Housing Chill Grows Worse, Bites Consumers

By SUDEEP REDDY and MICHAEL CORKERY
September 26, 2007
WALL STREET JOURNAL

The housing market is going into a deeper chill, and consumers are starting to shiver.

Sales of existing homes in August fell sharply, and home inventories by one measure soared to an 18-year high, according to data released yesterday. One major home builder, D.R. Horton Inc., is auctioning homes this weekend with starting prices for some units at 50% off an earlier price.

The housing market is worrying consumers, raising fresh concerns about economic growth. Consumer confidence fell this month to its lowest level in almost two years, a new survey showed. Retailers such as Lowe's Cos. and Target Corp. said they're feeling the pain. Both reported softer-than-expected sales Monday.

"The combination of all this is indicative of an economy that has lost quite a bit of momentum," said Joshua Shapiro, chief U.S. economist at the consulting firm MFR Inc., an economic forecasting firm that advises investors.

Wall Street seems unconcerned for now. Broad stock indexes moved little yesterday, and the Dow Jones Industrial Average is just a few hundred points from its all-time high.

Optimists believe the Federal Reserve's aggressive move last week to cut interest rates will help keep the economy out of recession. Also, exports are rising, thanks to a weaker dollar, and business investment is holding up.

Still, the pace of housing's downturn is accelerating, surprising even some bearish analysts.

Lennar Corp., the nation's second-largest home builder by market value, reported a net loss of $514 million for the quarter ended Aug. 31. That was nearly six times the loss Wall Street analysts on average had expected, and compared with net income of $207 million a year earlier. The company was forced to write down the value of land and write off deposits for land it no longer wants to build on. The writedowns totaled $847.5 million in the quarter. Lennar said it has cut its work force by 35% since last year.

REAL TIME ECONOMICS

• Read more about the decline in home prices at WSJ.com's Real Time Economics blog.

Lennar shares fell 4% and have lost more than half their value this year.

Chief Executive Stuart Miller said the problems are broad-based and stem from an oversupply of homes, turmoil in the mortgage market and weak consumer confidence. "We have not only not seen evidence of any of these items resolving, but instead we have seen further deterioration," Mr. Miller told investors and analysts during a conference call.

Overall, sales of existing homes tumbled 4.3% in August to an annual pace of 5.5 million, the slowest in five years, the National Association of Realtors said yesterday. More worrisome: The number of homes for sale is enough to satisfy 10 months of demand at the current pace. Two years ago the figure was below five months. Analysts cite excess supply in forecasting that an upturn in sales and prices may not come until 2009.

Home prices in July fell 3.9% from a year earlier, according to the S&P/Case-Shiller home-price index. The index, which tracks prices in 20 U.S. metropolitan areas, hadn't measured that big of a decline since just after the 1990-91 recession.

The bottom is "not yet in sight" for housing, said Mr. Shapiro, the economist. He said the growing number of unsold homes "argues for accelerating declines of prices."

The worsening housing slump and turmoil in the credit markets is beginning to take a toll on retailers. Lowe's Chief Executive Robert Niblock, addressing analysts and investors at a conference in Charlotte, N.C., yesterday, refused to hazard a guess on when the housing slowdown will bottom. "The only thing that is consistent is the inaccuracies of the economic forecasts," he said. Late Monday, Lowe's reduced its earnings outlook for this year and 2008. Its shares fell 6.7% yesterday.

Other well-regarded retailers are missing forecasts. Target on Monday lowered its estimate for September sales. In August, Costco Wholesale Corp.'s sales at stores open at least a year rose just 1%, much lower than its original forecast. It cited weakness in California, which has been hard-hit by the housing slowdown. Target mentioned soft sales in the Northeast and Florida.

The Conference Board said yesterday that its index of consumer confidence dropped to 99.8 in September from 105.6 in August, putting it at the lowest point since November 2005. The survey ended on Sept. 18, the day the Fed lowered interest rates by half a percentage point. The share of consumers reporting jobs as "hard to get" rose to 22.1% from 19.7%.

