Here in South Florida (officially the Worst Talk Radio Market in the World...) Clear Channel has blown away three stations, converting the former Love 94 (a terrific smooth jazz station) to a computer-programmed party music station with no deejays, and the "progressive talk" station to an all-syndicated sports station (the market's fifth.) The third blow came last week, when dozens more employees were let go, as the company's FM hip-hop/R&B station was handed over to the New York computers, too. Clear Channel has layed off who knows how many people, maybe more than 100, including sales and programming staff, in South Florida. Across the country, the job loss has been in the thousands.
So you'll forgive me if I consider Clear Channel employee Rush Hudson Limbaugh III a total cretin -- if an unsurprising one -- when he, a resident of real estate-devastated Florida, and Madoff-hit Palm Beach no less, belittles the recession as the little people's problem, as ThinkP reports:
Last night, Rush Limbaugh came to Washington, D.C. to address the President’s Club Dinner, a meeting of wealthy donors and supporters of the Heritage Foundation. The audience included Supreme Court justice Clarence Thomas, Sen. Jim DeMint (R-SC), as well as various millionaire trustees of the Heritage Foundation, like Thomas Saunders.
After more or less reprising his radio show routine, Limbaugh went on to brag about his $400 million contract with Clear Channel Communications. As he continued to gloat about his show’s success, Limbaugh mocked the idea that Americans are suffering, noting, “I’ve never had financially a down year” despite the “supposed” recession:
LIMBAUGH: But during all this growth I haven’t lost any audience. I’ve never had financially a down year. There’s supposedly a recession, but we’ve got - what is this May? Back in February we already had 102% of 2008 overbooked for 2009. [applause] So I always believed that if we’re going to have a recession, just don’t participate. [laughter]
(ThinkP also has the audio.) Which leads me to a question. Just what do the Dittoheads need to hear before they figure out that they're storming the Bastille on behalf of Marie Antoinette, and that the Queen is laughing her ass off at how stupid they are?
The undertaker: Richard Shelby tries to provoke a run on Citibank
Richard Shelby proved that he is far too crazy to be in the United States Senate, when this morning on "This Week," he suggested a surprising fix to the banking crisis: close down Citigroup and other major banks. Writes George Stephanopoulos:
Sen. Richard Shelby, R-Ala., the top Republican on the Senate Banking Committee, said today on "This Week" that the government should let trouble banks fail.
"I don't want to nationalize them, I think we need to close them," Shelby told me this morning. "Close them down, get them out of business. If they're dead, they ought to be buried," he said. "We bury the small banks; we've got to bury some big ones and send a strong message to the market. And I believe that people will start investing [again] in banks."
Shelby didn't explain, nor was he asked, by the way, how pulling a Lehman Brothers on potentially dozens of megabanks would inspire investors to re-enter the markets, nor did he explain the particular free market principle behind having the federal government come in with the padlocks and shut down a private bank. George did ask Shelby if he had a particular hit list in mind:
I asked Sen. Shelby if he was referring specifically to Citigroup, the struggling bank that has received about $45 billion in taxpayer money.
"Well whatever. Citi's always been a problem child," said Shelby, who has long opposed giving federal TARP money to struggling banks.
But Thomas Donohue, head of the U.S. Chamber of Commerce, disagreed. "It's not practical to talk about closing a bank that is integrated throughout the whole global economy," he said. "It is practical to talk about buying some of those assets away from those banks and holding them in an institution that would have both public and private money."
Question: is it responsible, in the middle of a recession, for a United States Senator to suggest killing off major banks, by name? If there is a run on Citi, or a major sell-off, on Monday, would Shelby be to blame?
As bad as it gets (but not as bad as December or January)
The new jobless rate: 8.1 percent, is bad. The February figure: 651,000 jobs lost, is worse. But it turns out that December and January made that figure look like a walk in the park. The closing two months of George W. Bush's disastrous presidency saw the highest job losses since just after World War II:
The economy has lost 4.4 million jobs since the recession began in December 2007, with more than half coming in the last four months. Read full report.
