YLSP wrote: I don't understand how stimulus funds are being allocated. Of concern to me are that HHS, SSA and DOL are way ahead as far as spending what has been allocated to them.
That's how the stimulus was supposed to work. HHS sent actual cash to the states immediately in the form of Medicaid rebates after the passage of ARRA. Since money is fungible, the states used these rebates to plug holes in budget gaps, stopping the immediate 1Q cash flow crisis (e.g. remember California in Feb/Mar). Then the money ran out, and the states are waddling through the process again. SSA stimulus funds were primarily $250 checks mailed out to its beneficiaries. DOL consisted of the expanded unemployment insurance benefits. Cash is always easy to implement; no rules or regulations need to be passed.
As for the GDP growth Yellen speaks about...she is perfectly correct. It's not hard to make forecasts for GDP SAAR at or around zero now...we've done the cliff-diving, hit the ground hard, and bounced a bit. I wrote about the inventory correction issue in a previous comment.
The important takeaway now is that the drags are shifting...residential may be bottoming (stupidly) but commercial's (albeit smaller) pipeline is emptying, and will be the new drag. Consumers have picked up a bit from stimulus supported income, which will make that a small positive perhaps, but government spending at the state and local level (and soon the federal) will be a bigger drag ahead. Plus, the rise of the consumer means imports are stronger, so unless exports compensate (a big unknown depending on the dollar and global growth, with the EU looking very shaky) net trade drags comparatively. So, we are in transition, but there are big problems to solve.
Of course, the consumer saving rate plays a huge role too, and that trend is against GDP. Asset prices (houses, bad, stocks, who knows?) means we cant get much wealth effect, and if that doesnt pick up, it reinforces higher savings rate. All in all, a string of quarterly 0's for GDP would be an accomplishment...and when we do get past the short term, weve got the medium term problem of the Fed unwind, plus the medium to long of horrible demographics and entitlements.
Summing up....v shaped recovery looks delusional. L shaped, probable, and downward staircase, possible.
Government agencies & leaders, financial institutions, and the commentariat have already voted for 'delusional', and only their votes count (facts? we don't need no f*cking facts).
This flat step - either L or stair step - was basically bought for $700+ billion, no?
With rising unemployment, and in the even the MSM finally starting to note that now leads credit deterioration it is difficult to see how the L is probable and the downward staircase possible - good overall assessment IMNSHO, just swap your possible and probable.
I'm noticing the same thing in our neighborhood that a previous poster noted. Many homes showing indication of ongoing renovation work. People have given up on selling. I wonder how this will affect GDP.
Tanta was such an amazing combo of intelligence and writing ability. I'd hope CR could find another co-blogger like her, but I know that would be impossible.
I suppose re-reading the old Saturday posts will have to do. It would be fun to have them, along with all the comments, in book format. (A "free gift" publication for donating to hoocoodanode?)
While Krugman's main beef is with the size of the stimulus package, it is interesting to highlight Summers' views on the financial system: In addition to providing fiscal stimulus, the Administration also set to work on addressing the origins of this crisis: a financial system in severe distress. There were many—from across the political spectrum—who proposed precipitous action to universalize guarantees or nationalize major financial institutions. There was an even larger group who believed that policy needed to start from the premise that the financial system, as a whole, was substantially insolvent. Even Alan Greenspan asserted that "it may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring."
After considering all options, Secretary Geithner led the Administration in a different approach. We recognized the irreversibility of such actions as nationalization. We recognized that there was a very substantial risk that government could be a source of fear, rather than a source of confidence, and that strong actions taken towards one institution could have major implications for other institutions.
Irreversibility of nationalization??? What kind of strawman is that? CR used to call it, quite appripriately, "pre-privatization". No sane person ever called for converting the financial system into a USPS outlet.
And didn't the government provide universal and limitless guarantees to the select largest banks?
Central elements of the plan included the stress tests process and the Capital Assistance Program, which sought to increase capital in the banking system by supplementing private sources of capital as needed. The transparency of the stress tests contributed to confidence in the financial system. Since the release of the stress test results, banks have been able to generate over $80 billion in equity and issue over $30 billion in unguaranteed debt.
The market knows the government will always be there for big banks and even holders of junior bank debt will be protected by the full faith of the US government - why not to invest? It's become plain obvious that Goldman is really the world largest hedge fund with the best access to White House, so of course there will be a stampede of investors trying to get a piece of that action.
The standard of living of US citizens has only begun to fall. Their standard of living will continue to fall until it meets the rising standard of living of the developing countries. Not a pleasant prospect.
Hangtown (profile) wrote on Sat, 7/18/2009 - 11:25 am reply Ignore user Anyone starting a chart on if homes being purchased at "reduced price" are going up in value or depreciating?
That would be interesting to know, since so many people seem to be tripping all over themselves to buy distressed housing:
"Recently a Californian purchased 178 properties, mostly one at a time, and most for under $10,000. Another has purchased six Detroit properties since September and hopes to begin buying five a month. "
Janet Yellen missed the next obvious step in the argument: Yes, GDP will grow by virtue of inventory burnoff etc being "less bad". So you will see that -1.0% turn into 0%. But then, that becomes the new baseline, and until you have a growing economy (not merely a less shrinking one), GDP will still be bad enough that folks will tighten in whatever new ways that they can. That will give us the W recession.
And in truth, that mid-highpoint of the W is nothing more than ringing from the overshoot. (Do economists ever study second-order systems?)
One more thing to keep in mind - the Japan population is essentially not growing, so it could afford the lost decade of no growth.
US GDP has to to grow about 1% per year in real terms just to keep up with the the population growth.
we've paid a lot more than 700bln to arrest the fall. at least, for now, it appears we've avoided gd2. what comes to pass as we approach 2010 could be an entirely different story.
CR .... I'll take stability at any level, or at least here. Indecision from these financial surgeons, the PHeD, Geitner, and Obama, is killing the patient. You've got to quit the talking and get out the knife.
My business works well when potential clients sense stability. Not in CA where our legislature has yet to pass a budget, where federal stimulus funds are still mostly being held in DC "just in case"
Or do I have to wait for newly wealthy Chinise to come over here and buy my stuff? I want their incentive package.
kcoop - it would be nice if we could have a "reply to" option that would copy the text we're replying to, so we didn't have to click to find out what the post is responding to. Yes, I'm being picky.
kcoop - it would be nice if we could have a "reply to" option that would copy the text we're replying to, so we didn't have to click to find out what the post is responding to. Yes, I'm being picky.
Irreversibility of nationalization??? What kind of strawman is that? CR used to call it, quite appripriately, "pre-privatization". No sane person ever called for converting the financial system into a USPS outlet.
MrM: Before this meltdown, the nomenclature for temporary nationalization was still "nationalization". I don't read that PK is arguing for USPS-like banks; I think he is saying just that the insolvency demands reorganization (as opposed to liquidation) and that only the feds have the resources (ie DIP equivalent) to make that work. In the period between BK and reselling the equity, the company capital structure is dominated by the feds, ergo it is "nationalized". (Many folks played the MSM into making "nationalize" into a perjorative (like the word "liberal"), which sadly had the effect of helping programs like TARP along.)
I haven't read all of Krugman's work obviously, but I'd be very surprised by him saying that a permanent USPS banking system is desirable.
July 18 (Bloomberg) -- A hardware distributor in Alabama became the first company to blame the troubles of commercial lender CIT Group Inc. for its bankruptcy yesterday when it filed for protection from creditors.
Moore-Handley Inc., which supplies tools and other items to hardware stores and home centers, said in court papers that it was forced into Chapter 11 because it had trouble getting cash from CIT, its lender.
Yes, $787 bil, plus assorted incalculable other costs just to get us to flatline. Kind of scary, huh? Granted, some of that isnt spent yet, and some more looks likely (see : CA budget, related, and extra stimulus)
It seems clear to me what they are trying to do is a confidence game (i mean that two ways)
First, figure out what BS you can conjure up to make it look like you are addressing the housing issue....this way, more people in trouble get out, and more new knifecatchers come in, sales rise, and a bottom forms there, and the price decline is less bad than otherwise, since more suckers are taken in by the confidence.
Second, pretend to fix the credit markets, save the big banks so that they can capitalize on the suckers buying into the false housing bottom. Screw the rest of the banks at taxpayer expense, talk as little about it as possible (see BFF)
Third, let the bank lovelliness drag the broader market upward, restoring paper wealth, confidence, and possibly at some point in the future, helping the saving rate come back down. When, dunno. Not now, not soon.
Fourth, super stimuli means you get a inventory bounce, after the cliff dive, the perfect peat moss in which to plant your green shoots. Make sure that story is all over the MSM.
Fifth, repeat various parts of said racket at any sign of trouble in the markets, any bad news that has to be balanced with some govt scheme to make it all better, etc.
In the end, its all about getting the consumer back to fantasy island, that place in the sun where the CC bill keeps rising and is never really ever paid. The home value will be reverse mortgaged to pay for your retirement, and you need a bigger house so you can buy another car. Im truly beginning to think that we will learn nothing from this crisis, even if the USAToday says otherwise.
The flailings of TPTB may induce a slight bump to GDP, but inevitably the decline in the US standard of living will reemerge. Gimmicks cannot change reality for long. Call it a W, L or whatever shape if you like.