"Looking ahead, little economic improvement is expected," said Lynn Franco, who directs the Conference Board survey.

Builders are divided on how drastically to cut prices to put a dent in supply. Earlier this month, Hovnanian Enterprises Inc. held a 72-hour weekend sale nationwide, dubbed "The Deal of the Century," and offered discounts of up to 30% on certain homes. The company sold 2,100 homes during the promotion, about 10 times the usual weekly number. Hovnanian executives said that demonstrates buyers will come if the price is right.

On Saturday, D.R. Horton is using an auction to sell 53 homes in San Diego. The starting bid for some units will be as much as 50% lower than previous prices, according to the auction Web site. On a one-bedroom unit, the starting bid is $149,000, down from a previous price of $309,990.

Lennar's Mr. Miller questioned the wisdom of deep discounts, saying he's not willing to match some of the incentives offered by competitors. He said some recent price cuts were "just unrealistic and maybe even ridiculous."

Lennar's average home price nationally declined 6% in the third quarter to $296,000 from $316,000 from a year ago. Its average incentive per home -- a figure that includes extra amenities and price discounts -- increased to $46,000 from $36,000 a year ago.

Individual home owners have been slower than builders to bring down their prices to match demand, but that may be changing as the housing slump worsens. "The existing-home market is moving much more rapidly to adjust downward," Mr. Miller said.

The National Association of Realtors reported yesterday that the median national home price was $224,500 in August, up 0.2% from $224,000 in August 2006. Those numbers can be skewed by the mix of homes sold in a particular month. Economists say the Case-Shiller index is less vulnerable to that distortion because it tracks the sales of individual homes over time.

Mortgage companies are scaling back loans to people who have poor credit or can't document their income, while looking to make more loans that can be insured by the Federal Housing Administration.

That trend showed up in Lennar's figures. In the third quarter, 25% of buyers using Lennar's in-house mortgage company used an "Alt-A" mortgage, a category between prime and subprime that often requires little documentation, down from 41% a year earlier. The proportion of FHA-insured loans rose to 25% from 12%.

"The days of no verification, no down payment and low credit scores are past," said Lennar's chief financial officer, Bruce Gross.

--Ann Zimmerman contributed to this article.

Sarkozy calls for UN-led 'new world order'

DPA
Wednesday September 26, 2007

New York - The United Nations should avail itself as an instrument for a "new world order of the 21st century," French President Nicolas Sarkozy said Tuesday in his first address to the General Assembly. Sarkozy, who won the presidency this year on a strong reform platform to modernize France, urged the world body to embark on programmes ranging from equal wealth distribution to fighting corruption in his speech full of references to France's past revolutionary ideals.

"In the name of France, I call upon all states to join ranks in order to found the new world order of the 21st century on the notion that the common goods that belong to all of humankind must be the common responsibility for us all," he told the General Assembly.

The UN should ensure access for all human beings to vital resources, such as water, energy, food, medication and knowledge, he said. He called for "more morality" in "financial capitalism" and a fairer distribution of profits, earnings in commodities, raw materials and new technologies.

"There must be a change of mindset and behaviour," Sarkozy said in a long list of demands to the international community.

Known for his admiration of the United States and its culture, Sarkozy said France will remain loyal to its friends and the values it shares with them.

But he warned that loyalty should not be equated with submission, a reference to Paris' disagreement with the US-led war in Iraq.

"What I want to say to the world is that France, faithful to its friends, stands ready to talk to all people, on every continent," he said.

Harper takes shot at Bush administration

Focus on nationalism hurts economic ties: PM

Sep 26, 2007 04:30 AM

Allan Woods the star
Ottawa Bureau

NEW YORK–Canada's relationship with the United States is stalled thanks to an "unhealthy" trend in the U.S. toward nationalism and away from deeper economic ties, Prime Minister Stephen Harper told a prestigious foreign policy think-tank here yesterday.

