As the recession drags on, municipalities struggling to fix roads, fund schools and pay bills increasingly are rescinding tax abatements to companies that don’t hire enough workers, lay them off or close up shop. At the same time, they’re sharpening new incentive deals, leaving no doubt what is expected of companies and what will happen if they don’t deliver.

“We will roll out the red carpet as much as we can (but) they are going to honor the contract,” said Brendon Gallagher, an alderman in DeKalb, Ill., where Target Corp. got abatements from the city, county, school district and other taxing bodies after promising at least 500 jobs at a local distribution center.

So when the company came up 66 workers short in 2009, Target got word its next tax bill would be jumping almost $600,000 — more than half of which go to the local school district, where teachers and programs have been cut as coffers dried up.

The newfound boldness comes from communities and states that have long bent over backward to lure companies and jobs by offering abatements and other incentives — to the tune of an estimated $60 billion a year in the United States, according to the Washington-based economic development watchdog group Good Jobs First.

The willingness to write — and enforce — so-called “clawback” provisions comes even as companies across the country struggle and against a broader backdrop of governments getting tough on business practices.

What’s more, the recession has communities thinking about how the tax breaks they dole out will play with residents who have grown increasingly angry at the thought of anything that hints of corporate welfare.

“The public is a lot more aware of tax abatements and there’s a climate of skepticism about what can be perceived as corporate handouts,” said Geoff McKimm, a member of the Monroe County Council in Indiana.

With that in mind, county officials drew up an agreement with Printpack, a packaging company, that includes a provision requiring the company to refund either $197,000 or that year’s abatement, whichever is more, if the number of employees at a new factory falls below 140.

Another provision requires Printpack refund the entire abatement if it employs fewer than 75 people — a guarantee meant to prevent companies from leaving a “skeleton crew” at a location to avoid paying up.

“With so many businesses going to Mexico, communities are desperately trying to hold onto jobs,” said Amy Gerstman, the county’s auditor. “This was a carefully put-together abatement.”

And companies increasingly are being forced to hold up their end of the bargain.

In Texas, where companies can get money from the Texas Enterprise Fund if they promise to create a specific number of jobs, the number of clawbacks rose to nine in 2008, compared to a total of seven for the previous three years combined, the governor’s office said.

In Illinois, the number of companies from which the state sought to “recapture” incentive money has steadily climbed, from 6 in 2005 to a total of 37 by 2008.

Meanwhile, more communities are contemplating similar action.

In St. Louis County, officials have told Pfizer that if it cuts 600 jobs, as planned, they’ll rethink the $7 million in tax breaks they promised to give the company for the next 10 years.

And in Detroit, while the state was approving expanded tax credits in exchange for General Motors Co.’s promise not to move its headquarters, the city council was talking about cracking down on tax breaks for GM and other major employers.

“We know that there are more clawbacks getting triggered because more deals are falling short,” said Greg LeRoy, executive director of Good Jobs First, who has written extensively on clawbacks.

It’s unclear exactly how much is being recovered because nobody collects comprehensive statistics on clawbacks, LeRoy and others say. States that keep do statistics only track their own deals, not those initiated by local governments. Communities also may revoke the entire abatement or only a portion of it, while others sometimes simply rule out future abatements, LeRoy said.

Finally, some communities crack down on companies quietly, out of concern that they could scare off other potential employers, LeRoy said. He said that fear persists even thought there is no evidence that having or enforcing clawbacks poisons the business climate.

“We were told that we were going to ruin Topeka’s ability to attract businesses; we’d give Topeka a black eye,” said James Crowl, assistant county counselor in Shawnee County, where last year officials approved a settlement that calls for Target to pay $200,000 a year for 10 years after failing to create as many jobs as it had agreed to.

So what happened?

“Last year we opened a Home Depot distribution center right next door,” said County Counselor Rich Eckert.

In DeKalb, some officials were concerned about sending a bad message to other businesses considering locating there, said Gallagher, the alderman. But he didn’t buy it.