JP - I am afraid my quote was confusing
Paul Krugman provided the link to Larry Summers' speech, from which I was quoting
Summers said We recognized the irreversibility of such actions as nationalization.
Of course, nationalization is irreversible for a given bank in question, just like bankruptcy is. But that's a good thing, no? You do want to change/restructure a failed institution.
However, at the macro level, nationalization is fully reversible - you start with banks as regulated private enterprises and you end up with banks as regulated private enterprises. In the meantime you "enforce the private part" - equity holders get wiped out, debt holders get converted into equity holders, so that in the future investors into bank equity and debt will be forced to pay attention to more than just the size of the balance sheet. I am quite troubled that the opposite lesson had been learned.
A couple of meta observations. If the period 2001-06 was one of false economic activity then we are only back to a decade of an anemic economy. If that's the case we are about to see a real recession from these levels. A regular plain old recession led by employment. Second, we have only stabilized due to an extraordinary series of coordinated efforts and one time exceptions. Were it not for the stimpaks and rule changes and such there would have been no reported stabilization. In that case we borrowed future growth forward. It would take some extraordinary growth rates to pay that back and still show current economic growth from this point.
Third, taxes. Taxes are not what is collected, taxes are what are spent. Government spending is the new bubble and when it pops there's no place to turn. It is the last bubble. As painful as that reconciliation will be it may be worth it if Keynes stays dead this time.
@ GDD9000 (profile) wrote on Sat, 7/18/2009 - 8:53 am
In the end, its all about getting the consumer back to fantasy island, that place in the sun where the CC bill keeps rising and is never really ever paid. The home value will be reverse mortgaged to pay for your retirement, and you need a bigger house so you can buy another car. Im truly beginning to think that we will learn nothing from this crisis, even if the USAToday says otherwise.
Yup agreed........Zombieconomy isn't a buzzword. It's not an event. It's not (really) about banks. It is simply about the state of our economy today with Cali leading the way with many mores states to follow in the ditch !
Seriously MrM - what planet is Summers on? In countless countries, bank privatization has been happening from the drecks of a long nationalized industry. What in the world would be irriversible about it here?
Lately there has been a lot of optimism from the MSM. But I still see no way off the bottom for three main reasons.
1) MEW. The salad days of the economy were pumping $600 - 800 billion of MEW into the economy. Now essentially zero. The stimpack approximates a good year of MEW but it is spread over 4+ years.
2) UE. With UE heading over 10% that will continue to be a drag.
3) Savings rate. Sharply up. If we are a saving then we ain't a spending.
To a lesser degree I would also include the ramp in equities. As stocks soar money will flow away from bonds and go to equities and commodities. For the lower 80% of wage earners (who own little equity) higher interest rates and oil will hurt more than any benefits of a rising equity market and serve to further dampen demand.
GDP is currently being engineered to look positive, as government lends itself money to stimulate the economy in the form of IOU debts which will need to be repaid. Peter is simply borrowing from Paul and all the other guys to help offer an illusion of resurrection. All the cash going into education and retraining will have no impact on GDP.
The figure of $700 billion is just the tip of the federal government support. The actual amount is close to $15 trillion which exceeds the current annual US GDP.
[no-glossary]Perhaps Summers is being less crappy than I thought. His next sentence is: We recognized that there was a very substantial risk that government could be a source of fear, rather than a source of confidence, and that strong actions taken towards one institution could have major implications for other institutions.
He's saying the "irreversibility" is that announcing even re-privatization of an insolvent bank or two reduces confidence, and can be detrimental to other banks/financials.
To which I say: Yes that's right, but it is also "irreversible" to go down some wacky path of rewarding the failed institutions (and their execs) with piles of money. And that path is also a source of fear, rather than a source of confidence. It too will have major implications for other institutions.
So rather than take the path of lessening confidence, the admin rewarded bad businesses and bad leaders (and the bad stockholders and BoDs) and are arguing this is better for confidence.[/no-glossary]
Good posts. I agree. I wish I didn't. My 17 year daughter is sitting next to me using her laptop. Her generation is going to miss the trip to Fantasy Island. A good thing. The bad thing is I hope it dosen't instead mutate into the Island of Dr. Moreau.
"Recently a Californian purchased 178 properties..."
Of course they did, just look at those low prices! Californians alone understand that RE always goes up! Why, just today i got an email from a realtor I once dealt with letting me know that:
"Southland home prices looking up. The median value rises 6.4% in June from May as high-end properties take a greater share of the housing market."
Her advice? "Now is the time to Act on your home or investment purchase. Please contact me!" :-/
Oh, this same agent purchased a house 2 years ago in the neighborhood she "specializes" in for 1.25 million. Recent comps indicate it is currently worth about 1 million and falling. Oops!
Pennsylvania withholds July pay Struggling to resolve a 17-day-old budget impasse, Pennsylvania is withholding pay for 69,000 state employees for time worked after July 1. Workers Friday received only 70% of their salary, covering days worked in June. Starting two weeks from now, they'll get nothing on payday until a state budget is approved.
The figure of $700 billion is just the tip of the federal government support. The actual amount is close to $15 trillion which exceeds the current annual US GDP.
Big numbers being thrown around here today.
As Bloomberg has shown several times about 70% of the "$15 trillion" authorized (but not fully allocated) for the financial system is merely loan guarantees. That isn't spending at all. In theory those are loans anyway.
On the ARRA, an article today claims that as of 6/19/09, exactly $52.9 blllion had been spent as of that date, that being 35% of the amount to be spent during this calendar year, with roughly $400 billion to be spent next year, $135 billion in 2011 and around $75 billion in the following years.
It clear that more money has been lost on financial institutions than has been spent on the economy, but it helps to separate the two areas when talking about 'government support.'
The NAR was a big part of the problem heading in, and clearly, they are just as irresponsible and disgusting in their behavior now, leading people deeper into the forest as they profess to point the way out to prosperity. That institutional needs serious reform, and some education wouldnt hurt either. Bunch of simpleton, greedys, and nitwits.
I mean, why aren't David Lereah and Ed Yun put in front of Congress, given a national grilling, and have it officially pointed out to the public that people are complete fools at best, and criminals at worst. Why we let the NRA boil fester is beyond me, and only makes sense when you see that they are part of the hope plan, the return to fantasy cheerleader crowd. They'll bilk you the whole way to your grave. Egads....i need a pill or something.
"The standard of living of US citizens has only begun to fall. Their standard of living will continue to fall until it meets the rising standard of living of the developing countries. Not a pleasant prospect."
so very true
and the american people are very unlikely wake up from their indolence until it is far too late...maybe its far too late already
but our leaders and the fourth estate are culpable
the news media has been captured by the oligarchs
proof
last night at 11pm pac time not one of the 5 major media outlets, not fox, not nbc , not cbs not abc and not public media (news hour etc) was reporting on their web sites front pages (and maybe nowhere..i couldnt find it)
that 4 banks had failed that day, two of them multi billion dollar banks...amazing, while all manner of garbage news stories made the cut
i can tell you that this decline has led to permanent changes in my household. a 30pct drop in annual income (voluntarily withdrawal from the workforce to tend to the flock), a 30pct drop in fixed expenses, a cash-only budget (no more running expenses thru the cc), a 30pct drop in variable expenses, excess earnings go to debt redux, etc, extending lives of our autos. basically, learning to make do on less and developing the habits to do that over long term. even though we earn near the top of our locale, money is a constant topic of discussion. habits. it's all about new habits.
i'm sure we're not alone, but we tend to be ahead of the pack a little. if more people start living this way, we'll never go back to "the old daze".
With a note of irony, I see that it bears a time stamp of 2:36 a.m. EDT, which of course would have been 11:36 p.m. PDT, just after the 11:00 news ended.
So we stabilized with a massive government prop job. We have more aggregate debt with a lower GDP. Anyone forecasting recovery is missing the main point that our economy, even at current levels, requires significant, unsustainable debt creation.
i agree and have argued we are headed for a lazy L shaped "recovery"
a great lesson from my days watching lewis rukeysers program wall street week, if your portfolio drops 50% during Q1and then grows 50% during Q2 you have NOT re-couped your loses
They kept 30% of your pay check. They are not going to pay you for further work, but I am sure expext people to show up and do their jobs. And you can get a loan, and pay interest, on the pay you are not getting. The Payday Loan people are loving this I am sure.
Insisting you work for no pay is called Slavery, Last time I checked that is against the law.
What are they going to do? Fire you as well as not pay you? Unemployment checks are better than working for free.
Irreversibility of nationalization??? What kind of strawman is that?
Well, if the performance of nationalized banks is far better than the performance of the corporate oligarchy banks we've had over the past few years, it might be politically impossible to re-privatize them. Given how abominable the banks have performed in the past few years that might well happen, in spite of the inefficiencies you often see with government functions. Good for the country, bad for Summers' friends.
as of now only cbs web site has any mention of 4 bank failures on front web page...burried way down at bottom, a link to the story on the business page
nothing i could find on fox, msnbc, abc, nor public broadcasting
One of the main reasons for closing banks on Fridays it that most people don't see much news on the weekends. By Monday no one cares. We, as a country, have the attention span of knats.