He said he was "deeply concerned" that the political discourse in the U.S. had been infected by "populism, protectionism and nationalism in an unhealthy sense."

His candid comments came in an analysis of the Canada-U.S. relationship, one that Harper said is "the closest ... probably of any two countries in history."

The Prime Minister delivered a speech and took questions for more than an hour from the members of the Council on Foreign Relations, a non-partisan organization and resource for foreign affairs discussion.

In his speech, Harper emphasized the "shared values" of Canada and the U.S., and seemed taken by surprise when an audience member asked why, despite these common traits, Canada was not hated internationally, as is the U.S.

"It's certainly hated in some circles," Harper said.

"I suspect in the circles where the United States as a nation is genuinely hated, I suspect Canada is equally hated as are all countries that stand for these values. The American administration is, to be frank, more widely unpopular than the United States itself, but that's an issue for American domestic politics."

Unlike the U.S., Harper said, "Canada has no history anywhere in the world of conquest or domination. It's probably hard to perceive of Canada being in that type of a position."

In contrast, Canada is seen in the world as a "positive and non-threatening force," he said. "What my government is trying to do is to use those values to promote positive change in concert with our allies."

The shot at the administration of U.S. President George Bush was surprising from a prime minister seen as the most pro-American since Brian Mulroney.

But Liberal foreign affairs critic Ujjal Dosanjh said Harper was "simply acknowledging the truth." In light of the Prime Minister's comments, Dosanjh said he was puzzled that the government has set a foreign policy that is so closely aligned with the U.S. "I'm sorry to use the same old expression; he remains an echo of the U.S. whether it's on Afghanistan, whether it's on Kyoto," Dosanjh said in a telephone interview from Vancouver.

The fight between the Democrat-controlled U.S. Congress and the Bush administration means ties between the two nations could be further frustrated if a Democrat becomes president in 2008, he said.

"Mr. Bush is a lame-duck president ... and we have not been able to push our agenda for some time, whether it's on softwood lumber or any other policies. In a sense, Mr. Harper is whistling in the wind when he's talking to Washington," Dosanjh said.

Harper has been cast as a pro-American hawk on security and foreign policy matters, but he said he was concerned that Bush's Republican administration was "preoccupied" with security and that economic ties with Canada and other countries, particularly in Latin America, were suffering.

Harper said the U.S. focus on "national sovereignty and national borders" have limited the prospect of deeper trade ties. On issues like the U.S. law requiring passports to be presented at the border with Canada – one that MPs say puts the country's economy in jeopardy – Harper said he would continue to put up a fight to ensure "that we don't go backwards."

"Any talk of deepening NAFTA or strengthening trade relationships on this continent is not gonna happen in the immediate future," the Prime Minister said.

He used Colombia as an example, noting that the U.S. Congress recently blocked a free trade agreement proposed by Bush because of concerns over the country's human rights record. Harper travelled this summer to Colombia to meet President Alvaro Uribe and formally launch free trade talks.

"Colombia needs its democratic friends to lean forward and give them a chance at partnership and trade with North America," Harper said. "I am very concerned that some in the United States seem unwilling to do that. What message does that send to those who want to share in freedom and prosperity?"

Financial Times: Chinese buy into conspiracy theory

Financial Times
Wednesday September 26, 2007

The Battle of Waterloo. The deaths of six US presidents. The rise of Adolf Hitler. The deflation of the Japanese bubble economy, the 1997-98 Asian financial crisis and even environmental destruction in the developing world.

In a new Chinese best-seller, Currency Wars , these disparate events spanning two centuries have a single root cause: the control of money issuance through history by the Rothschild banking dynasty.

Even today, claims author Song Hongbing, the US Federal Reserve remains a puppet of private banks, which also ultimately owe their allegiance to the ubiquitous Rothschilds.

Such an over-arching conspiracy theory might matter as little as the many fetid tracts that can still be found in the west about the “gnomes of Zurich” and Wall Street’s manipulation of global finance.