Payrolls fell by 655,000 in January and by 681,000 in December, revised down by 161,000 from previous estimates.
The job losses in December were the biggest monthly decline in jobs since October 1949, when half a million steelworkers went on strike for higher pay.
Note, righties, when the recession began: December 2007. Bush time. Meanwhile, the figures for February are brutal:
The unemployment rate continued to trend upward in February for adult men (8.1 percent), adult women (6.7 percent), whites (7.3 percent), blacks (13.4 percent), and Hispanics (10.9 percent). The jobless rate for teen-agers was little changed at 21.6 percent. The unemployment rate for Asians was 6.9 percent in February, not seasonally adjusted.
And the losses occurred across every conceivable sector of the economy, with the exception of healthcare (up 27%):
Employment in professional and business services fell by 180,000 in February. The temporary help industry lost 78,000 jobs over the month. Since December 2007, temporary help employment has declined by 686,000, or 27 percent. In February, job declines also occurred in services to buildings and dwellings (-17,000), architectural and engineering services (-16,000), and business support services (-12,000).
Widespread job losses continued in manufacturing in February (-168,000). The majority of the decline occurred in durable goods industries (-132,000), with the largest decreases in fabricated metal products (-28,000) and machinery (-25,000). Employment in nondurable goods manufacturing declined by 36,000 over the month.
The construction industry lost 104,000 jobs in February. Employment in the industry has fallen by 1.1 million since peaking in January 2007. Two-fifths of that decline occurred over the last 4 months. Employment fell sharply in both the residential and nonresidential components of the industry in February.
Employment in truck transportation declined by 33,000 in February; the industry has lost 138,000 jobs since the start of the recession in December 2007. Nearly two-thirds of the decline (-88,000) occurred over the last 4 months. The information industry continued to lose jobs (-15,000). Over the last 4 months, employment in the industry has decreased by 76,000, with about two-fifths of the decline occur- ring in publishing.
"I'm curious to know how you are going to incorporate the unemployed into the stimulus. I'm broke as hell right now. I have $10 in my bank account. I've been out of work since October. No one is hiring. I just dropped off 30 applications today."
NEW YORK (Reuters) – Casino operator Trump Entertainment Resorts Inc filed for Chapter 11 bankruptcy protection on Tuesday, according to court documents, wiped out by the recession and a mountain of debt.
The move was widely expected, coming days after the casino operator's namesake tycoon, Chairman and founder Donald Trump, walked away from the company.
I guess people are sick of gambling. Ivanka is stepping down, too.
The best thing about this country is that even with its faults, the goodness and decency of most people almost always outweighs the nastiness and callowness of the few. When times are toughest, Americans pull together to help each other, and to support our neighbors, whether it's helping to put the shutters up on the block during hurricane season, or crying for the victims of 9/11 from a thousand miles away. I suppose that's actually true of all human beings, American or not, but hey, let me have my gauzy, patriotic moment.
A prime example of the fundamental goodness of people: Ms. Hughes and her son now have a home. From the Huffpo:
If you were paying attention to Obama's stimulus push yesterday it was hard to miss Henrietta Hughes, a woman on the verge of tears who asked the President to help her with an "urgent need": homelessness. After the Florida town hall where Hughes talked to Obama, a local Fort Myers paper says she was offered a home by State Representative Nick Thompson's wife.
The house is in LaBelle, the first home Scere Thompson bought after law school. She told Hughes, “Just give me the opportunity to help you.”
Rep. Thompson, I should point out, is a Republican, Expect the wingers to try and use this act of kindness to prove that government can't solve problems, since the Rep's wife got to Ms. Hughes before President Obama could (ah, look! They're starting already...) They do that, because "conservatives," broadly written, believe that human beings are fundamentally evil. Everything else they believe proceeds from there. But the right can't have it both ways. They can't sneer at charity and simultaneously claim that charity begins at the GOP.
