Tuesday's Top 10: What a zombie house in Masterton looks like; The very real risk France could exit the euro; Why the Fed's QE hasn't worked; President Xi cares less about GDP growth; Dilbert

Here's my Top 10 links from around the Internet at 10 am today.

As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

See all previous Top 10s here.

My must read today is #3 from Ambrose on France's National Front and its desire to get out of the euro. Ambrose is a euro-sceptic, but it's still bloodcurdling.

1. What a zombie house in Masterton looks like - This article in Stuff from Caleb Harris gives a fascinating insight into how banks in New Zealand handle mortgages that are under water.

In America during its housing bust banks tended to pull the trigger first and ask questions later, particularly in those non-recourse states where 'owners' of underwater properties could mail the keys back to the banks.

In New Zealand the banks were much more cautious and were given the time through late 2008 and 2009 to hold off on immediately ordering mortgagee sales. The Reserve Bank lent the banks a big wodge through that period when the banks couldn't roll over their overseas funding. That helped.

New Zealand banks are also genuinely nicer to their customers than US banks and certainly had bigger capital buffers.

This case shows how the bank, in this case ASB, pushed very hard to reduce the amount it was under water on the mortgage by forcing the buyer to pay more. 

It even held off on the sale for 3 months to pressure the buyer to increase his bid.

Here's the detail:

According to Mr Moser, the selling agent from Harcourts then told him the vendors' mortgage-holder, ASB, instructed the vendors to withdraw from the agreement because his offer was too low and would not cover the vendors' debt. On April 3, Mr Moser received a letter from the vendors' lawyer that said ASB had an "objection to the sale" and therefore the vendors would not be able to give clear title to the property.

The letter added that, if Mr Moser did not increase or withdraw his offer, the vendors would "walk away from the contract", and he could seek redress through the courts if he wished. He raised his offer to $180,000 to break the three-month stalemate, but says the bank threatened legal action if he did not meet a new backup offer price of $189,000. But last Friday, after months of wrangling, the bank decided to accept $180,000, and Mr Moser is claiming victory.

2. Serious about reform - China's credit markets may have settled down a bit, but don't bet on it being quiet for long.

Here's what the People's Bank of China President Zhou Xiaochuan said about cleaning up China's banks and shadow banks. 

Zhou told the China Business News that banks have been adjusting their asset structures since middle of June following the ramp-up in lending activity earlier in the month. "The positive aspect of the money rate volatility was it reminded banks of the need to adjust their asset business," Zhou said.

It marked Zhou's first direct reference to the extraordinary volatility seen in the interbank market last month after the PBOC declined to ease a liquidity shortage via injections of short-term funding. Zhou said the liquidity crunch was related to a "strong lending rush by banks".

3. 'Joan of Arc's plan to take France out of the euro - Ambrose Evans Pritchard from The Telegraph has been talking to Marine Le Pen, the anti-euro French politician. I had no idea the National Front was so high in the polls.

It is no longer an implausible prospect. "We cannot be seduced," she said, brimming with confidence after her party secured 46pc of the vote in a by-election earthquake a week ago. Her candidate trounced the ruling Socialists in their own bastion of Villeneuve-sur-Lot.

"The euro ceases to exist the moment that France leaves, and that is our incredible strength. What are they going to do, send in tanks?" she told the Daily Telegraph at the Front National's headquarters, an unmarked building tucked away in the Paris suburb of Nanterre. Her office is small and workaday, almost austere.

"Europe is just a great bluff. One side there is the immense power of sovereign peoples, and on the other side are a few technocrats," she said.

For the first time, the Front National is running level with the two governing parties of post-War France, Socialists and Gaullistes. All are near 21pc in national polls, though the Front alone has the wind in its sails.

4. Why the Fed's QE didn't (and isn't) working - Here's Robert Auerback writing at HuffPo about how most the Fed's printed money is sitting around as 'excess reserves' in the banks' accounts with the Fed. 

They way I describe it is if 'Helicopter' Ben Bernanke had been really serious about boosting the economy by dropping money onto the streets from a helicopter it might have actually worked. Instead he flew the pallet loads of money from the Fed to the front lawns of the bankers, who then promptly flew the pallet loads back to the Fed. It never fluttered anywhere or circulated anywhere. No wonder there is little inflation. Or economic growth.

Auerback says the Fed is actually paying the banks a small interest rate for those reserves. He says that should be cut to 0% to encourage the banks to lend.

Although the Bernanke Fed has disbursed $2.284 trillion in new money (the monetary base) since August 1, 2008, one month before the 2008 financial crisis, 81.5 percent now sits idle as excess reserves in private banks. The banks are not required to hold excess reserves. The excess reserves exploded from $831 billion in August 2008 to $1.863 trillion on June 14, 2013. The excess reserves of the nation's private banks had previously stayed at nearly zero since 1959 as seen on the St. Louis Fed's chart. The banks did not leave money idle in excess reserves at zero interest because they were investing in income earning assets, including loans to consumers and businesses.

This 81.5 percent explosion in idle excess reserves means that the Bernanke Fed's new money issues of $85 billion each month have never been a big stimulus. Approximately 81.5 percent (or $69.27 billion) is either bought by banks or deposited into banks where it sits idle as excess reserves. The rest of the $85 billion, approximately 18.5 percent (or $15.72 billion) continues to circulate or is held as required reserves on banks' deposit accounts (unlike unrequired excess reserves).