But in China, which is in the midst of a lengthy debate about opening its financial system under US pressure, the book has become a surprise hit and is being read at senior levels of government and business.

“Some senior heads of companies have been asking me if this is all true,” says Ha Jiming, the chief economist of China International Capital Corp, the largest local investment bank.

The book also gives ammunition, however hay-wire, to many in China who argue that Beijing should resist pressure from the US and other countries to allow its currency, the renminbi, to appreciate.

The book’s publisher, a unit of the state-owned CITIC group, said Currency Wars had sold nearly 200,000 copies, with an estimated 400,000 extra pirated copies in circulation as well.

Mr Song, an information technology consultant and amateur historian who has lived in the US since 1994 and is now based in Washington, says his interest was sparked by trying to uncover what lay behind the Asian crisis in 1997.

After he began blogging some of his findings, his friends suggested he find a publisher for a longer work. He professes himself surprised by the book’s success.

“I never imagined it could be so hot and that top leaders would be reading it,” he says during a book tour in Shanghai. “People in China are nervous about what’s going on in financial markets but they don’t know how to handle the real dangers. This book gives them some ideas.”

The thing that most shocked him, he says, was his “discovery” that the Fed is a privately owned and run bank. “I just never imagined a central bank could be a private body,” he says.

The Fed does describe itself “as an unusual mixture of public and private elements”. While its seven governors are all appointed by the US president, private banks do hold shares in its 12 regional reserve banks.

But Mr Song ignores the government’s role and argues that the Fed’s key functions are ultimately controlled by five private banks, such as Citibank, all of which have maintained a “close relationship” with the Rothschilds.

Mr Song is defensive about his focus on the Rothschilds and what the book depicts as their Jewish clannishness.

“The Chinese people think that the Jews are smart and rich, so we should learn from them,” he says. “Even me, I think they are really smart, maybe the smartest people on earth.”

Jon Benjamin, chief executive of the Board of Deputies of British Jews, is not impressed. “The Chinese have the highest regard for what they see as Jewish intellectual and commercial acumen, with little or no concurrent culture of antisemitism. This claim, however, plays to the most discredited and outmoded canards surrounding Jews and their influence. That it should gain currency in the world’s most important emerging economy is a great concern.”

The book has been ridiculed in internet postings in China, for exaggerating the lingering influence of the Rothschilds and being a re-write of existing conspiracy theories in the west.

Mr Ha puts the book’s popularity down to the decade-long stagnation in Japan and the Asian financial crisis, which he says had a profound impact on many Chinese policymakers.

Such officials remain deeply suspicious of advice from western countries to open up the financial system and float the currency. “They think it is just a new way of looting developing countries,” Mr Ha says.

Mr Song himself has been commissioned to write a number of new books to capitalise on his success, on the yen, the euro and also on China’s financial system.

But in conversation, he sounds hesitant about the line his future tomes might take. “This book may be totally wrong, so before the next one, I have to make sure my understanding is right,” he says.

“Before this book, I was a nobody, so I could say anything I liked, but now the situation has changed.”

Government Moles in 'Terror' Bomb Plot Provided Bomb, Set up Training Camp

Thomas Walkom
Toronto Star
Wednesday September 26, 2007

Terror trial proceedings troubling TheStar.com - News - Terror trial proceedings troubling

Bizarre allegations about Toronto 18, unorthodox decisions are raising questions about Crown's case

Ottawa's abrupt decision to cancel a preliminary inquiry into Canada's most spectacular post-9/11 terror allegations and instead move directly to trial raises new and troubling questions.

Everything about the case of the so-called Toronto 18 is shrouded in mystery. Evidence raised in court, either at bail hearings or the preliminary hearing, is covered by a publication ban. But this hasn't prevented the public from knowing allegations against 14 adults and four juveniles that are so bizarre as to be almost unbelievable.