When banks were not open Sat, it gave the gov time to sort out the books. Not so today.
for those who missed it..the cliff notes on the paulson testimony before congress
read thinking brando godfather voice
"i neva thretend missa lewis...i jus told em dat i taugt he might bafall a most unfortunate accident if he didn protect emself"
remember the feburary 09 frontline banking crisis program called "inside the meltdown"
i think it was clear that paulson had a vendetta with fuld...may have stemmed from lehman refusing to help rescue LTCM during the russian currency crisis
so paulson ordered fuld to sell or else...fuld tried to fight and was destroyed
the take away i got from that
history will show paulson got to the top with a combination of smarts and allegorical thuggery
just check out the transcript from the program
and look at how moral hazzard is thrown around like it ever really mattered to these people
they trumpt it up as an excuse to thrash an adversary
---- the transcript in part
NARRATOR: When he'd run Goldman Sachs, Hank Paulson had vigorously competed with Dick Fuld. Now, in a series of tough telephone conversations, Paulson insisted that Fuld find a buyer for Lehman Brothers.
JON HILSENRATH: Fuld and Paulson were in regular contact over the course of the summer. Paulson was warning Fuld that the firm ran the risk of failure if it didn't act very quickly.
NARRATOR: But it appears Fuld never thought the government would let Lehman fail.
GRETCHEN MORGENSON: There must have been a sense inside that it, too, would somehow survive, be merged, some shotgun marriage.
MICHAEL PETRUCELLI: I thought it would be something similar to the Bear Stearns. There would be some arranged merger, acquisition.
snip
JOE NOCERA: When I interviewed the secretary of the Treasury, I was really astounded at the vehemence of his reaction towards Dick Fuld. He was very angry. And whether that predated him being Treasury secretary or not, I don't know, but he was very, very angry. He said, you know, "I told Dick Fuld to sell the firm or to look for a buyer because he had a problem, and he wouldn't do it." And he's just, you know, practically pounding the table with his fist.
CHARLES DUHIGG: At this point, he makes a critical decision, because of this issue of moral hazard, that Lehman will be allowed to fail.
(yeah right))
JON HILSENRATH: It was a very high stakes game of signalling that he was playing. He wanted to show these guys, you know, all of his old buddies on Wall Street, that they were going to need to step up and do something themselves.
NARRATOR: Friday night, after the markets closed, Paulson and Bernanke summoned the heads of Wall Street's largest firms to the Federal Reserve Bank in New York.
snip
JON HILSENRATH: Bernanke told them that now is the time for collective action. They couldn't spend their time this weekend looking out for their individual interests, they had to find a way to resolve the problem for all of Wall Street.
CHARLES DUHIGG: Tim Geithner says, "Somebody needs to buy Lehman. You need to figure out how to rescue Lehman because otherwise, they're going to go bankrupt."
JON HILSENRATH: Geithner pointed out to the group that there was no political will for a bail-out in Washington.
NARRATOR: That weekend, a now familiar sight: Lehman's books opened up to their competitors. Now Dick Fuld was desperate to do a deal.
JOE NOCERA: On that last weekend, they really did think they had a deal lined up with either Bank of America or Barclays. But neither Bank of American America nor Barclays were willing to do the deal without the same kind of government guarantees that Bear Stearns got. And this time, unfortunately for Lehman, unfortunately for Mr. Fuld, this time the government said no.
(yeah baby...30 billion for jpm and bear but zilch for fuld...thugs)
A couple of meta observations. If the period 2001-06 was one of false economic activity then we are only back to a decade of an anemic economy. If that's the case we are about to see a real recession from these levels. A regular plain old recession led by employment.
Except that's not a regular plain old recession. Plain old recessions are driven by inventory and capital spending. Employment-driven recessions are a different beast.
We are already seeing this is a very different kind of economic weakness by the now 6-month-long spending plateau on the bottom. All previous post-war recessions had a sharp bounce in spending. I think the aggressive government intervention in the form of large fiscal deficits has averted a wild and disastrous debt deflation, but they haven't changed the underlying difference between the "great recession" and a normal recession. In a normal recession the problem is that some things (inventory and investments) have been done a bit early, but were basically sound, and we just needed a bit of time to catch up. Now the problem is that we have a lot of investments (McMansions, financialization, luxury good production) that will never be worth what they cost so the economy needs fundamental - and time-consuming - changes.
Alan Grayson on MSNBC with Dylan Ratigan and Eliot Spitzer discussing Hank Paulson and the bailouts. Grayson said about former Treasury Secretary and former Goldman Sachs CEO Hank Paulson who presided over the bailout while owning hundreds of millions in Goldman stock:
"Hank Paulson never should have had that job in the first place. He had a $700 million conflict of interest and everything that he did while he was Treasury Secretary, every single thing that he did, has one explanation - what's good for Hank Paulson?"
Allen C (profile) wrote on Sat, 7/18/2009 - 12:47 pm reply Ignore user So we stabilized with a massive government prop job. We have more aggregate debt with a lower GDP. Anyone forecasting recovery is missing the main point that our economy, even at current levels, requires significant, unsustainable debt creation.
Debt creation at the same time we suffer from debt deflation. Debt is jobs, GDP growth.
The really ironic (and quite f**ked-up) thing about the CIT situation is the government won't backstop Main Street; so what will it do? It 's going to allow JPMorgan Chase and Goldman (or, perhaps others) to come in with their tens of billions in backstopped funds from programs like the TLGP, and use that money to resolve the matter! In other words, the government will allow JPMorgan Chase and Goldman to use the same government funds (that CIT is trying to access, but isn't going to be allowed to use) to takeover CIT's assets, but it won't make/take notice of this.
Some folks, like Zero Hedge, are saying this is as much a political move--to make it appear that the government is not bailing out CIT--when in fact they are. But, it's being done in such an ass-backwards way that the too-big-to-fail lenders get to stripmine CIT, and make it appear as if this is a "private sector" effort, when nothing could be further from the truth.
The favored, too-big-to-fail firms reap rewards, D.C. makes it look like it is not a bailout, and Main Street, more or less, loses.
I read the article about distant people snapping up cheap Detroit properties. Yie, some are as far away as New Zealand or Australia! But then I clicked another article about why 13 people were staying in Detroit. It reminded me of some things I'd forgotten. This country will recover when people are pursuing their passions and dreams, instead of chasing the Joneses and buying worthless junk to stuff in the rented storage unit. And, as usual, it will be the young who take us out of the pit we are staring at right now. Why I love Detroit - Ara Howrani (1) - CNNMoney.com
Well the curtains lady is downstairs adding subtracting multiplying and dividing
so lengthily and fiercely that I am sure we will be boosting the economy to
an awesome extent.
None of the fabrics are from China. South Korea and Trinidad.
She said when she started working for Penny's 11 years ago they
prided themselves on American manufacturers. I said I would settle
for non-Chinese.
Anniversary sale at JWN started yesterday. GF is 20 year employee, top mgmnt at flagship store on west coast. She states yesterday was busiest she has seen in last 2 years in all time periods inc. xmas....didn't go into it anymore than that as she was tired and a little grumpy...
"As Bloomberg has shown several times about 70% of the "$15 trillion" authorized (but not fully allocated) for the financial system is merely loan guarantees. That isn't spending at all. In theory those are loans anyway."
Loan guarantees on worthless loans IS spending, ultimately
Well, my curtain spending will end the recession for sure.
Frankly we haven't changed our spending habits at all. But we
were never extravagant in the first place.
The curtain lady sez she is doing just fine, but has been doing this
for many years and has plenty of customers who come back for more.
At peak she was running around doing decorating for new homes.
Really too busy.
A bad sign actually. After we bought homes we felt strapped for a
while and certainly didn't decorate a lot. Except for the house we
live in now, which needed a makeover desperately. And so was
cheap.
WASHINGTON -- The Obama administration picked Goldman Sachs Group Inc. Vice Chairman Robert Hormats to be the State Department's undersecretary for economic, energy and agricultural affairs, the White House announced Friday.
Mr. Hormats, if confirmed by the Senate, will buttress Secretary of State Hillary Clinton's campaign to use economic, trade and environmental issues to redefine Washington's relationship with nations such as China, India and Russia, said administration officials.
Do you really think that the global economy can take a decade of low growth? I don't think you fully appreciate the spectrum of effects and probabilities that will overtake your visions of business as usual
GS & JPM will use those funds for DIP financing. That will be in bankruptcy, which will wipe out the equity, and there is no "takeover" of the assets.
What will be guaranteeing DIP financing if not CIT's assets, which, I would think, are mostly loans?
Traditionally DIP financing has been quite low risk, and I would not be surprised if the government backstopped losses for CIT DIP financiers, so DailyKos does not seem to be far off.
Do you really think that the global economy can take a decade of low growth?
Not unless the population growth slows down substantially, especially in China and India
In addition, hopes for moving millions of people out of poverty would have to be tempered, which might have implications for democracy in Asia and Africa
What will be guaranteeing DIP financing is not CIT's assets, which, I would think, are mostly loans?
There are others on the site with better understanding of DIP than me, but fwiw: The DIP is guaranteed by pretty much everything the company has for assets and cash flows. Since it is short-term (only the duration of bankruptcy), the bond holders (and equity holders etc) assent to subordinate their claim (because the alternative is liquidation.)
Many non-western countries have significant autonomous nuclear and bioweapon capacity.. they are also much younger (average age) and willing to take bigger risks. It will make for an interesting future..
July 18 (Bloomberg) -- A hardware distributor in Alabama became the first company to blame the troubles of commercial lender CIT Group Inc. for its bankruptcy yesterday when it filed for protection from creditors. Moore-Handley Inc., which supplies tools and other items to hardware stores and home centers, said in court papers that it was forced into Chapter 11 because it had trouble getting cash from CIT, its lender.