5. Really serious about reform - Xinhua reports China's new President is quite happy to sacrifice GDP growth. This is a major change in China that New Zealanders should know about. Check out the rhetoric. We forget, often, this is a communist government. 

Chinese President Xi Jinping Saturday noted that China would never assess the performance of an official simply based on his record of boosting economy.

The Communist Party of China (CPC) should adopt more comprehensive criteria for assessing the performance of its officials, said Xi, also general secretary of the CPC Central Committee, at a meeting on the work of personnel resources on the eve of the 92nd founding anniversary of the Communist Party of China (CPC). It should consider a local official's work in various aspects including people's livelihood, the development of local society and the quality of environment.

"We should never judge a cadre simply by the growth of gross domestic product (GDP)," he said. When promoting officials, the CPC organization departments should consider integrity as a priority and then capability, he said.

"The Party's cadres should be firm followers of Communist ideal, true believers of Marxism and devoted fighters for the socialism with Chinese characteristics," he said. A CPC official's integrity will not grow with the years of service and promotion of his post but with persistent efforts to discipline himself and study Marxist classics and theories of the socialism with Chinese characteristics, he said.

6. How to dodge the rules - WSJ reports on how Chinese property investors get around the rules in China against non-residents owning multiple properties.

People in the real-estate industry in the world's second-largest economy say there are many ways individuals, developers and local officials can get around Chinese home-purchase restrictions that were put in place to tame runaway housing costs. Individuals use false divorces, fake marriages, falsified proof of tax payments and even buy or sell office space as homes, they say.

Local governments, which depend on revenue from property sales, and real-estate developers engage in practices such as allowing apartments to be built in commercial buildings and recording home sales in such a way that the full purchase cost isn't applied to price caps, industry officials said.

Indeed, for the government, the abuse of the housing rules may be a blessing in disguise for China's economy. With export growth grinding to a halt, household consumption slowing and industrial overcapacity deterring investment, China's economic outlook has deteriorated. A robust real-estate sector is one of the few bright spots for the economy at the moment, promising to buoy construction and support demand for raw materials across industries.

7. Payment by debit cards - This is an interesting new trend in America where lowly paid and often casual workers are paid using pre-loaded debit cards, rather than with a cheque or cash. The banks then clip the ticket along the way with a variety of fees. Here's Sarah Jaffe with the report at Inthesetimes.

Is anyone in New Zealand paid like this?

In the years since the financial crisis struck in 2008, it’s often been pointed out that gains for bankers have gone hand in hand with losses for workers. But few cases provide a better example of just how direct that relationship can be than that of Natalie Gunshannon, who says her employer put her in a situation that forced her to pay fees to one of the big banks just to access her wages.

Gunshannon, of Dallas Township, Penn., filed a class action lawsuit this week against a McDonald’s franchise where she worked, claiming that she and other workers were paid not through check or direct deposit, but through a pre-paid JPMorgan Chase debit card. Along with her card, her lawsuit alleges, she received a list of fees she’d incur when she used it: $1.50 for ATM withdrawals; $5 for over-the-counter cash withdrawals; $1 per balance inquiry; 75 cents for online bill pay and $15 if she lost the card or had it stolen from her.

These “payroll cards,” which after being loaded with wages work like a regular debit card, are growing increasingly popular as companies look for alternatives to paper checks and payroll services. Like most debit cards, payroll cards can be used to purchase goods, or they can be used to make withdrawals from banks or ATMs. JPMorgan Chase is one of several banking companies, including Bank of America and U.S. Bank, that offer them.

8. How the temps who power corporate giants are getting crushed - Here's an excellent report from ProPublica on the increasing casualisation of work in America. It's a trend here too.

In cities all across the country, workers stand on street corners, line up in alleys or wait in a neon-lit beauty salon for rickety vans to whisk them off to warehouses miles away. Some vans are so packed that to get to work, people must squat on milk crates, sit on the laps of passengers they do not know or sometimes lie on the floor, the other workers’ feet on top of them.

This is not Mexico. It is not Guatemala or Honduras. This is Chicago, New Jersey, Boston.

The people here are not day laborers looking for an odd job from a passing contractor. They are regular employees of temp agencies working in the supply chain of many of America’s largest companies – Walmart, Macy’s, Nike, Frito-Lay. They make our frozen pizzas, sort the recycling from our trash, cut our vegetables and clean our imported fish. They unload clothing and toys made overseas and pack them to fill our store shelves. They are as important to the global economy as shipping containers and Asian garment workers.

9. Starving the squid - Here's J Bradford Delong writing at Project Syndicate about the problem of an increasingly financialised economy.

Over the past year and a half, in the wake of Thomas Philippon and Ariell Reshef’s estimate that 2% of US GDP has been wasted in the pointless hypertrophy of the financial sector, evidence that America’s financial system is less a device for efficiently sharing risk and more a device for separating rich people from their money – a Las Vegas without the glitz – has mounted.

This is not a partisan view. Bruce Bartlett, a senior official in the Reagan and George H. W. Bush administrations, recently pointed to research showing the sharp rise in the financialization of the US economy. He then cited empirical work suggesting that financial deepening is useful only in the early stages of economic development, evidence of a negative correlation between financial deepening and real investment, and the withering conclusion of Adair Turner, Britain’s former top financial regulator: “There is no clear evidence that the growth in the scale and complexity of the financial system in the rich developed world over the last 20 to 30 years has driven increased growth or stability.”

10. Totally John Oliver on being presumed 'guiltocent'. I laughed out loud.

(Updated with cartoons)