The Crown claims that at one point the alleged Islamic terrorists were plotting to cut off Prime Minister Stephen Harper's head – but changed their minds because they weren't sure where Parliament Hill was. It also claims some of the 18 attended a Keystone Kops-style military training camp at Washago north of Toronto where, it seems, they spent most of their time complaining about the cold.

Shortly after charges were levelled, the Star reported the government case rested on two informants. One, whose name cannot be published, is said to have been paid $4 million by the government. He was apparently a central figure in an alleged plot to make a fertilizer bomb. A second informant, Mubin Shaikh, decided to go public. Now you can't shut him up. He's been interviewed by the Star, the National Post, the Los Angeles Times, the CBC and most recently the BBC.

A former army cadet, Shaikh says he is the man who ran the alleged Washago terror training camp. In spite of the publication ban, he's been happy to tell the world everything he knows and much that he doesn't – including his opinion of one of the alleged ringleaders ("an effing time bomb").

In one interview, Shaikh claimed the alleged plotters planned to start a Chechen-style Muslim resistance movement in Northern Ontario, a region of the country with few Muslims and even fewer Chechens.

In April, in a completely unrelated case, Toronto police charged Shaikh with assault and threatening bodily harm after he allegedly attacked two 12-year-old girls.

He was in the middle of testifying in the terror case when the Crown shut down the preliminary hearing into the case of the 14 adults and announced it wanted to move directly to trial. (Charges have already been stayed against three of the four juveniles, which means that they are effectively off the hook).

Defence lawyers for the alleged terrorists are ticked. It's hard to blame them. The whole reason for a preliminary hearing is to determine whether there is enough evidence to warrant trial and, more important, to give the defence a chance to hear the Crown's case.

Defence lawyers say they made concessions in return for the right to cross-examine witnesses like Shaikh. Now they won't have a chance to test his widely publicized allegations until the trial.

By itself, a decision to avoid preliminary hearings and move directly to trial is not unusual. The government has done so in other high-profile criminal cases.

But usually, the Crown makes up its mind at the beginning; it does not normally change gears halfway through.

Which leaves us to ask: Was something about to be revealed in court that the government didn't want anyone to hear?

Was the Crown getting nervous about its informants?

Is there some other reason?

If I'd attended the preliminary hearing, I might know the answers to these questions. But then I wouldn't be able to report them.

So you'll have to wait for the next leak – or the next overseas media interview with one of the government's star witnesses. Perhaps CNN will call up Mubin Shaikh.

Bush's UN Speech Full of Fone-eh-tick Pronunciations for World Leaders

ABC
Wednesday September 26, 2007

ABC News' Ann Compton and Jennifer Duck report: Never before has the White House released a draft version of the President's speech to the annual United Nations General Assembly.

But this year, a glimpse of how the President sees his speeches was accidentally placed on the UN website along with the speechwriters' cell phone numbers.

Pronunciations for President Bush's friend French President Sarkozy "[sar-KOzee]" appeared in draft #20 on the UN website. Other pronunciations included the Mugabe "[moo-GAHbee] regime" and pronunciations for countries "Kyrgyzstan [KEYRgeez-stan]" and "Mauritania [moor-EH-tain-ee-a]."

Most leaders submit a text in advance, especially to help the many translators who simultaneously turn the speeches into more than half a dozen languages. The teleprompter also needs to be loaded with a copy of the President's words so it will appear on glass screens in front of the lectern.

The Bush White House is unaccustomed to providing advanced texts suitable for reporters to publish before he actually speaks.

During an afternoon briefing, White House Press Secretary Dana Perino said, "there was an error made in trying to make sure that interpreters had what they needed. I don't know how the draft of the speech -- it was not final -- was posted, but it was, and it was taken down."

Perino said it was "not unusual" to include phonetic spellings for various countries in the speech though when asked if the president had a hard time pronouncing some of those country names Perino declined comment saying, "I think that's an offensive question."

The White House also added that no one has called the speech writers' cell phones.