Many non-western countries have significant autonomous nuclear and bioweapon capacity.. they are also much younger (average age) and willing to take bigger risks. It will make for an interesting future..
Ah, a Molotov cocktail of WMDs, excess of young men and non-democratic governments willing to put them in harm's way
July 18 (Bloomberg) -- China’s stock market may surpass the U.S. as the world’s largest by value in three years as state- owned companies sell new shares and the nation’s 1.4 billion people put more of their money into equities, Mark Mobius said. “The Chinese population is just dipping its toe into equities and they’ve got a long way to go,” Mobius, who oversees about $25 billion of emerging-market assets as executive chairman of Templeton Asset Management Ltd., said in an interview with Bloomberg Television in London. State-owned companies are “coming up with more huge” initial public offerings, he said yesterday.
unless one is implicitly arguing that Main St is unable to find lending elsewhere, I'm not sure how letting CIT fail is ignoring Main Street. A bailout is essentially a backstop of CIT debt, which is probably not owned by Main Street. Just because CIT loans to small business doesn't mean that CIT is aligned with Main Street and its interests. Using CIT's logic, a government bailout of Capitol One would be a bailout of subprime consumers.
July 17 (Bloomberg) -- Anyone wondering about corruption in China should consider the number 21. That’s China’s ranking among 22 economies assessed as part of Transparency International’s latest bribe payers index. Only Russia has a lower score than the world’s third-biggest economy. That deflates the Chinese government’s claim that Rio Tinto Group executives may have engaged in bribery.
July 18 (Bloomberg) -- European Central Bank President Jean-Claude Trichet urged euro-area governments to trim their budget deficits after a flood of spending aimed at stemming the worst recession since World War II. “There is too much spending, there is a need to reduce spending as a proportion of gross domestic product,” Trichet told French TV channel LCI in an interview today.
And would those be bad loans? And would the Fed be backing up those loans for GS or JPM?
If by "loans" in the first sentence you mean the loans that CIT made: It doesn't matter if they are ultimately good or bad. The amount of financing for DIP is only the amount needed to get through bankruptcy. It is not large relative to the size of the biz (or cash flows). The loans just need to provide enough to cover the amount put up by JPM & GS.
If the loans are indeed bad, the current bond holders (and stockholders) will be the ones to get the haircut.
I note that this situation is exactly as it should be, and how it should have gone last Oct (with the gov't providing the DIP financing). But OMG! that's nationalization!
EDIT: As for the Fed backing the DIP by GS, I doubt it. But DIP financing is not high-risk either.
The recovery is a forest. People have let their credit cards go, and don"t have mortgage payments it looks as if we are spending more and people have disposable incomes again. Actually, savings are getting drained and there are no new jobs. We are in the calm before the storm. People are spending what every little cash they have left on eating out and shopping for smaller ticket items. This will come to an end in 6 months. There are no new jobs. Can you hear the quiet in America?
lawyerliz (profile) wrote on Sat, 7/18/2009 - 11:42 am
Are Cali legislators working today, or are they at the beach?
Next face time meetings are Sunday night. Idiots are operating under the delusion that since nothing happened Wednesday when they ran out of money that there is no desperate urgency.
As to Pennsylvania or Philly or both (who can keep track) were I an employee, I would
put up with not getting paid for a week or 2 and then I would be sick 30% of the time.
The most compelling argument for saving CIT Group from collapse is the impact it would have on small- and mid-sized business that depend on the New York-based lender for financing. But it’s increasingly looking like that argument is more hype than anything else.
BHO did not show any real balls/resolve and fix the GS/Wall Street corruption and the TBTF problem. His Health Care reform was doomed as a result. You cannot pick and choose when to do the RIGHT thing, IMHO.
Illinois unemployment fund goes broke, the 16th state so far forced to borrow funds from the fed to keep the benefits flowing, according to Pro Publica ProPublica - Journalism in the Public Interest
Maybe all the Chinese women will be able to have two husbands. Although there would be a very big fight over who gets to be the father of their one child. One child per father would still lower the repopulation rate.
JP (homepage, profile) wrote on Sat, 7/18/2009 - 12:01 pm
Dawg: What do you think is the next big event? or put differently, what next financial event cannot be temporarily swept under the rug?
I'm thinking the public unions strike authorization may harden the lines. There's also the debt downgrade threat. There's nothing like last Wednesday's running out of money.
burnside (profile) wrote (in reply to...) on Sat, 7/18/2009 - 3:25 pm replyIgnore userEither it isn't hype, or the writer can't find any reason to say so.
Ding!
Finally! I started to fear this blog had become an Audubon outlet
YLSP wrote:
I don't understand how stimulus funds are being allocated. Of concern to me are that HHS, SSA and DOL are way ahead as far as spending what has been allocated to them.
That's how the stimulus was supposed to work. HHS sent actual cash to the states immediately in the form of Medicaid rebates after the passage of ARRA. Since money is fungible, the states used these rebates to plug holes in budget gaps, stopping the immediate 1Q cash flow crisis (e.g. remember California in Feb/Mar). Then the money ran out, and the states are waddling through the process again. SSA stimulus funds were primarily $250 checks mailed out to its beneficiaries. DOL consisted of the expanded unemployment insurance benefits. Cash is always easy to implement; no rules or regulations need to be passed.
OT - what do you think about Joe Nocera's trying to write the history books on the BofA deal and the heroes that saved the financial system?
TALKING BUSINESS; Looking Back In Anger At the Crisis - NY Times
It strikes me as somewhat of an apologist manifesto.
Flat or less bad is the new up.
Missing Tanta an extra bit on a Saturday morning...
CR, Ben says otherwise. He's been on top of things from the git go, eh?
As for the GDP growth Yellen speaks about...she is perfectly correct. It's not hard to make forecasts for GDP SAAR at or around zero now...we've done the cliff-diving, hit the ground hard, and bounced a bit. I wrote about the inventory correction issue in a previous comment.
The important takeaway now is that the drags are shifting...residential may be bottoming (stupidly) but commercial's (albeit smaller) pipeline is emptying, and will be the new drag. Consumers have picked up a bit from stimulus supported income, which will make that a small positive perhaps, but government spending at the state and local level (and soon the federal) will be a bigger drag ahead. Plus, the rise of the consumer means imports are stronger, so unless exports compensate (a big unknown depending on the dollar and global growth, with the EU looking very shaky) net trade drags comparatively. So, we are in transition, but there are big problems to solve.
Of course, the consumer saving rate plays a huge role too, and that trend is against GDP. Asset prices (houses, bad, stocks, who knows?) means we cant get much wealth effect, and if that doesnt pick up, it reinforces higher savings rate. All in all, a string of quarterly 0's for GDP would be an accomplishment...and when we do get past the short term, weve got the medium term problem of the Fed unwind, plus the medium to long of horrible demographics and entitlements.
Summing up....v shaped recovery looks delusional. L shaped, probable, and downward staircase, possible.
Government agencies & leaders, financial institutions, and the commentariat have already voted for 'delusional', and only their votes count (facts? we don't need no f*cking facts).
This flat step - either L or stair step - was basically bought for $700+ billion, no?
With rising unemployment, and in the even the MSM finally starting to note that now leads credit deterioration it is difficult to see how the L is probable and the downward staircase possible - good overall assessment IMNSHO, just swap your possible and probable.
Is slip sliding sideways the best we can do with an ever increasing number of people not paying taxes, mortgages, and credit cards?
I'm noticing the same thing in our neighborhood that a previous poster noted. Many homes showing indication of ongoing renovation work. People have given up on selling. I wonder how this will affect GDP.
Tanta was such an amazing combo of intelligence and writing ability. I'd hope CR could find another co-blogger like her, but I know that would be impossible.
I suppose re-reading the old Saturday posts will have to do. It would be fun to have them, along with all the comments, in book format. (A "free gift" publication for donating to hoocoodanode?)
Anyone starting a chart on if homes being purchased at "reduced price" are going up in value or depreciating?
red hat to replace cit in s&p500
The Swan is still Black, and We're Still Screwed Hotlist
by ManfromMiddletown
Sat Jul 18, 2009 at 06:39:39 AM PDT
Daily Kos: The Swan is still Black, and We're Still Screwed
Excellent diary!
Paul Krugman links to a recent speech by Larry Summers .
While Krugman's main beef is with the size of the stimulus package, it is interesting to highlight Summers' views on the financial system:
In addition to providing fiscal stimulus, the Administration also set to work on addressing the origins of this crisis: a financial system in severe distress. There were many—from across the political spectrum—who proposed precipitous action to universalize guarantees or nationalize major financial institutions. There was an even larger group who believed that policy needed to start from the premise that the financial system, as a whole, was substantially insolvent. Even Alan Greenspan asserted that "it may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring."
After considering all options, Secretary Geithner led the Administration in a different approach. We recognized the irreversibility of such actions as nationalization. We recognized that there was a very substantial risk that government could be a source of fear, rather than a source of confidence, and that strong actions taken towards one institution could have major implications for other institutions.
Irreversibility of nationalization??? What kind of strawman is that? CR used to call it, quite appripriately, "pre-privatization". No sane person ever called for converting the financial system into a USPS outlet.