An interview with Ms. Hughes (before the gift) below:
Step one: take out everything House Republicans asked for
The negotiations are moving along on the House-Senate economic revitalization conference bill. Andrea Mitchell just reported that the gist of the changes are to add back in state grants that were stripped in the Senate (and we know the White House wants school construction money restored as well) and cutting back some tax cuts requested by Republican House members who wound up not voting for the bill. As Mitchell put it, the House GOP provisions were "the first to go." After all, Democrats got nothing in exchange for them.
Stimwinder: Two Maines, a Pennsylvania, and a side of bacon
According to MSNBC, the three Republicans who have pledged to vote for the stimulus compromise bill are Arlen Specter, Olympia Snowe and Susan Collins. If Ted Kennedy comes back, which is shameful for him to have to do (as Atrios points out,) that would give the Democrats exactly 60 votes, which NBC says they need because the bill would raise the deficit. Not sure I trust them on that -- need to look it up. But there it is. Cue the food metaphors!
Sen. Ben Nelson, D-Neb., said the agreement was a bipartisan effort and cited the work of Collins and Specter.
"We trimmed the fat, fried the bacon and milked the sacred cows," Nelson said. He said the compromise included $350 billion in tax cuts that would reach 95 percent of all Americans.
Collins said negotiators cut more than $110 billion in "unnecessary spending" in the compromise package.
"Is it perfect? No. Every compromise reflects choices that are necessary to bring people together," she said.
Specter said he supported the deal even though parts of it "give me heartburn."
So it seems we have a deal. The punkdafied Democrats in the Senate, led by the compromise king, Harry Reid, have crafted a deal (apparently co-produced by Olympia Snowe of Maine and Ben Nelson of Nebraska.) The deal? Supposedly, it's 52% spending and 48% tax cuts -- up from the 30 percent tax cuts already forked over by the House.
So what's wrong with this picture? I can still remember taking the class dubbed "Ec 10" at Harvard, taught by former Reagan economic advisor Martin "Marty" Feldstein. One of the few tidbits of that course that I remember is this: people tend act, according to utility theory, according to what they think is best for them. And they can be made to act on what's best for others only to the extent that they see the good in an action for themselves. For instance: if you give a hungry person $100, they will probably buy food with it. If you give a full person $100, you will have a hard time convincing them to use the money for food. So why, pray tell, would you give a rich person a tax cut, putting more cash in their pockets, and assume that they will use the money to help out the jobless? What, I ask, is in it for them?
Answer: not much -- not in this economy. Tax cuts, even for the middle class, will likely be saved, not spent. Whereas, tax cuts to the poor are guaranteed to be spent back into the economy, because the poor need to spend.
Meanwhile, over on Capitol Hill, Republicans -- the losing party in the last two national elections -- have managed to scam more tax cuts out of the stimulus bill, by accusing Democrats, successfuly it turns out, of "spending rather than stimulating." Well, let's return to our "Ec 10" lesson, shall we? See, as it turns out, the definition of "stimulus" in ecoomic terms is ... um ... spending. Go figure.
As Media Matters points out, Republicans have succeeded in getting the media to frame the debate as either government spending or stimulation, with tax cuts placed in the column of stimulation. But the problem is, tax cuts are not stimulative. And spending is not just stimulative, it is the very definition of stimulation. As President Obama put it today, "that's the whole point! Watch:
And MM's Jamison Foser adds:
Fundamentally flawed stimulus coverageby Jamison FoserIf there's one fact that should be made clear in every news report about the stimulus package working its way through Congress, it is this: Government spending is stimulative. That's a basic principle of economics, and understanding it is essential to assessing any stimulus package. So it should be an underlying premise of the media's coverage of the stimulus debate. Unfortunately, that hasn't been the case. Indeed, reporters routinely suggest that spending is not stimulative.
Economist Dean Baker, co-director of the Center for Economic and Policy Research, explains: "Spending that is not stimulus is like cash that is not money. Spending is stimulus, spending is stimulus. Any spending will generate jobs. It is that simple. ... Any reporter who does not understand this fact has no business reporting on the economy.