Durbin: Lieberman-Kyl Amendment Is ‘Dangerous,’ ‘Puts Us On Record’ In Support Of Iran War

Think Progress
Wednesday September 26, 2007

Senate Majority Whip Dick Durbin (D-IL) spoke forcefully this afternoon on the Senate floor against the Lieberman-Kyl amendment. Durbin described the “sense of the Senate” legislation as a “dangerous effort to put us on the record for the use of military force in Iran.”

Noting that the language of the amendment suggests the use of “military instruments,” Durbin said:

What does that mean? Does that mean we are supporting the invasion of Iran? That we are supporting military tactics against Iran? Shouldn’t we be extra careful in the language of these resolutions when we find that the authorization for force for Iraq has dragged us into a war now in its fifth year, a war longer than World War II with bloody and deadly consequences for the United States and innocent Iraqis.

“I think it is dangerous language,” Durbin said, concluding his statement by saying he will oppose the amendment as it is currently written. Watch it:

Due to early concerns raised by Sen. Jim Webb, Senate Majority Leader Harry Reid announced this afternoon that the language of the Lieberman-Kyl amendment was being modified. The Senate then released new language, but as Carah Ong notes, the modifications did little to ease fears:

The new language allows for the use of U.S. military instruments inside of Iraq for dealing with Iran, but it still does not contain a measure to prevent a conflict from spilling beyond Iraq’s borders.

Due to the still outstanding concerns raised over the amendment, Reid announced this evening on the Senate floor that Lieberman-Kyl bill “will not have a vote in the near future.” Reid added that negotiations are ongoing and “maybe the night will be bring more clearness to the issue. But right now I think it’s fair to say there will be no votes tonight.”

Iran Nuke Strikes Are Out, Regime Change Is In On FOX News

Newshounds
Wednesday September 26, 2007

Just as predicted by The New Yorker’s George Packer, FOX News is assisting the Bush administration with a post-Labor Day PR campaign against Iran. The first half of Hannity & Colmes was devoted to it last night (9/25/07), complete with a preview of a FOX News special “Iran: The Ticking Bomb” to air on both Saturday and Sunday. And despite the fact that the public favors diplomacy as a solution, the network that claims “We like America” offered only hawkish guests hawking regime change. The only debate was over how to do it. With video.

In Part 1, John “I want war against Iran” Bolton was the sole analyst regarding Ahmadinejad’s speech to the United Nations. “Democratic strategist” Kirsten Powers, subbing for Alan Colmes, once again was more eager to brandish her conservative talking points (Columbia should not have allowed Ahmadinejad to speak, he’s a very dangerous man, etc.) than to offer any real debate or balance. The video is currently posted on the Hannity & Colmes website.

After Bolton, there was a preview of the upcoming special in which Hannity narrated a film about “what a strike against Iran would look like.” Surprisingly, even FOX News admitted that a strike against Iran’s nuclear facilities would not be the cakewalk Iraq was supposed to be. So in the following discussion, the debate was about the narrow question of bringing about regime change. Author Michael LeDeen, whom I caught lying about his views on the Iraq war just a few weeks ago, advocated military strikes on “terrorist training camps” in Iran and Syria, along with action (presumably covert) to foment unrest. FOX News military analyst Chuck Nash, whose affiliation with the regime-change-pushing Iran Policy Committee was undisclosed, advocated “empowering the Iranian opposition and causing an internal revolution.” He didn't rule out military action; he just thought "regime change" was a better option.

Powers, a former inmate of the News Hounds dog house, repeatedly distanced herself from liberals, repeatedly agreed with the conservatives and Republicans on the show, and her only “advocacy” on behalf of Democrats was to question the practicality of strikes on Iran’s nuclear facilities. Coincidentally, that stance was the same one both guests put forth. Hannity was on the edge of his seat, hoping for military action - with other people doing the fighting, of course.

Nash told Powers, “The (International Atomic Energy Agency) has admitted that about a year and a half ago they found traces of enriched uranium that they could not tag to known facilities. So we’re pretty much convinced that Iranians have facilities we do not know about.”

