Stet: New York

Has it really come to this?

Just where to begin pointing out the flaws in this madness isn’t easy.

With so many US homeowners and developers having their backs to the walls, a chink of light is reported. It’s surely one of the most spectacular false dawns ever.

Incredibly, some US estate agents are hoping that foreign buyers – including those from Ireland – are going to help prop up the housing market and prevent it heading into even deeper freefall.

Someone has forgotten to take their pills.

The debris from the US sub-prime implosion has spread not only domestically, but across the globe.

In Canada, which counts the US as its biggest trading partner, a peak in housing prices during the summer has already turned into a rout, with anecdotal evidence from cities such as Edmonton, that homes are now sitting on the market unable to find buyers in what was just months ago a sizzling-hot property cauldron.

Manhattan, in particular, has enjoyed a cosy relationship with Irish property investors for years.

A euro on steroids and prospects for capital appreciation in the city have provided the catalysts needed to attract old money, new money and the par-venu hoping to gain credibility. Owing an apartment in Majorca just doesn’t hack it any more – Manhattan’s the place to be, apparently.

And the Irish have taken chunks out of the Big Apple.

The buyers read like a who’s who of Irish society. Among those who have famously splashed out on pads include Derek Quinlan, who two years ago paid an astonishing $26m for a cavernous townhouse on East 64^th Street – the second-most expensive house bought in New York in 2005, and the second property he owns on the street.

But others have followed suit. Domhnal Slattery of Claret Capital, Ciaran Haughey, son of former Taoiseach Charles Haughey, and his sister Eimear Mulhern have all been buying apartments in New York. The list doesn’t end there. Jockeys, property developers and other business personalities have been stuffing money into New York.

Others amassing Stateside portfolios include Galway solicitor Patrick Keane, who last month sourced a $1.37m mortgage from Anglo Irish Bank to buy an apartment at West 48^th Street. From Limerick, Patrick Cheeser of Cheeser Auctioneers recently obtain a $2.8m mortgage to buy on East 63^rd Street; and James McEvoy, an auctioneer in Newbridge, Kildare, who earlier this year obtained a $1.36m mortgage to buy on 5^th Avenue.

In fact, even as the credit crunch bites, Anglo Irish Bank has continued to dole out tens of millions of dollars worth of mortgages to Irish buyers.

But how long will this last? However long, it certainly won’t be enough to support the US market in any conceivably appreciable manner.

Last week, however, Associated Press reported that there’s a “rally in the struggling housing market driven by foreign investors”.

“European investment is likely to pick up,” the piece quotes Mark Vitner, chief economist with Wachovia as saying. “Now is the time to come over and take advantage”.

Without doubt, a feeble dollar makes the prices wholly attractive. But the financial woes of late, and the prospect of more to come, must surely be enough to make even the most experienced of investor think twice.

“The theory goes,” adds the Associated Press, “that foreign investors step in and replace first-time home buyers who have been squeezed out of the housing market during the recent downturn. These new investors in turn allow current homeowners to sell and trade up to larger homes.”

Bunkum.

Irish investors aren’t buying the Graysons’ four-bedroom in Charlotte that’s been sitting on the market for the past six months, or any other similar property – they’re buying newly-developed apartments in major urban areas such as New York and Chicago – the result of which has no impact on helping existing home-owners elsewhere in the US to sell their properties.

Irish and other investors simply can’t save the US property market. You might as well ask the Japanese to save the whale.

Is Anglo Irish Bank digging a hole for itself? Maybe not. It has strict lending criteria, and its clients can generally afford to hang on to property for the longer-term, even if they happen to take short-term hits.

But even Anglo Irish Bank can’t be expected to save the US real estate market.

Even its former executives aren’t finding these easy.

One-time Anglo Irish Bank chief operating officer Tiarnan O’Mahony is the latest to feel the fallout pain.

His International Securities Trading Corporation (ISTC), which he founded two years ago, announced yesterday that it has delayed its results announcement, taken a €70m ($102m) charge, and suspended grey trading of its shares.

ISTC borrows money from mainstream lenders and then uses the funds to lend the same money to borrowers, making its profit from the difference between the interest rates it pays, and the higher rate it charges to its own clients. Among its investors are former Anglo chief executive Sean Fitzpatrick.

ISTC has €210m in SIV capital notes which have either been downgraded or listed for review by Moody’s Investor Services. It has also cancelled a convertible bond issue.

Seems there’s enough problems at home without having to rescue the US too.

http://ap.google.com/article/ALeqM5gs7J81K2jeycsahYDzU3W5Bqr0XgD8SQLVL00

http://www.bendweekly.com/Real-Estate/10256.html

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No doubt Stan O’Neal is coming to terms with being ousted from Merrill Lynch this week thanks to the whopping $161.5m worth of benefits and stock options he’ll take away with him. Oh, and the personal assistant for three years.

O’Neal (above) is most definitely one of the first major SIV-positive (former) executives – the tag dreamt up by Wall Street wags to describe the most unstable structured investment vehicles that have thrown the credit markets into crisis.

The head of the former General Motors boss was offered on a platter to investors after the company posted a massive $2.24bn quarterly loss – its biggest ever. The firm also booked a $7.9bn charge in the previous quarter following the credit fall-out, ($4.5bn related to sub-prime related products) and some analysts expect it could have to take a further $4bn hit in the next quarter.

Media-shy, O’Neal had encouraged more risk taking from its trading operations as interest rates sank over the past number of years. It expanded into areas such as private equity and structured products and commodity trading. It seemed to be going so well. Last year Merrill Lynch posted earnings of $7.5bn. Then the bottom fell out of the structured finance market.

For some though, there’s a silver lining.

Merrill Lynch’s Ed Moriarty has been appointed to the newly-created role of chief risk officer.

An Irish citizen, it will now fall on Moriarty’s shoulders to assume responsibility for market risk, and “re-evaluating parts of our risk framework,” according to Merrill Lynch. That’s code for “getting the hell out of Dodge”.

“Ed’s promotion reflects the importance of deeper and more comprehensive risk management discipline under a single senior executive,” added Merrill Lynch on the appointment.

For Moriarty, the task must appear monumental. Graciously exiting all its structured investments in an orderly fashion isn’t going to be easy. If Moriarty manages to pull it off, he may even attain a Cicero-type status as the man who helped save Rome, or at least Merrill Lynch. Such accolades will not be easily won though.

A graduate of Clinton, New York-based Hamilton College, Moriarty has been a lifer at Merrill Lynch. Just where his Irish pedigree comes from is unknown, but it could, of course, extend back as far as grandparents.

Moriarty gave New York’s current mayor Michael Bloomberg one of his first big breaks, when the now billionaire turned up at Merrill Lynch’s office touting a new computer system that would offer traders functionality not available elsewhere. A Merrill Lynch executive said the company could do it itself, so Bloomberg offered to put together the system in six months and put Merrill Lynch under no obligation to buy if it wasn’t up to scratch. Moriarty agreed to the deal.

The next year will be a busy one for Moriarty as he tries to clear up the mess at Merrill. One suspects he’ll be in line for a tidy bonus if he does. No doubt more than enough to buy a handsome spread in Ireland from which to plot his retirement.

Meanwhile, those being tipped as candidates to replace O'Neal, include Kelly Martin, chief executive of pharmaceutical firm Elan. He left Merrill Lynch in 2001 to take up the Elan position as the company came close to collapse.

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