"Unfortunately, many of the reporters who have shaped the stimulus debate don't seem to understand that.ABC's Charles Gibson portrayed spending and stimulus as opposing concepts in a question to President Obama: "And as you know, there's a lot of people in the public, a lot of members of Congress who think this is pork-stuffed and that it really doesn't stimulate. A lot of people have said it's a spending bill and not a stimulus."
That formulation -- "it's a spending bill and not a stimulus" -- is complete nonsense; it's like saying, "This is a hot fudge sundae, not a dessert." But nonsensical as it is, it has also been quite common in recent news reports. There's another problem with Gibson's formulation, though -- in describing the stimulus as a "spending bill," he ignores the fact that the bill contains tax cuts, too. Lots and lots of tax cuts. And those tax cuts, by the way, provide less stimulus than government spending on things like food stamps and extending unemployment benefits. It probably goes without saying that Gibson didn't ask if the bill would be more effective if the tax cuts were replaced by additional spending.
MSNBC's Mika Brzezinski, among others, has repeatedly suggested "welfare" provisions in the bill wouldn't stimulate the economy. This is the exact opposite of true; those provisions are among the most stimulative things the government can possibly do. There are some fairly obvious reasons why that is true, beginning with the fact that if you give a poor person $100 in food stamps, you can be pretty sure they're going to spend all $100 of it; but if you give a rich person $100 in tax cuts, they probably won't spend much of it at all.
But we needn't rely on logic and common sense to know that welfare spending is stimulative; economists study these things. One such economist is Mark Zandi of Moody's Economy.com, who served as an adviser to John McCain's presidential campaign. Zandi has produced a handy chart showing how much a variety of spending increases and tax cuts would stimulate the economy. According to Zandi, a dollar spent on increasing unemployment benefits yields $1.64 in increased gross domestic product, and a dollar spent on food stamps yields $1.73 in GDP. As for tax cuts, Zandi says the most effective form is a payroll tax holiday. A one dollar reduction in federal revenues as a result of such a tax holiday would produce a $1.29 increase in GDP -- far less than the benefit realized from extending unemployment benefits, increasing food stamps, providing general aid to state governments, or spending on infrastructure. ...
Now that a deal has apparently been done, let's hope that the 42% of the now $790 billion deal is tax cuts for the middle and lower middle classes.
Otherwise, it might be time to impeach Harry Reid.
The GOP continues to fiddle while the country burns. Today, Barack Obama continued his "calling out the losers" tour:
WASHINGTON – President Barack Obama decried as "inexcusable and irresponsible" the delay of his economic recovery legislation in Congress with an estimated 3.6 million Americans losing their jobs since the recession began.
Obama's remarks were some of his most direct and pointed in support of the massive economic package that the Senate considered Friday and tried to pare down below its $900-billion-plus price tag. Obama acknowledged it was not perfect and pledged to work with lawmakers to refine the measure, which he called "absolutely necessary."
"But broadly speaking, the package is the right size, it is the right scope, and it has the right priorities to create 3 to 4 million jobs, and to do it in a way that lays the groundwork for long-term growth," Obama said at a ceremony in the White House East Room.
The president named an outside economic team of advisers as the nation dealt with more bad news in the unemployment report for January. Employers slashed payrolls by 598,000, the most since the end of 1974, propelling the unemployment rate to 7.6 percent. The rate is the highest since September 1992.
"These numbers demand action. It is inexcusable and irresponsible for any of us to get bogged down in distraction, delay or politics as usual while millions of Americans are being put out of work," Obama said bluntly. "Now is the time for Congress to act."
Meanwhile, the staggering job losses that aren't phasing the GOPers, apparently, continue to bite the hell out of the rest of us.
John Kerry did an outstanding job this morning on "Meet the Press," knocking down David Gregory's absurd "stipulation" that no one knows whether tax cuts or government spending make for superior stimulus (Kerry said "I won't stipulate to that at all," then pointed out that we've had eight years of Bush tax cuts plus neglect of our infrastructure and look what we've got to show for it...) and he slapped down Kay Bailey Hutchinson's talking points about the stimulus bill needing to incorporate Republican tax cut philosophy. Said Kerry: "we are not duty bound to accept something with which we fundamentally disagree." He added that when it comes to bipartisanship, President Obama has met with the GOP caucus, while he said he couldn't recall in eight years, President Bush meeting with Democrats on the Hill.