Maybe so. But that doesn’t mean the facilities are producing nuclear weapons. That point eluded Powers who either didn’t know or didn’t care that Mohamed ElBaradei, IAEA head, said a week ago, "I do not believe at this stage that we are facing a clear and present danger that requires we go beyond diplomacy.”

Diplomacy was never offered as an option by anyone on the “we report, you decide” network’s prime time debate show.

Commercial Real Estate Remains Stalled

Despite Fed Rate-Cut Jolt,
Near Paralysis Continues;
Marylebone Pulls Sale

By KEMBA J. DUNHAM
September 26, 2007; Page B4
wallstreet journal

Last week's interest-rate cut by the Federal Reserve gave hope to many people who follow the residential real-estate market, but the commercial markets have shrugged it off.

Industry watchers say the new rate could boost consumer confidence, but so far it hasn't been enough to significantly ameliorate the credit crunch. One factor is that the 10-year Treasury yield, to which fixed-rate, commercial mortgages are closely tied, has risen in the past week, increasing borrowing costs. Thus, many commercial deals could remain stalled, experts say.

"While the interest-rate cut by the Federal Reserve definitely helped restore investor confidence in the near term, it will likely have little fundamental effect on commercial mortgage lending," said Alan Todd, executive director and head of CMBS research for JP Morgan Securities, a unit of J.P. Morgan Chase & Co.

In the days leading up to the Fed's announcement that it would lower its target for the federal-funds rate by half a percentage point to 4.75%, there was a lot of conjecture from those who track the industry about how the move would affect commercial real estate.The credit markets had been in a state of near paralysis in recent months following the mortgage-market meltdown, with fears that the lax underwriting standards that were rampant in residential lending were also commonplace on the commercial side. As a result, few banks were making new loans for commercial properties. The market for commercial-mortgage backed securities (pools of loans that are sold to investors as bonds) had nearly shut down because bond buyers began viewing them as too risky.

So when the Federal Reserve made the steep cut, it appeared to give a badly needed jolt to the commercial market. Here's why: the federal-funds rate is the interest banks charge one another for overnight loans. Many industry watchers assumed that once lenders had a lower cost of capital, they would pass along the savings to borrowers. The day of the announcement, stocks of publicly traded real-estate investment trusts rallied, closing up 3.31%, although the have been volatile since, according to SNL Financial's Equity REIT index.

"The Fed is making a concerted effort to avoid an economic slowdown, and that will likely keep property-leasing demand healthy in the short term and continue to support the perception that real-estate values and assets are a good place to be," Wachovia analyst Christopher Haley said.

Nonetheless, the credit crunch remains evident. Late last week, United Kingdom property company Marylebone Warwick Balfour Group PLC pulled the sale of its £495 million ($1 billion) hotel portfolio for the second time, citing "current uncertainties in the markets" for the postponement of the deal.

"I think we're far from out of the woods yet," said Mike Kirby, chairman of Green Street Advisors, a Newport Beach, Calif., real-estate research company.

One reason is that the federal-funds rate has a greater impact on shorter-term financing, such as construction loans. Most long-term commercial mortgages are tied to the 10-year Treasury note, not the federal-funds rate. And the 10-year Treasury yield moved up in the past week (it typically moves independently of the federal-funds rate) increasing the cost to borrowers.

So the Federal Reserve's move has done little to allay bond buyers' fears. For those needing short-term loans, "it will help people make deals, but we don't see how lower interest rates will break up the logjam and cause bond buyers to buy hundreds of billions of dollars of bonds in all the asset classes," said Gary Mozer, principal with George Smith Partners, a Los Angeles-based commercial-real-estate finance firm.

Still, that doesn't mean some outlets aren't trying. Lehman Brothers Holdings Inc. has found buyers for $8.9 billion of commercial-mortgage-backed securities that will be used to fund its joint-venture purchase with Tishman Speyer Properties of apartment company Archstone-Smith Trust, according to people familiar with the matter who say the buyers are "locked up." Lehman began to shop an additional $3.1 billion in debt tied to the deal the day after the Fed cut rates. Lehman declined to comment, so it's unclear how well those bonds are selling.