“We are 65 miles from Chicago (and) if someone wants to locate 120 miles from Chicago, I can’t stop them,” he said.

Besides, he said, $600,000 means less to Target than a struggling community where he said the city alone is facing a $2 million revenue shortfall.

Target was disappointed, but understood the decision, spokeswoman Jill Hornbacher said.

“We are very committed to DeKalb and that distribution center and proud to be there,” she said.

And don’t expect communities to back down soon, officials said.

“There is much more (language) tied to jobs now because of economy,” said Lee Garrity, city manager in Winston-Salem, N.C., which along with the surrounding county is sharing more than $26 million that computer giant Dell Inc. paid after announcing it will close its assembly plant next year. Hard money training

Crews rushed to complete preparations for the official opening of the tower, which stands at least 160 stories high. The exact height will only be revealed at the evening inauguration. The developer’s chairman said it cost about $1.5 billion to build the tapering metal-and-glass spire billed as a “vertical city” of luxury apartments and offices. It boasts four swimming pools, a private library and a hotel designed by Giorgio Armani.

Dubai’s ruler will open the skyscraper with a fireworks display and light show in a celebration that also marks four years since his ascension to power. Security is expected to be tight with more than 1,000 security personnel including plainclothes police and sharpshooters, local media reported. Cleaning crews were busy scrubbing windows and sweeping the plaza at the tower’s base just hours before festivities began.

Burj Dubai opens in the midst of a severe financial crisis in the city-state — one of seven tiny sheikdoms that make up the United Arab Emirates.

Dubai was little more than a sleepy fishing village a generation ago but it boomed into the Middle East’s commercial hub over the past two decades on the back of business-friendly trading policies, relative security, and vast amounts of overseas investment.

Then property prices in parts of sheikdom popular with foreign buyers collapsed by nearly half over the past year, and firms owned by the government struggled to pay their massive debts. Dubai had to turn to its richer neighbor and UAE capital Abu Dhabi for bailouts totaling $25 billion in 2009 to help cover debts amassed by a network of state-linked companies.

Now Dubai is now mired in debt and many buildings sit largely empty — the result of overbuilding during a property bubble that has since burst.

Burj developer Emaar is itself partly owned by the government, but is not among the companies known to have received emergency bailout cash.

Despite the past year of hardships, the tower’s developer and other officials were in a festive mood, trying to bring the world’s focus on the Dubai’s future potential rather than past mistakes.

“Crises come and go. And cities move on,” said Mohammed Alabbar, chairman of the tower’s developer Emaar Properties, told reporters before the inauguration. “You have to move on. Because if you stop taking decisions, you stop growing.”

Alabbar said the landmark tower is 90 percent sold in a mix of residential units, offices and other space, offering a counterpoint to Dubai’s financial woes.

The developer has only said the spire stands more than 2625 feet (800 meters) tall. Alabbar said Dubai’s ruler will announce the height at the inauguration ceremony.

At a reported height of 2,684 feet (818 meters), the Burj Dubai long ago vanquished its nearest rival, the Taipei 101 in Taiwan.

But the tower’s record-seeking developers didn’t stop there.

The building boasts the most stories and highest occupied floor of any building in the world, and ranks as the world’s tallest structure, beating out a television mast in North Dakota. Its observation deck — on floor 124 — also sets a record.

“We weren’t sure how high we could go,” said Bill Baker, the building’s structural engineer, who is in Dubai for the inauguration. “It was kind of an exploration. … A learning experience”

Baker, of Chicago-based architecture and engineering firm Skidmore, Owings & Merrill, said early designs for the Burj had it edging out the world’s previous record-holder, the Taipei 101, by about 33 feet (10 meters). The Taiwan tower rises 1,667 feet (508 meters).

Work on Burj Dubai began in 2004 and moved ahead rapidly. At times, new floors were being added almost every three days, reflecting Dubai’s raging push to reshape itself over a few years from a small-time desert outpost into a cosmopolitan urban giant packed with skyscrapers.

