News summaries
Privatize Fannie and Freddie? Easier said than done
Privatizing Fannie Mae and Freddie Mac is much easier said than done, says a new report on
the future of the mortgage-finance giants from Standard & Poor’s. The S&P report
also predicts that any full-scale overhaul of Fannie and Freddie is still a long ways off
because home prices and unemployment need to stabilize so that the market and the government,
which effectively owns Fannie and Freddie, can assess the full scale of damages incurred by the
housing bust. S&P analysts Vandana Sharma and Daniel Teclaw say such privatization
remains an implausible scenario. “It’s hard for us to imagine how the $11 trillion U.S. residential
mortgage market could attract enough private capital to replace the GSEs historical share
(43% at the end of 2007, and an even higher 51% as of Sept. 30, 2009),” they write. The authors
argue that because the purely private sector entities wouldn’t benefit from a lower-cost funding
structure without any government backstop, mortgage rates for 30-year fixed-rate mortgages
would become “too expensive for many originators.”...The S&P report says that it doesn’t
believe the administration will attempt to overhaul Fannie and Freddie until next year, at the
earliest.
The Wall Street Journal
CA: Grim budget news for LA: Mayor wants more privatization
The bad financial news just keeps coming at Los Angeles City Hall, where the top budget
analyst reported this morning that tax revenue has come in at $186 million below estimates
for the current year. Mayor Antonio Villaraigosa and City Council leaders want to deal with the
budget crisis by eliminating at least 1,000 jobs...Villaraigosa and five council members circulated
a letter....calling called on City Administrative Officer Miguel Santana to speed up plans for leasing
city parking structures, giving him a deadline of Sept. 30. And it broached the subject of privatizing
the Los Angeles Zoo and municipal airports in Van Nuys and Ontario, asking him to look at the
concept.
Los Angeles Times
CA: 14 arrested in protest over privatization of UC bus service
Several hundred UC Berkeley staff, students, and faculty held a noon rally on Wednesday to protest
UC administration plans to privatize bus service at the Lawrence Berkeley National Laboratory. Fourteen
protesters, including Berkeley City Councilmember Jesse Arreguin, sat down in front of one of the buses
in an act of civil disobedience and were arrested.
The Daily Planet
CO: Gov talks privatizing workers' comp fund
Gov. Bill Ritter's office for weeks has been quietly discussing the prospect of privatizing
Pinnacol Assurance, the state-chartered worker's compensation insurance fund. Such a
move, assuming it was legal, could fetch hundreds of millions of dollars for the state, which
is facing a shortfall of at least $1.3 billion for the budget year that begins in July.
The Denver Post
OK: Lawmakers pursue workers' comp privatization
Meanwhile, the legislative, executive and judicial branches of state government will all be
involved in a pending privatization of CompSource Oklahoma, which is the state's largest workers'
compensation insurer by market share. The legislature formed a task force last year
to consider privatizing CompSource, a 77-year-old nonprofit, self-funded insurer that provides
coverage for businesses and government agencies. The task force did not recommend a single
course of action, but individual task force leaders... recommended a sale be pursued as the first
option. H.B. 2662, which would mandate a sale of CompSource and its assets by Dec. 31, 2011.
Insurance News Net
PA: Parking authority signs on with Chicago, local law firms
The Pittsburgh Parking Authority officials today hired two law firms to represent them as they
attempt to privatize the city's parking assets. The authority hired Chicago-based law firm
Katten Muchin Rosenman to represent them on a national level and Downtown law firm K&L Gates
to represent them locally. Both law firms will bill the authority for their hours worked with no payments
until Nov. 1. A minimum payment of $350,000 will be paid to the firms even if no deal is made, said David
Onorato, the authority's executive director... The board in November hired global management firm
Morgan Stanley to assist in the privatization. Morgan Stanley will be paid $3 million from the proceeds
of the deal should one occur...Overall the plan to privatize is expected to generate $300 million annually.
Mayor Luke Ravenstahl hopes to pump $200 million into the city's ailing pension fund from the
privatization of the parking assets.
Pittsburgh Tribune-Review
IN: Race to improve education will hit hard
Indiana's $500 million Race to the Top education grant application contains some aggressive
moves that could force out ineffective teachers and put failing schools under the guidance of a private
management company...The plan would allow Indiana to take over the lowest-performing schools,
give them to a private management company and eventually offer them the chance to return to their
districts or become a charter school.
Gary Post-Tribune