Many industry watchers believe it will be months before the market fully recovers. "Some deals have gone through, and pricing for senior bonds is firming up, but the market is still a little bit choppy in trying to work its way back to health," said Tad Philipp, a managing director for Moody's Investors Service.

Treating depressed workers boosts productivity, retention: study

Last Updated: Tuesday, September 25, 2007 | 5:24 PM ET

CBC News

Taking care of depressed employees through screening and enhanced-care programs may be financially beneficial to employers, finds a new study.

The study, "Enhanced Depression Treatment and Work Outcomes," in the Sept. 26 issue of the Journal of the American Medical Association (JAMA), finds that outreach programs that screened depressed employees and pointed them to psychotherapy and/or medication for their condition led to improved productivity, greater staff retention and happier staff members.

Outreach programs that screened depressed employees and pointed them to psychotherapy and/or medication led to improved productivity, greater staff retention and happier staff members, says the study.
(CBC)

According to the Mood Disorders Society of Canada, approximately eight per cent of adults will experience major depression at some time in their lives.

Researchers at the National Institute of Mental Health in Rockville, Md., conducted a two-part randomized controlled trial involving 604 employees covered by a managed behavioural health plan; 304 employees were enrolled in the enhanced care program while 300 received the program's usual care.

Those employees who refused to enter treatment were offered structured cognitive behavioral psychotherapy exclusively via telephone.

'Outreach and enhanced care for depressed workers might be better conceptualized as an opportunity to invest in improving the productive capacity of workforces than as workplace costs.'—Study's authors

Employees in both groups were assessed at six-month and 12-month intervals on their job retention, time missed from work and their work performance.

Boost to clinical, workplace outcomes

Those who received the enhanced outreach and care management program were more likely to recover from their depression at the 12-month mark (26.2 per cent versus 17.7 per cent).

Employees in the telephonic program also worked more hours when assessed at six and 12 months, working an average of two more hours per week than workers in the usual care group, which, the authors say, is equivalent to an annualized effect of more than two weeks of work.

This overall effect was due to a higher rate of job retention (92.6 per cent versus 88.0 per cent) in the enhanced care group, according to the study.

"The results suggest that enhanced depression care of workers has benefits not only on clinical outcomes but also on workplace outcomes," reads the study.

"The financial value of the latter to employers in terms of recovered hiring, training, and salary costs suggests that many employers would experience a positive return on investment from outreach and enhanced treatment of depressed workers."

Return on investment

The study's authors acknowledge that calculating the impact of improved productivity and higher retention on a company's bottom line is tricky. But they speculate that if two weeks of extra work of each participant in an enhanced care program leads to an approximate figure of $1,800 in profit, then companies paying $100 to $400 in outreach and care management costs associated with low to moderate intensity interventions would be farther ahead financially than if they were not to implement these types of programs.

"Outreach and enhanced care for depressed workers might be better conceptualized as an opportunity to invest in improving the productive capacity of workforces than as workplace costs," says the study.

Bill Wilkerson, co-founder and CEO, Global Business and Economic Roundtable on Addiction and Mental Health, told CBCNews.ca Tuesday that Canadian companies have been slow to implement depression programs in their workplaces. But he feels the JAMA study is a great way of presenting them with the financial evidence they're looking for.

"I think what we're seeing is an accumulation of anecdotal evidence which is finally infiltrating both the instinctual business judgement of the executive and secondly, there is sufficient evidence now that there is a dollar cash return for every dollar spent to promote the mental health of employees."

The only thing that hasn't been proven, he says, is "how we can do that in say, two years or three years rather than vaguely sometime: a concrete timeline that will be a manageable return on investment."

"Based upon this kind of evidence, this will encourage employers to invest in research that will advance the quality of care that will bring us closer to the day when we can find a solution to preventing the onset of these illnesses," says Wilkerson.