The tower is more than 50 stories higher than Chicago’s Willis Tower, the tallest building in the U.S. formerly known as the Sears Tower.

At their peak, some apartments in the Burj were selling for more than $1,900 per square foot, though they now can go for less than half that, said Heather Wipperman Amiji, chief executive of Dubai real estate consultancy Investment Boutique. Hard money training

Lawyers for Birkenfeld, a former UBS banker, claimed prosecutors made “inaccurate, misleading and incomplete” statements about him at his Aug. 21 sentencing hearing and in an interview on CBS Corp.’s 60 Minutes television show aired Jan. 3. Birkenfeld, 44, must report to prison on Jan. 8 and can’t extend his surrender date as he requested, a judge ruled Jan. 4.

Birkenfeld asked for an internal probe in a letter yesterday to U.S. Attorney General Eric Holder and the Justice Department’s Office of Professional Responsibility, which investigates allegations of attorney misconduct. Birkenfeld began telling U.S. authorities in 2007 how UBS helped Americans hide assets in secret Swiss accounts. He pleaded guilty in 2008 to helping California billionaire Igor Olenicoff and others evade taxes.

“It is one thing to hold Mr. Birkenfeld accountable for wrongdoing,” Birkenfeld’s lawyers wrote. “It is another thing altogether to imprison Mr. Birkenfeld on false information, especially when he is treated far more harshly than the wrongdoers who actually profited from the illegal tax schemes that Mr. Birkenfeld disclosed.”

Justice Department spokeswoman Tracy Schmaler said in a statement that Birkenfeld pleaded guilty to conspiracy to defraud the U.S. and admitted criminal wrongdoing.

‘Same Issues’

“At his sentencing in August, Mr. Birkenfeld made arguments for leniency,” Schmaler said. “In a motion filed in December, Mr. Birkenfeld requested a resentencing hearing citing the same issues raised in his letter to the Justice Department Office of Professional Responsibility. After consideration of these issues, that request was denied by a federal judge.”

Before his sentencing, Birkenfeld cooperated with the Justice Department, U.S. Senate and Internal Revenue Service probes of Zurich-based UBS. The bank paid $780 million in February and handed over data on 250 accounts to avoid prosecution. It agreed in August to turn over data on 4,450 clients sought by the IRS. Another 14,700 U.S. taxpayers disclosed offshore bank accounts to the IRS last year.

At his sentencing hearing in federal court in Fort Lauderdale, Florida, Justice Department prosecutor Kevin Downing said the U.S. couldn’t have unraveled the bank’s “massive tax fraud scheme” without Birkenfeld’s cooperation.

30 Months Recommended

Downing also recommended a 30-month term for Birkenfeld, saying he wasn’t initially truthful about Olenicoff. U.S. District Judge William Zloch, who could have imposed as many as five years, instead gave Birkenfeld a term of three years and four months.

Olenicoff, who pleaded guilty in 2007 to filing a false tax return, got two years’ probation and paid $52 million in back taxes, fines and penalties. Last year, six former UBS clients pleaded guilty.

Birkenfeld, who is under house arrest with electronic monitoring in Massachusetts, filed a motion Dec. 26 seeking a delay in his prison term and a hearing on a reduced sentence.

The letter was sent yesterday by attorneys Stephen Kohn and Dean Zerbe of the National Whistleblowers Center in Washington.

Birkenfeld first told U.S. Senate investigators about Olenicoff in October 2007, or two months before the California real-estate developer pleaded guilty, according to the letter. It referred to a Dec. 7 letter that Kohn sent to Holder which said his client told the Senate, the IRS and the Securities and Exchange Commission in 2007 about Olenicoff. Hard money training

In the last 12 months such apartments have doubled or tripled in price, to about $400 per square foot. “This year they’ll be even higher,” says Li.