Waiting for the transcript to post.
Meanwhile, Gregory was true to form, quoting of all people, the right wing Heritage Foundation, for his facts on the deficit.
If a presidency's success or failure is judged on how the country as a whole changed during its time, how its people are doing by the end of his term or terms, or how America's standing in the world changed, relative to where it was when the president's reign began, then George W. Bush's presidency can rightly be judged an abject failure. The vast majority of Americans are worse off economically than when Bush came into office in the closing months of the heady days of boom and surplus during the Clinton years. The United States remains mired in an unnecessary war in Iraq, for which an astounding 650,000 Americans have already paid the price in physical and mental injuries serious enough to require medical treatment or disability. The war in Afghanistan rages on, and the world economy has been dragged into the tar pit of mortgage backed securities and derivatives invented on Wall Street.
But if a presidency is to be judged on whether it achieved its prime directive -- whether it lived up to the implicit promise made by its leadership on their way in, campaign rhetoric aside -- then George W. Bush's presidency has to be judged a resounding success. George W. Bush came into office calling the very wealthy his "base." He rode in on a promise to restore the full promise of trickle down "Reaganomics" in Washington, complete with neutering the federal government through deregulation, fattening the wealthy's pockets through corporate tax cuts and the virtual elimination of the concept of taxing wealth, and making war a permanent fixture of the American GDP. And Bush did just that, and more.
Bloomberg reports that, according to recently released IRS data, “the average tax rate paid by the richest 400 Americans fell by a third to 17.2 percent through the first six years of the Bush administration and their average income doubled to $263.3 million.” Much of their income came from capital gains resulting from the Bush tax cuts.
The 17.2 percent tax rate in 2006 was the lowest since the IRS began tracking the 400 largest taxpayers in 1992, although the richest 400 Americans paid more tax on an inflation-adjusted basis than any year since 2000.
The drop from 2001’s tax rate of 22.9 percent was due largely to ex-President George W. Bush’s push to cut tax rates on most capital gains to 15 percent in 2003.
Capital gains made up 63 percent of the richest 400 Americans’ adjusted gross income in 2006, or a combined $66.1 billion, according to the data. In all, the 400 wealthiest Americans reported a combined $105.3 billion of adjusted gross income in 2006, the most recent year for which the IRS has data.
“The big explosion in income for this group is clearly on the capital gains side, although there are also sharp increases in dividend and interest income,” said Dean Baker, co-director of the Center for Economic Policy and Research in Washington.
In other words, Bush did precisely what he came to Washington to do: namely, to pull of the largest bank robbery in history -- a "reverse Robin Hood" scheme that consists of stealing from the United States treasury to give to the rich, and not just to individuals, but also to the energy industry, particularly oil and gas, which reaped huge profits from his presidency, and from the defense contractors from whence his chief henchmen, Dick Cheney and Don Rumsfeld, slunk.
The only trouble is, Bush also succeeded in thoroughly discrediting the idea of "trickle down" a/k/a "supply side" economics or "Reaganomics," revealing, ironically, that his father was right when he called it "voodoo." Because, though dummies and ideologues like Rudy Giuliani (who is both) still believe that you have to feed the rich so they'll keep holding up the economy on their strong, broad shoulders, the rest of us are on to the fact that it is the middle class, not the wealthy, who carry the economy with our spending. That's why the suddenly robust personal savings rate of 2.9% last quarter helped tank economic expansion by 3.5 percent. No middle class buying TVs and computers and clothes, on credit, usually ... no economic growth, which leads to layoffs that even further restrict spending. The middle class -- wage earners -- not Wall Street fat cats and richie rich's who plough their extra duckets into really bad investments (and bubbles) drive the economy. If you want to help the economy, help THEM.