And didn't the government provide universal and limitless guarantees to the select largest banks?
Central elements of the plan included the stress tests process and the Capital Assistance Program, which sought to increase capital in the banking system by supplementing private sources of capital as needed. The transparency of the stress tests contributed to confidence in the financial system. Since the release of the stress test results, banks have been able to generate over $80 billion in equity and issue over $30 billion in unguaranteed debt.
The market knows the government will always be there for big banks and even holders of junior bank debt will be protected by the full faith of the US government - why not to invest? It's become plain obvious that Goldman is really the world largest hedge fund with the best access to White House, so of course there will be a stampede of investors trying to get a piece of that action.
"Propaganda may be facilitated by leaders with prestige."
The standard of living of US citizens has only begun to fall. Their standard of living will continue to fall until it meets the rising standard of living of the developing countries. Not a pleasant prospect.
Hangtown (profile) wrote on Sat, 7/18/2009 - 11:25 am reply Ignore user Anyone starting a chart on if homes being purchased at "reduced price" are going up in value or depreciating?
That would be interesting to know, since so many people seem to be tripping all over themselves to buy distressed housing:
"Investors Bet on Detroit Housing Market"
Investors bet on Detroit housing market, buy homes in bulk - Jun. 11, 2009
"Recently a Californian purchased 178 properties, mostly one at a time, and most for under $10,000. Another has purchased six Detroit properties since September and hopes to begin buying five a month. "
"Finally! I started to fear this blog had become an Audubon outlet"
?
Janet Yellen missed the next obvious step in the argument: Yes, GDP will grow by virtue of inventory burnoff etc being "less bad". So you will see that -1.0% turn into 0%. But then, that becomes the new baseline, and until you have a growing economy (not merely a less shrinking one), GDP will still be bad enough that folks will tighten in whatever new ways that they can. That will give us the W recession.
And in truth, that mid-highpoint of the W is nothing more than ringing from the overshoot. (Do economists ever study second-order systems?)
One more thing to keep in mind - the Japan population is essentially not growing, so it could afford the lost decade of no growth.
US GDP has to to grow about 1% per year in real terms just to keep up with the the population growth.
Pavel - that was in reference to the pigeon discussion on the previous thread
we've paid a lot more than 700bln to arrest the fall. at least, for now, it appears we've avoided gd2. what comes to pass as we approach 2010 could be an entirely different story.
CR .... I'll take stability at any level, or at least here. Indecision from these financial surgeons, the PHeD, Geitner, and Obama, is killing the patient. You've got to quit the talking and get out the knife.
My business works well when potential clients sense stability. Not in CA where our legislature has yet to pass a budget, where federal stimulus funds are still mostly being held in DC "just in case"
Or do I have to wait for newly wealthy Chinise to come over here and buy my stuff? I want their incentive package.
"Pavel - that was in reference to the pigeon discussion on the previous thread"
Ah! And isn't a pigeon also a mark in a con game?
kcoop - it would be nice if we could have a "reply to" option that would copy the text we're replying to, so we didn't have to click to find out what the post is responding to. Yes, I'm being picky.
a W sounds good. at least that shape requires a sharp leg up on the other end of the malaise.
kcoop - it would be nice if we could have a "reply to" option that would copy the text we're replying to, so we didn't have to click to find out what the post is responding to. Yes, I'm being picky.
Click on (in reply to...) link
Irreversibility of nationalization??? What kind of strawman is that? CR used to call it, quite appripriately, "pre-privatization". No sane person ever called for converting the financial system into a USPS outlet.
MrM: Before this meltdown, the nomenclature for temporary nationalization was still "nationalization". I don't read that PK is arguing for USPS-like banks; I think he is saying just that the insolvency demands reorganization (as opposed to liquidation) and that only the feds have the resources (ie DIP equivalent) to make that work. In the period between BK and reselling the equity, the company capital structure is dominated by the feds, ergo it is "nationalized". (Many folks played the MSM into making "nationalize" into a perjorative (like the word "liberal"), which sadly had the effect of helping programs like TARP along.)
I haven't read all of Krugman's work obviously, but I'd be very surprised by him saying that a permanent USPS banking system is desirable.
So fast?
July 18 (Bloomberg
) -- A hardware distributor in Alabama became the first company to blame the troubles of commercial lender CIT Group Inc. for its bankruptcy yesterday when it filed for protection from creditors.
Moore-Handley Inc., which supplies tools and other items to hardware stores and home centers, said in court papers that it was forced into Chapter 11 because it had trouble getting cash from CIT, its lender.
a W sounds good. at least that shape requires a sharp leg up on the other end of the malaise.
True, but I'm dubious that the up leg is going to be steep. So transform my W to a "VL". Name it the Vlad™ recovery.
Yes, $787 bil, plus assorted incalculable other costs just to get us to flatline. Kind of scary, huh? Granted, some of that isnt spent yet, and some more looks likely (see : CA budget, related, and extra stimulus)
It seems clear to me what they are trying to do is a confidence game (i mean that two ways)
First, figure out what BS you can conjure up to make it look like you are addressing the housing issue....this way, more people in trouble get out, and more new knifecatchers come in, sales rise, and a bottom forms there, and the price decline is less bad than otherwise, since more suckers are taken in by the confidence.
Second, pretend to fix the credit markets, save the big banks so that they can capitalize on the suckers buying into the false housing bottom. Screw the rest of the banks at taxpayer expense, talk as little about it as possible (see BFF)
Third, let the bank lovelliness drag the broader market upward, restoring paper wealth, confidence, and possibly at some point in the future, helping the saving rate come back down. When, dunno. Not now, not soon.
Fourth, super stimuli means you get a inventory bounce, after the cliff dive, the perfect peat moss in which to plant your green shoots. Make sure that story is all over the MSM.
Fifth, repeat various parts of said racket at any sign of trouble in the markets, any bad news that has to be balanced with some govt scheme to make it all better, etc.
In the end, its all about getting the consumer back to fantasy island, that place in the sun where the CC bill keeps rising and is never really ever paid. The home value will be reverse mortgaged to pay for your retirement, and you need a bigger house so you can buy another car. Im truly beginning to think that we will learn nothing from this crisis, even if the USAToday says otherwise.
The flailings of TPTB may induce a slight bump to GDP, but inevitably the decline in the US standard of living will reemerge. Gimmicks cannot change reality for long. Call it a W, L or whatever shape if you like.
JP - I am afraid my quote was confusing
Paul Krugman provided the link to Larry Summers' speech, from which I was quoting
Summers said We recognized the irreversibility of such actions as nationalization.
Of course, nationalization is irreversible for a given bank in question, just like bankruptcy is. But that's a good thing, no? You do want to change/restructure a failed institution.
However, at the macro level, nationalization is fully reversible - you start with banks as regulated private enterprises and you end up with banks as regulated private enterprises. In the meantime you "enforce the private part" - equity holders get wiped out, debt holders get converted into equity holders, so that in the future investors into bank equity and debt will be forced to pay attention to more than just the size of the balance sheet. I am quite troubled that the opposite lesson had been learned.
A couple of meta observations. If the period 2001-06 was one of false economic activity then we are only back to a decade of an anemic economy. If that's the case we are about to see a real recession from these levels. A regular plain old recession led by employment. Second, we have only stabilized due to an extraordinary series of coordinated efforts and one time exceptions. Were it not for the stimpaks and rule changes and such there would have been no reported stabilization. In that case we borrowed future growth forward. It would take some extraordinary growth rates to pay that back and still show current economic growth from this point.
Third, taxes. Taxes are not what is collected, taxes are what are spent. Government spending is the new bubble and when it pops there's no place to turn. It is the last bubble. As painful as that reconciliation will be it may be worth it if Keynes stays dead this time.
@ GDD9000 (profile) wrote on Sat, 7/18/2009 - 8:53 am
In the end, its all about getting the consumer back to fantasy island, that place in the sun where the CC bill keeps rising and is never really ever paid. The home value will be reverse mortgaged to pay for your retirement, and you need a bigger house so you can buy another car. Im truly beginning to think that we will learn nothing from this crisis, even if the USAToday says otherwise.
Yup agreed........Zombieconomy isn't a buzzword. It's not an event. It's not (really) about banks. It is simply about the state of our economy today with Cali leading the way with many mores states to follow in the ditch !
Seriously MrM - what planet is Summers on? In countless countries, bank privatization has been happening from the drecks of a long nationalized industry. What in the world would be irriversible about it here?
Lately there has been a lot of optimism from the MSM. But I still see no way off the bottom for three main reasons.
1) MEW. The salad days of the economy were pumping $600 - 800 billion of MEW into the economy. Now essentially zero. The stimpack approximates a good year of MEW but it is spread over 4+ years.
2) UE. With UE heading over 10% that will continue to be a drag.
3) Savings rate. Sharply up. If we are a saving then we ain't a spending.
To a lesser degree I would also include the ramp in equities. As stocks soar money will flow away from bonds and go to equities and commodities. For the lower 80% of wage earners (who own little equity) higher interest rates and oil will hurt more than any benefits of a rising equity market and serve to further dampen demand.
Aha, that makes more sense. Summers is saying: See? Nationalization is forever, aren't y'all glad that we had the wisdom not to go down that path?
Summers knows better than that: He's just being a politican. And a crappy one at that.