Millions of Chinese are pursuing property with a zeal once typical of house-happy Americans. Some Chinese are plunking down wads of cash for homes: Others are taking out mortgages at record levels. Developers are snapping up land for luxury high-rises and villas, and the banks are eagerly funding them. Some local officials are even building towns from scratch in the desert, certain that demand won’t flag. And if families can swing it, they buy two apartments—one to live in, one to flip when prices jump further.

And jump they have. In Shanghai, prices for high-end real estate were up 54 percent through September, to $500 per square foot. In November alone, housing prices in 70 major cities rose 5.7 percent, while housing starts nationwide rose a staggering 194 percent.

The real estate rush is fueling fears of a bubble that could burst later in 2010, devastating homeowners, banks, developers, stock markets, and local governments. “Once the bubble pops, our economic growth will stop,” warns Yi Xianrong, a researcher at the Chinese Academy of Social Sciences’ Finance Research Center. On Dec. 27, China Premier Wen Jiabao told news agency Xinhua that “property prices have risen too quickly.” He pledged a crackdown on speculators. Hard money training.

The Federal Deposit Insurance Corp. said that Seattle-based Washington Federal Savings and Loan Association has agreed to take on the deposits of Horizon Bank and to purchase essentially all of the bank’s assets.

As of Sept. 30, Horizon Bank had assets of $1.3 billion and deposits totaling $1.1 billion.

The 18 branches of Horizon Bank will reopen Saturday as branches of Washington Federal Savings and Loan.

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have accelerated and sapped billions out of the federal deposit insurance fund. It fell into the red last year.

The FDIC estimates that the closing of Horizon Bank will cost its insurance fund $539.1 million.

The 140 bank failures last year were the highest annual tally since 1992 at the height of the savings and loan crisis. They cost the insurance fund more than $30 billion last year. The failures compare with 25 in 2008 and three in 2007.

FDIC Chairman Sheila Bair has said the number of bank failures could rise further this year. The agency expects the cost of resolving failed banks to grow to about $100 billion over the next four years.

The FDIC last year mandated banks to prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.

Depositors’ money — insured up to $250,000 per account — is not at risk, with the FDIC backed by the government. Besides the fund, the FDIC has about $21 billion in cash available in reserve to cover losses at failed banks.

Banks have been especially hurt by failed real estate loans, both residential and commercial. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. As development projects collapse, builders are defaulting on their loans.

If the economic recovery falters, defaults on the high-risk loans could spike. Many regional banks hold large concentrations of these loans. Nearly $500 billion in commercial real estate loans are expected to come due annually over the next few years.

Last month, the Obama administration extended until October the $700 billion financial bailout program, saying the fund was still needed to prevent further turmoil in the banking system. Treasury Secretary Timothy Geithner said extending the rescue program also will help homeowners struggling to avoid losing homes to foreclosure and small businesses having trouble getting loans.

Hundreds of banks, including major Wall Street institutions, received taxpayer support through the politically unpopular rescue called the Troubled Asset Relief Program, which had been due to expire at year’s end. Congress enacted the program in October 2008, at the height of the financial crisis with markets in free fall. Hard money training.

But the statistics and stories over the last two years make a case that it is: Since the housing crisis began, this inland port city 80 miles east of San Francisco has had one of the worst foreclosure rates in the country — for most of the time, the worst.

At the height of it, about 1 in 10 houses fell to foreclosure. Houses that sold for more than $500,000 before the crash now go for $200,000. In some neighborhoods, fixer-uppers cost less than a new Honda Fit — under $20,000.

To spend time in Stockton, a plain-jane city of single-family home neighborhoods edged by freeways and lingering farms, is to begin to understand the calamitous effects of the nation’s foreclosure crisis, which has devastated so many once-booming places.

Stockton is the San Joaquin County seat. And according to the Associated Press Economic Stress Index, a month-by-month scoring of U.S. counties’ rates of unemployment, bankruptcy and foreclosures, San Joaquin had a score of 23.55 in November, making it the fourth-most stressed of counties with a population over 25,000. Its foreclosure rate of 6 percent was exceeded only by metro Las Vegas, metro Fort Myers, Fla., metro Orlando, Merced County, Calif., and Kendall County, Ill.

