months as a result of the Great Recession. For example, office rents in prime areas of Manhattan that were in the $100-$120 a square foot range in 2007 are now trading (with rent concessions and work letters) at half that amount.

After two years of one financial crisis after another, the Fed has fewer cards to play, and the foreign investors who bailed out commercial real estate investors in the past are sitting on the sidelines waiting for the prices to collapse. This problem is exacerbated by the lingering effects of the recession: absence of credit; growing job losses as a result of falling prices, consumer demand and credit; the insolvency or near insolvency of so many institutions; and the loss of confidence in the U.S. economy by our trading partners.

In the last few weeks there have been a series of court decisions that will have repercussions in the credit markets for years to come making an already cautious lending community absolutely paranoid, and restricting credit even if available.

In Syracuse, N.Y., a state court refused to allow Citigroup to foreclose a mortgage on what was to be the second largest mall in the country even though it had no tenants. In a recent decision in the General Growth Properties bankruptcy, the court held that the special purpose entities structure was not bankruptcy-proof. The court also ignored the fact that General Properties fired the independent directors of the special purpose entities and appointed new ones without telling anyone, including the fired directors, for seven weeks. Finally, last week in the Tousa bankruptcy in Florida, the bankruptcy court set aside the subsidiary’s obligations and grants of security and ignored the savings clause in the loan documents to reverse a legitimate transaction meant to save the company.

The recent court decisions demonstrate how courts can override the words and intent of loan documents and lenders’ remedies notwithstanding the widespread concern about the fiscal health of our lending institutions and the need for them to recover to unfreeze the credit markets and permit economic growth to resume. The media regularly contains stories about home owners who have been able to avoid foreclosure and have their debt canceled because of administrative or technical errors by the lenders. One would think that the courts believe that the money people borrowed to buy homes magically appeared and did not come from other people’s savings, investments and retirement accounts. Has any court considered that, when they preclude a bank from foreclosing a mortgage, the home owner, who actually borrowed the money and is refusing to repay, is actually stealing the savings of their neighbors? So far, the courts seem to believe that they are playing the role of Robin Hood and ignoring creditors’ rights. This behavior is also causing lenders to think twice before making loans.

As far as commercial loans are concerned, lenders have been hoping that something will happen to avoid their being required to either foreclose or declare a default. Both would have an immediate adverse impact on the lenders’ financial condition and could result in a need to raise more regulatory capital to avoid being taken over or merged into another institution or reporting another mess to their shareholders. However, delaying the recognition of the problem will not cause it to disappear.

In order to avoid a collapse that will result in a significant erosion of capital and the likely freezing of credit again with consequences worse than a year ago, the following steps should be taken immediately:

The Federal Reserve should provide a credit facility to commercial real estate owners as a lender of last resort with the government obtaining an equity interest (but not control) over the real estate in order to avoid the real estate from being dumped on the market, thereby further depressing values, which will also provide lenders with a way to liquidate their loans.

Lenders should not be required to appraise real estate that they own, are part of special assets or the subject of workouts using a mark-to-market standard but, recognizing the current aberration in the market place, using a “fair value” approach that recognizes the need to sell in an orderly transaction. What helped to destroy the S&L industry in the late 1980s and bring on the last real estate recession was the need of solvent banks to mark the real estate assets to market.

The City of New York (and the taxing authority in other jurisdictions) should reduce the real estate tax assessments on commercial properties to reflect the loss in value rather than making owners pay real property taxes based on assessments that are no longer relevant and then wait years to obtain a refund to help offset lost revenues.

Courts must begin to take cognizance of the fact that ignoring the terms of loan documents is not in the best interest of anyone except the owners of assets that no longer have value in excess of debt. Until the lenders begin to provide credit again, the economy is not going to grow and unemployment will increase.

Until the commercial market corrects itself, municipalities and states should suspend unfunded mandates that require large capital outlays by building owners that are not safety related (e.g., this is not the time to demand that buildings comply with new “green” standards) unless the municipality provides an economic benefit (i.e., tax abatements) to the property owner.

The Internal Revenue Code should be modified to suspend the passive activity rules and reduce the depreciation period for real estate acquired between 2010 and 2013 in order to make the acquisition of commercial real estate more attractive for domestic investors and offset the loss of value in the current market, which actions are just an income tax deferral and not a loss in revenue.

The Internal Revenue Code should also be modified to reduce the negative tax implications for foreign investors in purchasing and holding US real estate.

Finally, the federal government needs to focus on policies that will produce jobs and an environment that will spur job creation.

In all probability the subprime collapse and the damage done to the broader economy could have been averted by faster government intervention. In the current environment, there are just a few weeks left before phase two of the Great Recession commences due to the hundreds of billions of dollars in credit that will be lost from commercial defaults. Fixing the problem afterward will be far more expensive and damaging to the nascent economic recovery.

Stuart M. Saft, Esq. is a partner at the international law firm of Dewey & LeBoeuf LLP.

The Internet Corporation for Assigned Names and Numbers (ICANN) has opened the application process, ending the exclusive use of Latin characters for website addresses.

On the first day, “we have already received six applications from around the world for three different scripts,” ICANN CEO Rod Beckstrom told an Internet Governance Forum (IGF) in Egypt’s Red Sea resort of Sharm el-Sheikh.

He said that while ICANN could not reveal the names of those applying, Egypt — with .misr, meaning Egypt in Arabic — and Russia had already made public their applications for country code top level domains in their scripts.

With the introduction of “internationalised” domain names (IDNs), scripts such as Chinese, Korean or Arabic will eventually be usable in the last part of an address name — the part after the dot, as in .com and .org.

“It’s an historic moment,” Beckstrom said.

“Of 1.6 billion (Internet users), more than half are born using languages that do not use Latin scripts, so this means that for more than half of users today of the Internet, they will be able to type domain names entirely in their own language,” he said.

He said it would take time to process the applications but hoped that by 2010 the entries would make it to the Internet.

Egyptian Communication Minister Tarek Kamel said the process would require “strong investment in the coming phase.”

“There will also be issues to deal with: linguistic, technical, legal, related to intellectual property and many other big challenges,” Kamel told reporters on the sidelines of the IGF.

The Fourth Meeting of the IGF groups more than 1,500 representatives of government, advocacy groups, non-governmental organisations and the private sector to discuss the future of the Internet.