GDP is currently being engineered to look positive, as government lends itself money to stimulate the economy in the form of IOU debts which will need to be repaid. Peter is simply borrowing from Paul and all the other guys to help offer an illusion of resurrection. All the cash going into education and retraining will have no impact on GDP.
The figure of $700 billion is just the tip of the federal government support. The actual amount is close to $15 trillion which exceeds the current annual US GDP.
Summers is saying: See? Nationalization is forever, aren't y'all glad that we had the wisdom not to go down that path?
Banksters: Yes, we are very happy and forever thankful
GS: Excellent!..
[no-glossary]Perhaps Summers is being less crappy than I thought. His next sentence is: We recognized that there was a very substantial risk that government could be a source of fear, rather than a source of confidence, and that strong actions taken towards one institution could have major implications for other institutions.
He's saying the "irreversibility" is that announcing even re-privatization of an insolvent bank or two reduces confidence, and can be detrimental to other banks/financials.
To which I say: Yes that's right, but it is also "irreversible" to go down some wacky path of rewarding the failed institutions (and their execs) with piles of money. And that path is also a source of fear, rather than a source of confidence. It too will have major implications for other institutions.
So rather than take the path of lessening confidence, the admin rewarded bad businesses and bad leaders (and the bad stockholders and BoDs) and are arguing this is better for confidence.[/no-glossary]
GDD9000,
Good posts. I agree. I wish I didn't. My 17 year daughter is sitting next to me using her laptop. Her generation is going to miss the trip to Fantasy Island. A good thing. The bad thing is I hope it dosen't instead mutate into the Island of Dr. Moreau.
Not too worry...jobless "recoveries" always slip slide sideways
"Recently a Californian purchased 178 properties..."
Of course they did, just look at those low prices! Californians alone understand that RE always goes up! Why, just today i got an email from a realtor I once dealt with letting me know that:
"Southland home prices looking up. The median value rises 6.4% in June from May as high-end properties take a greater share of the housing market."
Her advice? "Now is the time to Act on your home or investment purchase. Please contact me!" :-/
Oh, this same agent purchased a house 2 years ago in the neighborhood she "specializes" in for 1.25 million. Recent comps indicate it is currently worth about 1 million and falling. Oops!
this can't be good...
Pennsylvania withholds July pay
Struggling to resolve a 17-day-old budget impasse, Pennsylvania is withholding pay for 69,000 state employees for time worked after July 1. Workers Friday received only 70% of their salary, covering days worked in June. Starting two weeks from now, they'll get nothing on payday until a state budget is approved.
The figure of $700 billion is just the tip of the federal government support. The actual amount is close to $15 trillion which exceeds the current annual US GDP.
Big numbers being thrown around here today.
As Bloomberg has shown several times about 70% of the "$15 trillion" authorized (but not fully allocated) for the financial system is merely loan guarantees. That isn't spending at all. In theory those are loans anyway.
On the ARRA, an article today claims that as of 6/19/09, exactly $52.9 blllion had been spent as of that date, that being 35% of the amount to be spent during this calendar year, with roughly $400 billion to be spent next year, $135 billion in 2011 and around $75 billion in the following years.
Stimulus spending faces red tape bottlenecks
It clear that more money has been lost on financial institutions than has been spent on the economy, but it helps to separate the two areas when talking about 'government support.'
The NAR was a big part of the problem heading in, and clearly, they are just as irresponsible and disgusting in their behavior now, leading people deeper into the forest as they profess to point the way out to prosperity. That institutional needs serious reform, and some education wouldnt hurt either. Bunch of simpleton, greedys, and nitwits.
"The bad thing is I hope it dosen't instead mutate into the Island of Dr. Moreau."
Bioengineering will show the way, if they can find out how to make money out of it.
this can't be good...
Pennsylvania withholds July pay
I wouldn't mind seeing it happen in California. It might just piss off enough people to get something done.
I mean, why aren't David Lereah and Ed Yun put in front of Congress, given a national grilling, and have it officially pointed out to the public that people are complete fools at best, and criminals at worst. Why we let the NRA boil fester is beyond me, and only makes sense when you see that they are part of the hope plan, the return to fantasy cheerleader crowd. They'll bilk you the whole way to your grave. Egads....i need a pill or something.
Anon2 wrote - 8:33 a
"The standard of living of US citizens has only begun to fall. Their standard of living will continue to fall until it meets the rising standard of living of the developing countries. Not a pleasant prospect."
so very true
and the american people are very unlikely wake up from their indolence until it is far too late...maybe its far too late already
but our leaders and the fourth estate are culpable
the news media has been captured by the oligarchs
proof
last night at 11pm pac time not one of the 5 major media outlets, not fox, not nbc , not cbs not abc and not public media (news hour etc) was reporting on their web sites front pages (and maybe nowhere..i couldnt find it)
that 4 banks had failed that day, two of them multi billion dollar banks...amazing, while all manner of garbage news stories made the cut
mock, you know that isnt an accident right? Once you see the light, and understand the confidence game that is in play, everything makes sense.
vlad recovery. like it.
i can tell you that this decline has led to permanent changes in my household. a 30pct drop in annual income (voluntarily withdrawal from the workforce to tend to the flock), a 30pct drop in fixed expenses, a cash-only budget (no more running expenses thru the cc), a 30pct drop in variable expenses, excess earnings go to debt redux, etc, extending lives of our autos. basically, learning to make do on less and developing the habits to do that over long term. even though we earn near the top of our locale, money is a constant topic of discussion. habits. it's all about new habits.
i'm sure we're not alone, but we tend to be ahead of the pack a little. if more people start living this way, we'll never go back to "the old daze".
mock, the story is still one of the features on the Yahoo home page.
Regulators shut banks in Calif., Ga. and SD
With a note of irony, I see that it bears a time stamp of 2:36 a.m. EDT, which of course would have been 11:36 p.m. PDT, just after the 11:00 news ended.
So we stabilized with a massive government prop job. We have more aggregate debt with a lower GDP. Anyone forecasting recovery is missing the main point that our economy, even at current levels, requires significant, unsustainable debt creation.
as for slip sliding sideways as CR said
i agree and have argued we are headed for a lazy L shaped "recovery"
a great lesson from my days watching lewis rukeysers program wall street week, if your portfolio drops 50% during Q1and then grows 50% during Q2 you have NOT re-couped your loses
i still find great irony in the fact that the only people who came close to warning the ignoramous class of the fall were the wachowksi (sp?) bros.
they're not brothers anymore...
GDD9000
sportsfan
yes very true and if it were not for the internet and the blogs we would know far less
Most state workers don't really need their pay, right?
Hey, they are trying to make California look good.
Allen C
yes and with more gov debt and less real gdp there is only one way out, inflation, the dollar becomes worth-less
bt,
only lovers?
larry wachowski is supposedly a "she" these days.
The state of PA is nuts.
They kept 30% of your pay check. They are not going to pay you for further work, but I am sure expext people to show up and do their jobs. And you can get a loan, and pay interest, on the pay you are not getting. The Payday Loan people are loving this I am sure.
Insisting you work for no pay is called Slavery, Last time I checked that is against the law.
What are they going to do? Fire you as well as not pay you? Unemployment checks are better than working for free.
mock turtle,
Yes...All roads lead to devaluation.
LOL. You guys gossip like old women caricatures: Wachowski brothers - Wikipedia, the free encyclopedia
Irreversibility of nationalization??? What kind of strawman is that?
Well, if the performance of nationalized banks is far better than the performance of the corporate oligarchy banks we've had over the past few years, it might be politically impossible to re-privatize them. Given how abominable the banks have performed in the past few years that might well happen, in spite of the inefficiencies you often see with government functions. Good for the country, bad for Summers' friends.
as of now only cbs web site has any mention of 4 bank failures on front web page...burried way down at bottom, a link to the story on the business page
nothing i could find on fox, msnbc, abc, nor public broadcasting
nothing i could find on fox, msnbc, abc, nor public broadcasting
What's in the news?
Eh, nothing, just a few more banks closing. Big deal...
Is that the attitude?
One of the main reasons for closing banks on Fridays it that most people don't see much news on the weekends. By Monday no one cares. We, as a country, have the attention span of knats.
When banks were not open Sat, it gave the gov time to sort out the books. Not so today.
One of the main reasons for closing banks on Fridays it that most people don't see much news on the weekends.
josap, I don't believe there is any effort by regulators to try to hide bank closings from the public.
I do believe Friday closings are necessary to getting things in order to reopen Monday morning.
for those who missed it..the cliff notes on the paulson testimony before congress
read thinking brando godfather voice
"i neva thretend missa lewis...i jus told em dat i taugt he might bafall a most unfortunate accident if he didn protect emself"
remember the feburary 09 frontline banking crisis program called "inside the meltdown"
i think it was clear that paulson had a vendetta with fuld...may have stemmed from lehman refusing to help rescue LTCM during the russian currency crisis
so paulson ordered fuld to sell or else...fuld tried to fight and was destroyed
the take away i got from that
history will show paulson got to the top with a combination of smarts and allegorical thuggery
just check out the transcript from the program
and look at how moral hazzard is thrown around like it ever really mattered to these people
they trumpt it up as an excuse to thrash an adversary
---- the transcript in part
NARRATOR: When he'd run Goldman Sachs, Hank Paulson had vigorously competed with Dick Fuld. Now, in a series of tough telephone conversations, Paulson insisted that Fuld find a buyer for Lehman Brothers.