An outsider might not notice immediately how Stockton has suffered. It boasts a downtown mall, a mix of handsome, century-old and modern architecture, a new sports stadium, even a promenade overlooking the city’s canal.

But two years into the housing crisis, Stockton is a changed place. Whole neighborhoods have been decimated by the mortgage disaster. The tax base has shrunken. City services and municipal jobs have been cut. Unemployment hovers at about 16 percent. Economists predict it will take years for Stockton to recover from the housing bust.

Locals say the same about the city’s reputation.

Since the housing meltdown began, journalists from around the world have parachuted in to see the city felled by sub-prime mortgages, which enticed new homeowners priced out of the San Francisco Bay area with low interest rates that reset to levels they could not afford.

“Welcome to Foreclosureville, U.S.A.” wrote the Los Angeles Times. “America’s Most Miserable City,” declared the London Independent. That headline was inspired by Forbes’ “most miserable cities” index, which ranked Stockton No. 1.

City officials say they fully expect Stockton to shake the title in 2010 (it’s recently dropped to No. 4 or 5). But how far away from the top can it go? The population of 290,400 is strapped. Up to two-thirds of homeowners owe more on their properties than the houses are now worth. Housing values have dropped more than 60 percent since the height of the boom four years ago, more than any other city.

Housing developments built for commuters have been hit the hardest, since they were the ones to attract newcomers fleeing the huge spike in prices closer to the Bay area. Those whose livelihoods depend on a healthy housing environment — real estate brokers, contractors, day laborers — are barely holding on here.

Probably the happiest people are the ones scooping up foreclosures. Speculators are back, of course, but the other bargain hunters include people who only dreamed of being able to afford a house. They’re now living the dream in Stockton.

By the time the whole foreclosure phenomenon is done, Stockton may well look less like the bedroom community for commuters to the Bay Area that it was becoming and more like the working-class, immigrant community ringed by Central Valley farm country that it was before.

For now, residents just hope the worst is over.

___

The heart of Foreclosureville, U.S.A. — the Stockton subdivision that had more bank repossessions than any other place in the country for much of the last two years — is starting to look like its old self again.

The “For Sale” signs that overwhelmed Weston Ranch are mostly gone, and the lawns where weeds grew like corn stalks are shorn.

Foreclosure businesses that sprang up, including one that spray-painted brown lawns green and another that offered a foreclosure bus tour, have folded. Every time a foreclosure hits the market, bargain hunters snap it up.

But looks are deceiving. In Weston Ranch, financial devastation struck like a natural disaster and the ground has not yet settled. Speculators are buying houses to rent out. On streets where everyone knew everyone, no one knows anyone.

Orlando Mixon and his family — wife, son and daughter — are typical Weston Ranch settlers. They moved here eight years ago from Union City, east of San Francisco, after a search for an affordable house sent them farther and farther down the freeway.

In those boom times, the Mixons paid $175,000 for a new four-bedroom, three bath split-level, more than they would have paid just five days earlier. But they were excited. They didn’t know Stockton, but the subdivision of 5,000 homes was like a town unto itself, built for easy access to and from a long commute. Beige and boxy, the houses made up in size what they lacked in style.

Now, the Mixons are hanging on by their fingers. Their house, they think, is worth just over $200,000, though some on the next street sold recently for $150,000. Still, with two mortgages, they owe more than that (they won’t say how much). Until last month, Mixon spent four months out of work, pushing the family toward financial ruin.

“I try not to think about that,” Mixon said. He spoke while washing his blackened work clothes in the driveway: He now works on an oil rig in Los Angeles when there is work, drives the 340 miles every other week to his job, seven days on, seven off. His wife Sharon’s commute is 60 miles each way, five days a week in rush hour traffic, for her job as a manager in a hospital in Hayward.

Stockton residents on average commute 46 miles each way.

The biggest bargain in Stockton stands on a street most people would choose to avoid. Old men drinking from bottles in brown paper bags lean against an empty brick building. Younger ones loiter on the corners, wearing puffy parkas, selling … something.

Rudy Willey, a real estate broker who knows his turf, had had no great expectations for the house. But the property was worse than he had imagined: more like a package store than a single-family home. It had no land, no porch, no stoop.

Squatters had had their way with the place. Its small, low-ceilinged rooms looked lopsided. All the fixtures were gone. The bathroom, the kitchen — the whole place — needed a do-over.

“$15,000?” Willey said, locking the front door. “I think they’re asking too much.”

He smiled at the irony of it. Twenty-seven years of selling real estate in Stockton had not fully prepared him for what has happened to his city, his vocation and his livelihood.

At 58, nearing retirement, or so he thought, Willey is working twice as hard and making half as much as he did two years ago. In two months, he has taken just two days off. Hard money training

In Europe, the FTSE 100 index of leading British shares was up 45.05 points, or 0.8 percent, at 5,579.29 while Germany’s DAX rose 46.17 points, or 0.8 percent, to 6,083.78. The CAC-40 in France was 37.33 points, or 0.9 percent, higher at 4,082.47.

Wall Street was set to join Europe and Asia higher too, with Dow futures up 48 points, or 0.5 percent, at 10,614 while the broader Standard & Poor’s 500 futures rose 6.2 points, or 0.5 percent, to 1,147.80.

Sentiment around the world appears to have been buoyed by the news that China exports in December jumped nearly 18 percent, way more than the 5 percent increase expected in the markets and the first increase in more than a year.

“Markets have taken this as confirmation that global recovery is still based on solid foundations,” said Anthony Grech, market strategist at IG Index.

The export data helped ease some of the concerns that emerged Friday after figures showed that 85,000 U.S. jobs were lost in December, which was substantially higher than the 10,000 or so predicted in the markets.

However, some of the sting was taken out of the news by the revision to November’s figures to show that there actually positive jobs growth of 4,000, instead of the initial estimate of 11,000 losses.

Investors will be keeping a close eye on the start of the fourth-quarter earnings season to see if the increasing optimism on Wall Street, that has seen stocks enjoy a ten-month bull run, is justified by the fundamentals.

As usual, aluminum company Alcoa Inc. kicks off the results season later Monday.

Nicholas Colas, chief market strategist at ConvergEx Group, said much of the attention will be on whether companies are witnessing improvements in sales, with the consensus of analysts forecasts pointing to a 7.6 percent increase in fourth quarter revenues compared with the same three-month period in 2008.

“The real story will be on the top of the income statement, however, rather than the bottom,” said Colas.

The key driver to stock market performance, at least in the first part of the year, will likely be whether economic and corporate figures, particularly out of the U.S., back up the optimism that is evident in company valuations.

Stock markets around the world have rallied strongly since March’s lows — the Dow and the S&P 500 for example surged more than 60 percent since then — as investors grew more optimistic about the global economic recovery after central banks and governments pushed through extraordinary policy measures to mitigate the deepest recession since World War II.

Earlier in Asia, Hong Kong’s Hang Seng benchmark climbed 114.77 points, or 0.5 percent, to 22,411.52 and Shanghai’s main index added 16.75 points, or 0.5 percent, to 3,212.75. As well as the export data, Chinese markets were also supported by news regulators were moving ahead with plans for stock futures and other trading products that could make the market more attractive to investors.

Japan’s stock market was closed for a holiday.

Elsewhere, Singapore’s market rose 0.3 percent and Australia’s index was up 0.8 percent. South Korea’s Kospi benchmark gave up early gains to close down 0.1 percent at 1,694.12.

Oil prices jumped amid signs of strong Chinese demand for crude and rebel attacks on Nigerian supplies. Benchmark crude for February delivery was up 82 cents to $83.57.