JON HILSENRATH: Fuld and Paulson were in regular contact over the course of the summer. Paulson was warning Fuld that the firm ran the risk of failure if it didn't act very quickly.
NARRATOR: But it appears Fuld never thought the government would let Lehman fail.
GRETCHEN MORGENSON: There must have been a sense inside that it, too, would somehow survive, be merged, some shotgun marriage.
MICHAEL PETRUCELLI: I thought it would be something similar to the Bear Stearns. There would be some arranged merger, acquisition.
snip
JOE NOCERA: When I interviewed the secretary of the Treasury, I was really astounded at the vehemence of his reaction towards Dick Fuld. He was very angry. And whether that predated him being Treasury secretary or not, I don't know, but he was very, very angry. He said, you know, "I told Dick Fuld to sell the firm or to look for a buyer because he had a problem, and he wouldn't do it." And he's just, you know, practically pounding the table with his fist.
CHARLES DUHIGG: At this point, he makes a critical decision, because of this issue of moral hazard, that Lehman will be allowed to fail.
(yeah right))
JON HILSENRATH: It was a very high stakes game of signalling that he was playing. He wanted to show these guys, you know, all of his old buddies on Wall Street, that they were going to need to step up and do something themselves.
NARRATOR: Friday night, after the markets closed, Paulson and Bernanke summoned the heads of Wall Street's largest firms to the Federal Reserve Bank in New York.
snip
JON HILSENRATH: Bernanke told them that now is the time for collective action. They couldn't spend their time this weekend looking out for their individual interests, they had to find a way to resolve the problem for all of Wall Street.
CHARLES DUHIGG: Tim Geithner says, "Somebody needs to buy Lehman. You need to figure out how to rescue Lehman because otherwise, they're going to go bankrupt."
JON HILSENRATH: Geithner pointed out to the group that there was no political will for a bail-out in Washington.
NARRATOR: That weekend, a now familiar sight: Lehman's books opened up to their competitors. Now Dick Fuld was desperate to do a deal.
JOE NOCERA: On that last weekend, they really did think they had a deal lined up with either Bank of America or Barclays. But neither Bank of American America nor Barclays were willing to do the deal without the same kind of government guarantees that Bear Stearns got. And this time, unfortunately for Lehman, unfortunately for Mr. Fuld, this time the government said no.
(yeah baby...30 billion for jpm and bear but zilch for fuld...thugs)
A couple of meta observations. If the period 2001-06 was one of false economic activity then we are only back to a decade of an anemic economy. If that's the case we are about to see a real recession from these levels. A regular plain old recession led by employment.
Except that's not a regular plain old recession. Plain old recessions are driven by inventory and capital spending. Employment-driven recessions are a different beast.
We are already seeing this is a very different kind of economic weakness by the now 6-month-long spending plateau on the bottom. All previous post-war recessions had a sharp bounce in spending. I think the aggressive government intervention in the form of large fiscal deficits has averted a wild and disastrous debt deflation, but they haven't changed the underlying difference between the "great recession" and a normal recession. In a normal recession the problem is that some things (inventory and investments) have been done a bit early, but were basically sound, and we just needed a bit of time to catch up. Now the problem is that we have a lot of investments (McMansions, financialization, luxury good production) that will never be worth what they cost so the economy needs fundamental - and time-consuming - changes.
Alan Grayson on MSNBC with Dylan Ratigan and Eliot Spitzer discussing Hank Paulson and the bailouts. Grayson said about former Treasury Secretary and former Goldman Sachs CEO Hank Paulson who presided over the bailout while owning hundreds of millions in Goldman stock:
"Hank Paulson never should have had that job in the first place. He had a $700 million conflict of interest and everything that he did while he was Treasury Secretary, every single thing that he did, has one explanation - what's good for Hank Paulson?"
YouTube - Rep. Alan Grayson: "Hank Paulson Had a $700M Conflict of Interest"
Allen C (profile) wrote on Sat, 7/18/2009 - 12:47 pm reply Ignore user So we stabilized with a massive government prop job. We have more aggregate debt with a lower GDP. Anyone forecasting recovery is missing the main point that our economy, even at current levels, requires significant, unsustainable debt creation.
Debt creation at the same time we suffer from debt deflation. Debt is jobs, GDP growth.
bobswern nails it!....
The really ironic (and quite f**ked-up) thing about the CIT situation is the government won't backstop Main Street; so what will it do? It 's going to allow JPMorgan Chase and Goldman (or, perhaps others) to come in with their tens of billions in backstopped funds from programs like the TLGP, and use that money to resolve the matter! In other words, the government will allow JPMorgan Chase and Goldman to use the same government funds (that CIT is trying to access, but isn't going to be allowed to use) to takeover CIT's assets, but it won't make/take notice of this.
Some folks, like Zero Hedge, are saying this is as much a political move--to make it appear that the government is not bailing out CIT--when in fact they are. But, it's being done in such an ass-backwards way that the too-big-to-fail lenders get to stripmine CIT, and make it appear as if this is a "private sector" effort, when nothing could be further from the truth.
The favored, too-big-to-fail firms reap rewards, D.C. makes it look like it is not a bailout, and Main Street, more or less, loses.
Same shit, different day...
Daily Kos :: Comments The Swan is still Black, and We're Still Screwed
I read the article about distant people snapping up cheap Detroit properties. Yie, some are as far away as New Zealand or Australia! But then I clicked another article about why 13 people were staying in Detroit. It reminded me of some things I'd forgotten. This country will recover when people are pursuing their passions and dreams, instead of chasing the Joneses and buying worthless junk to stuff in the rented storage unit. And, as usual, it will be the young who take us out of the pit we are staring at right now.
Why I love Detroit - Ara Howrani (1) - CNNMoney.com
Shylockracy...janet tavakoli made a similar point on a cnn broadcast (Q&A) and makes it clear the system is rotten
really excellent but lengthy interview that explains quite clearly how the system failed...fraud fraud fraud
YouTube - Q&A: Janet Tavakoli
GS & JPM will use those funds for DIP financing. That will be in bankruptcy, which will wipe out the equity, and there is no "takeover" of the assets.
Not even close to how it is represented on dkos. BTW, I have yet to see anybody over there with a clue about corporate capital structure.
Well the curtains lady is downstairs adding subtracting multiplying and dividing
so lengthily and fiercely that I am sure we will be boosting the economy to
an awesome extent.
None of the fabrics are from China. South Korea and Trinidad.
She said when she started working for Penny's 11 years ago they
prided themselves on American manufacturers. I said I would settle
for non-Chinese.
Green shoot update-Short Courage take notice..
Anniversary sale at JWN started yesterday. GF is 20 year employee, top mgmnt at flagship store on west coast. She states yesterday was busiest she has seen in last 2 years in all time periods inc. xmas....didn't go into it anymore than that as she was tired and a little grumpy...
"As Bloomberg has shown several times about 70% of the "$15 trillion" authorized (but not fully allocated) for the financial system is merely loan guarantees. That isn't spending at all. In theory those are loans anyway."
Loan guarantees on worthless loans IS spending, ultimately
OT-
Tom Watson is defying age out in Scottland... great story...
Well, my curtain spending will end the recession for sure.
Frankly we haven't changed our spending habits at all. But we
were never extravagant in the first place.
The curtain lady sez she is doing just fine, but has been doing this
for many years and has plenty of customers who come back for more.
At peak she was running around doing decorating for new homes.
Really too busy.
A bad sign actually. After we bought homes we felt strapped for a
while and certainly didn't decorate a lot. Except for the house we
live in now, which needed a makeover desperately. And so was
cheap.
WASHINGTON -- The Obama administration picked Goldman Sachs Group Inc. Vice Chairman Robert Hormats to be the State Department's undersecretary for economic, energy and agricultural affairs, the White House announced Friday.
Mr. Hormats, if confirmed by the Senate, will buttress Secretary of State Hillary Clinton's campaign to use economic, trade and environmental issues to redefine Washington's relationship with nations such as China, India and Russia, said administration officials.
Do you really think that the global economy can take a decade of low growth? I don't think you fully appreciate the spectrum of effects and probabilities that will overtake your visions of business as usual
GS of America....
GS & JPM will use those funds for DIP financing. That will be in bankruptcy, which will wipe out the equity, and there is no "takeover" of the assets.
What will be guaranteeing DIP financing if not CIT's assets, which, I would think, are mostly loans?
Traditionally DIP financing has been quite low risk, and I would not be surprised if the government backstopped losses for CIT DIP financiers, so DailyKos does not seem to be far off.
Do you really think that the global economy can take a decade of low growth?
Not unless the population growth slows down substantially, especially in China and India
In addition, hopes for moving millions of people out of poverty would have to be tempered, which might have implications for democracy in Asia and Africa
What will be guaranteeing DIP financing is not CIT's assets, which, I would think, are mostly loans?
There are others on the site with better understanding of DIP than me, but fwiw: The DIP is guaranteed by pretty much everything the company has for assets and cash flows. Since it is short-term (only the duration of bankruptcy), the bond holders (and equity holders etc) assent to subordinate their claim (because the alternative is liquidation.)
What will be guaranteeing DIP financing is not CIT's assets, which, I would think, are mostly loans?
That should have read "if not" - my bad, sorry
i agree and have argued we are headed for a lazy L shaped "recovery"
I'd be thrilled with that. An L shaped recovery is the the best case scenario, IMO.