The dollar continued to weaken following the U.S. jobs data, which reined in expectations of when the U.S. Federal Reserve will start raising interest rates. Hard money training

London’s benchmark FTSE 100 index of leading shares slumped 1.19 percent to 5,472.91 points, dragged down by heavyweight mining groups whose share prices suffered after Alcoa’s earnings missed analyst expectations.

The FTSE had on Monday struck the highest level for 16 months in the wake of robust Chinese economic data.

Elsewhere on Tuesday, Frankfurt’s DAX 30 slid 1.32 percent to 5,962.46 points and in Paris the CAC 40 shed 1.09 percent to 3,998.66 approaching the half-way mark.

The DJ Euro Stoxx 50 index of top eurozone shares declined by 1.09 percent in value to reach 2,977.00 points.

“US earnings season kicked off last night with Alcoa missing its expectations, this coming on the back of last week’s weaker job data has contributed to a slightly uncertain start… and a feeling that equity markets have got ahead of themselves,” said equity trader Arifa Sheikh-Usmani at financial betting firm Spreadex.

After the Wall Street close, Alcoa said that it had earned one cent a share in the fourth quarter, which compared with analyst expectations of six cents a share.

Ahead of the data, Wall Street indices ended mixed on Monday.

The Dow Jones Industrial Average rose 0.43 percent to 10,663.99 points, clawing higher in the final hour of trading. The blue chip index hit an intra-day high of 10,676.23, its best price since October 3, 2008.

The technology-heavy Nasdaq composite fell 0.21 percent to 2,312.41 points while the broad-market Standard & Poor’s 500 index added 0.17 percent to 1,146.98 points after languishing in the red for most of the day.

All three key stock indices had opened on a positive note, mirroring sharp gains in Europe, after robust China trade data at the weekend but shares turned mixed in choppy trading later on caution ahead of Alcoa’s earnings news. Home Security Systems.

Four of Wall Street’s most powerful leaders — Goldman Sachs Group Inc. Chairman-CEO Lloyd Blankfein, JPMorgan Chase & Co. CEO James Dimon, Morgan Stanley Chairman John Mack and Bank of American Corp. CEO-President Brian Moynihan — were to give sworn testimony before the Financial Crisis Inquiry Commission, which was holding its first session Wednesday.

The bipartisan, 10-member panel was handed the job of writing the official narrative of what went wrong before the financial system nearly collapsed in the fall of 2008.

The banking executives summoned to testify spent the days leading up to the hearings in meetings with corporate lawyers and government relations specialists.

Dimon planned to highlight JPMorgan’s relative strength, saying it did not engage in some of the riskiest practices that led to the industry’s near-collapse, according to a person who does not work at JPMorgan but is familiar with the executive’s thinking.

Dimon also was to discuss gaps in the regulatory structure before the crisis, including those that allowed banks to use too much leverage, and the weak oversight of vast swaths of the mortgage industry, said the person, who spoke on condition of anonymity because he was not authorized to discuss the plans.

Mack’s testimony also was to highlight regulatory failures and would include calls to improve regulators’ tools to oversee financial activity, said another person familiar with Mack’s plans.

Mack was to emphasize Morgan Stanley’s relatively early response to the crisis, which included reducing leverage and tying compensation to long-term performance, said the person, who also spoke anonymously because she was not authorized to discuss the matter.

The hearings come at a sensitive time for the banking industry. Congress is writing a full-scale overhaul of financial regulations, bankers are about to announce huge bonuses for their executives and the Obama administration is considering extracting a fee from banks to cover about $120 billion in taxpayer losses from a government Wall Street bailout fund.

The bankers’ demeanor before the commission, the tone of the commission’s questions and the continuing inquiry could affect public perceptions and influence how lawmakers and the White House deal with the industry.

A coalition of liberal activist groups is urging the commission to work aggressively and look beyond the bankers to the actions of former government regulators. In newspaper ads set to appear in Washington publications Wednesday, the group, Accountable America, singles out former Securities and Exchange Commission Chairman Christopher Cox for not detecting Bernie Madoff’s Ponzi scheme.

“The hearings are important and a good first step, but they are not sufficient,” said Tom Matzzie, the group’s chairman. “We don’t just have to look at the people who are going to be witnesses. We also need to be investigating the role of the regulators under the Bush administration who failed to stop the crisis.”

The commission is chaired by former California Treasurer Phil Angelides, a Democrat. His vice chairman is Republican Bill Thomas, a former California congressman who chaired the House Ways and Means Committee.

In an interview last week, Thomas expressed impatience with bankers who worry that some additional government scrutiny and demands for transparency will hobble the industry.

“We came close to the worst thing in the world,” Thomas said. “So whenever you hear from these people, ‘Well, this will make us not to do this and not to do that,’ I immediately flip it from negative to positive and say, ‘Yeah, and so?’”

In featuring the bankers at its first public hearings, the commission is sending a clear message that the first part of the narrative starts with the chief executives.

The commission is modeled on the panel that examined the causes of the Sept. 11, 2001, terrorist attacks. But its prototype could be the Pecora Commission, the Senate committee that investigated Wall Street abuses in 1933-34. It was named after Ferdinand Pecora, the committee’s chief lawyer. Hard money training.

The number of households that received a foreclosure-related notice rose 21 percent from 2008, RealtyTrac Inc. reported Thursday. One in 45 homes were sent a filing, which includes default notices, scheduled foreclosure auctions and bank repossessions.

In December, more than 349,000 households, or one in 366 homes, were hit with a foreclosure-related notice. That represents a 14 percent spike from November and a 15 percent jump from December 2008.

Banks repossessed more than 92,000 homes, up 19 percent from November. That increase was likely due to lenders working to clear their books at the end of the year, RealtyTrac said.

Stemming the tide of foreclosures is an important step for the real estate market and the economy to recover. Because foreclosures are usually sold at heavy discounts they can lower the value of surrounding properties. Cities lose property tax dollars from empty foreclosures and declining home values, straining local economies. Home prices have stabilized in some cities, but are still down 30 percent nationally from mid-2006.

The foreclosure crisis isn’t letting up. Between 3 and 3.5 million homes are expected to enter some phase of foreclosure this year, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac, which began tracking the data five years ago.

High foreclosures forced the federal government and several states to come up with plans to prevent or delay foreclosures to help troubled borrowers.

“It was bad, but it could have been much worse, and it probably should have been worse,” Sharga said.

One plan intended to help homeowners is the Obama administration’s loan modification program known as Making Home Affordable. Lenders participating in the program have offered trial loan modifications to 760,000 eligible borrowers since it was launched in March. A loan modification changes the terms of the loan, such as lowering the interest rate, to make the monthly payments more affordable.

As of November, just 31,000 of them had been made permanent. Nearly the same number had dropped out of the program or were found to be ineligible. The Treasury Department will release updated figures Friday.

Economic issues, such as unemployment or reduced income, are expected to be the main catalysts for foreclosures this year. Homeowners with good credit who took out conventional, fixed-rate loans are the fastest growing group of foreclosures.

The Mortgage Bankers Association on Wednesday recommended changes to the government’s program to account for borrowers who’ve lost their jobs. The program, for example, should include a suspension of payments as the first step for borrowers with a temporary loss of income.

The government also should refrain from “endless incremental program changes,” the trade association said.

Since April 2009, there have been nine instances where new program requirements were released, and more than 90 clarifications for new or revised forms, reporting changes and policies. The changes forced mortgage companies to implement new procedures and retrain employees, taking away time that could be spent helping borrowers.

The same three states that led the nation in foreclosure rate in December also posted the highest rates for the entire year: Nevada, Arizona and Florida. More than 10 percent of Nevada housing units received at least one foreclosure filing in 2009, with Florida and Arizona following with about 6 percent each. Hard money training.