And would those be bad loans? And would the Fed be backing up those loans for GS or JPM?
MrM,
Many non-western countries have significant autonomous nuclear and bioweapon capacity.. they are also much younger (average age) and willing to take bigger risks. It will make for an interesting future..
"we are headed for a lazy L shaped "recovery"'
Sorry to be a nitpicking son of a cattleman, but...that doesn't mean what you think it means.
Edit: Unless, of course, you mean "lazy, L shaped."
Alabama Hardware Distributor Blames CIT Woes for Its Bankruptcy
Alabama Hardware Distributor Blames CIT Woes for Its Bankruptcy - Bloomberg.com
By Steven Church and William Rochelle
July 18 (Bloomberg) -- A hardware distributor in Alabama became the first company to blame the troubles of commercial lender CIT Group Inc. for its bankruptcy yesterday when it filed for protection from creditors. Moore-Handley Inc., which supplies tools and other items to hardware stores and home centers, said in court papers that it was forced into Chapter 11 because it had trouble getting cash from CIT, its lender.
Many non-western countries have significant autonomous nuclear and bioweapon capacity.. they are also much younger (average age) and willing to take bigger risks. It will make for an interesting future..
Ah, a Molotov cocktail of WMDs, excess of young men and non-democratic governments willing to put them in harm's way
On that cheerful note - see you all later
This idiot does not realize that it is the mentality of the chinese consumer that has to change.. without consumerism the stock market is meaningless.
Mobius Says China Market Value to Overtake U.S. in Three Years
Mobius Says China Market Value to Overtake U.S. in Three Years - Bloomberg.com
By Francine Lacqua and Michael Patterson
July 18 (Bloomberg) -- China’s stock market may surpass the U.S. as the world’s largest by value in three years as state- owned companies sell new shares and the nation’s 1.4 billion people put more of their money into equities, Mark Mobius said. “The Chinese population is just dipping its toe into equities and they’ve got a long way to go,” Mobius, who oversees about $25 billion of emerging-market assets as executive chairman of Templeton Asset Management Ltd., said in an interview with Bloomberg Television in London. State-owned companies are “coming up with more huge” initial public offerings, he said yesterday.
Am I having fever dreams, or has that Alabama hardware distributor taken over the comments?
unless one is implicitly arguing that Main St is unable to find lending elsewhere, I'm not sure how letting CIT fail is ignoring Main Street. A bailout is essentially a backstop of CIT debt, which is probably not owned by Main Street. Just because CIT loans to small business doesn't mean that CIT is aligned with Main Street and its interests. Using CIT's logic, a government bailout of Capitol One would be a bailout of subprime consumers.
Both burnside, in spite of the fact that yesterday we decided that one had nothing
to do with the other. The company just can't pay.
How a white person , who is stuck in the old universe, thinks
-if we tell the chinese to do something they will obey because they want our approval..
How chinese think
-Am I making any money out of this interaction? and why should I care about that person's opinion if I have the trump cards.
China’s 7.9% Triumph Tarnished by Rio Tinto Mess: William Pesek
China’s 7.9% Triumph Tarnished by Rio Tinto Mess: William Pesek - Bloomberg.com
Commentary by William Pesek
July 17 (Bloomberg) -- Anyone wondering about corruption in China should consider the number 21. That’s China’s ranking among 22 economies assessed as part of Transparency International’s latest bribe payers index. Only Russia has a lower score than the world’s third-biggest economy. That deflates the Chinese government’s claim that Rio Tinto Group executives may have engaged in bribery.
Are Cali legislators working today, or are they at the beach?
The real question is.. can they go to the beach in a year?
//Are Cali legislators working today, or are they at the beach?//
Is he nuts? Does not not understand the basis of our economy today is consumer consumption..
and what is he spending anyway..
Trichet Urges Governments to Curb Spending, Deficits (Update1)
Trichet Urges Governments to Curb Spending, Deficits (Update1) - Bloomberg.com
By Fabio Benedetti and Gabi Thesing
July 18 (Bloomberg) -- European Central Bank President Jean-Claude Trichet urged euro-area governments to trim their budget deficits after a flood of spending aimed at stemming the worst recession since World War II. “There is too much spending, there is a need to reduce spending as a proportion of gross domestic product,” Trichet told French TV channel LCI in an interview today.
You mean they will fear stoning?
Hoover Trichet.
By .357, 9mm or other sizes of lead stones.. likely.
//You mean they will fear stoning?//
With the one child thing, why is the Chinese pop still growing?
I imagine there's some cheating, but there doesn't seem to be much.
If the flu hit children and young people hard, they would be in even
more of a pickle.
I think they should listen to his advice..
//Hoover Trichet.//
I dunno, sand in the mouth and eyes would be painful and
nonfatal, so you literally could rinse and repeat.
If they interpret that as a stealthy bioattack on them.. or use that idea to deflect blame.. it is the west that will be screwed.
//If the flu hit children and young people hard, they would be in even more of a pickle.//
And would those be bad loans? And would the Fed be backing up those loans for GS or JPM?
If by "loans" in the first sentence you mean the loans that CIT made: It doesn't matter if they are ultimately good or bad. The amount of financing for DIP is only the amount needed to get through bankruptcy. It is not large relative to the size of the biz (or cash flows). The loans just need to provide enough to cover the amount put up by JPM & GS.
If the loans are indeed bad, the current bond holders (and stockholders) will be the ones to get the haircut.
I note that this situation is exactly as it should be, and how it should have gone last Oct (with the gov't providing the DIP financing). But OMG! that's nationalization!
EDIT: As for the Fed backing the DIP by GS, I doubt it. But DIP financing is not high-risk either.
lliz...maybe today but sunday they will be done..so they say
Deal possible Sunday on California budget
Yahoo! 404 - Page Not Found
China population control policy:
Population Control and Consequences in China
The recovery is a forest. People have let their credit cards go, and don"t have mortgage payments it looks as if we are spending more and people have disposable incomes again. Actually, savings are getting drained and there are no new jobs. We are in the calm before the storm. People are spending what every little cash they have left on eating out and shopping for smaller ticket items. This will come to an end in 6 months. There are no new jobs. Can you hear the quiet in America?
good articles : Interesting Finance & Economic articles
lawyerliz (profile) wrote on Sat, 7/18/2009 - 11:42 am
Are Cali legislators working today, or are they at the beach?
Next face time meetings are Sunday night. Idiots are operating under the delusion that since nothing happened Wednesday when they ran out of money that there is no desperate urgency.
maybe GS told them to get it done sunday night to goose market, we'll charge you less points when you need some change........heading to SP 1200...
Dawg: What do you think is the next big event? or put differently, what next financial event cannot be temporarily swept under the rug?
The article mentioned about had a headline about Florida pythons.
Just sayin'.
It said Cali legislators were on the verge, but not what they had agreed to.
As to Pennsylvania or Philly or both (who can keep track) were I an employee, I would
put up with not getting paid for a week or 2 and then I would be sick 30% of the time.
The most compelling argument for saving CIT Group from collapse is the impact it would have on small- and mid-sized business that depend on the New York-based lender for financing. But it’s increasingly looking like that argument is more hype than anything else.
Reuters.com
BHO did not show any real balls/resolve and fix the GS/Wall Street corruption and the TBTF problem. His Health Care reform was doomed as a result. You cannot pick and choose when to do the RIGHT thing, IMHO.
OT: From green shoots to green sprouts.
Idiots are operating under the delusion that since nothing happened Wednesday when they ran out of money that there is no desperate urgency.
Maybe Cali really can operate on no cash. They'll just float along forever.
Kinda like most households.
Ha.
Illinois unemployment fund goes broke, the 16th state so far forced to borrow funds from the fed to keep the benefits flowing, according to Pro Publica ProPublica - Journalism in the Public Interest
Interesting blog story.
If they haven't been lending, or lending much for months, why do they matter to small firms?
I wonder how many firms, that weren't doing well anyway, will file BK and can blame it on CIT?
Too much we don't know, and probably never will know. One more dead lender of many dead lenders.
With the one child thing, why is the Chinese pop still growing?
And where are all those men going to find wives?
I know several American men with Chinese wives. I don't know of one American woman with a Chinese husband.
Wonder how those demographics are going to work out.
Outsider,
That is a very interesting question.. isn't it
Either it isn't hype, or the writer can't find any reason to say so.
God, Reuters is awful.
Maybe all the Chinese women will be able to have two husbands. Although there would be a very big fight over who gets to be the father of their one child. One child per father would still lower the repopulation rate.
JP (homepage, profile) wrote on Sat, 7/18/2009 - 12:01 pm
Dawg: What do you think is the next big event? or put differently, what next financial event cannot be temporarily swept under the rug?
I'm thinking the public unions strike authorization may harden the lines. There's also the debt downgrade threat. There's nothing like last Wednesday's running out of money.
burnside (profile) wrote (in reply to...) on Sat, 7/18/2009 - 3:25 pm replyIgnore userEither it isn't hype, or the writer can't find any reason to say so.
God, Reuters is awful.
Is this better?
http://www.pehub.com/44966/cit-debt-extends-to-mega-buyouts-full-list-of-sponsor-facilities/
josap,
reality is not linear.
That's better. But it's half the equation. How much non-LBO financing has CIT extended to small and medium-sized business over the same three years?
The report at Reuters proposes the company's small business portfolio is 'hype'. Show me.