It's a painful lesson that an entire nation, and indeed the world, has now learned, the hard way.
The U.S. economy is shedding jobs like dog hair ... unemployment has hit a 16-year high of 7.2 percent ... with 524,000 jobs lost in December alone (projections put it at 9 percent or more by next year):
The economy lost an astonishing 1.9 million jobs in the past four months alone, an acceleration in layoffs toward the end of a year that brought the biggest drop in employment in more than a half century.
For all of 2008, the economy shed 2.6 million jobs, the largest decline since a 2.75 million drop in 1945.
The December data pointed to a bleak start for 2009 and increased chances the economic downturn could become the longest since the 1930s.
Is the plan being limited by fear of debt? There are dangers associated with large-scale government borrowing — and this week’s C.B.O. report projected a $1.2 trillion deficit for this year. But it would be even more dangerous to fall short in rescuing the economy. The president-elect spoke eloquently and accurately on Thursday about the consequences of failing to act — there’s a real risk that we’ll slide into a prolonged, Japanese-style deflationary trap — but the consequences of failing to act adequately aren’t much better.
Is the plan being limited by a lack of spending opportunities? There are only a limited number of “shovel-ready” public investment projects — that is, projects that can be started quickly enough to help the economy in the near term. But there are other forms of public spending, especially on health care, that could do good while aiding the economy in its hour of need.
Or is the plan being limited by political caution? Press reports last month indicated that Obama aides were anxious to keep the final price tag on the plan below the politically sensitive trillion-dollar mark. There also have been suggestions that the plan’s inclusion of large business tax cuts, which add to its cost but will do little for the economy, is an attempt to win Republican votes in Congress.
Meanwhile, more proof that Bush's $700 billion TARP swindle was just that: a massive giveaway to the country's largest banks, in exchange for nothing. Nothing for mortgage holders, nothing for taxpayers, though they did give bonuses to their CEOs and dividends to their richest investors. Hopefully, Obama will scrap the plan and use the remaining $350 billion to beef up his stimulus plan.
Obama delivered his first major economic speech since becoming president this morning. First, he makes a couple of basic points:
This crisis did not happen solely by some accident of history or normal turn of the business cycle, and we won’t get out of it by simply waiting for a better day to come, or relying on the worn-out dogmas of the past. ...
... ow, the very fact that this crisis is largely of our own making means that it is not beyond our ability to solve. Our problems are rooted in past mistakes, not our capacity for future greatness.
And sets down a core Democratic principle worthy of FDR:
It is true that we cannot depend on government alone to create jobs or long-term growth, but at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy – where a lack of spending leads to lost jobs which leads to even less spending; where an inability to lend and borrow stops growth and leads to even less credit.
Here's video of the opening remarks:
Okay, now for the plan, which starts with the much mentioned "green jobs":
To finally spark the creation of a clean energy economy, we will double the production of alternative energy in the next three years. We will modernize more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills. In the process, we will put Americans to work in new jobs that pay well and can’t be outsourced – jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain.
On health care, a plan that so far, is not exactly bold:
To improve the quality of our health care while lowering its cost, we will make the immediate investments necessary to ensure that within five years, all of America’s medical records are computerized. This will cut waste, eliminate red tape, and reduce the need to repeat expensive medical tests. But it just won’t save billions of dollars and thousands of jobs – it will save lives by reducing the deadly but preventable medical errors that pervade our health care system.
I didn't read the word "universal" in there, or see dramatic change that doesn't sound strangely like something Jeb Bush would come up with ... okay, giving him and Tom Daschle the benefit of the doubt on that one, we move on to education:
To give our children the chance to live out their dreams in a world that’s never been more competitive, we will equip tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries. We’ll provide new computers, new technology, and new training for teachers so that students in Chicago and Boston can compete with kids in Beijing for the high-tech, high-wage jobs of the future.
To build an economy that can lead this future, we will begin to rebuild America. Yes, we’ll put people to work repairing crumbling roads, bridges, and schools by eliminating the backlog of well-planned, worthy and needed infrastructure projects. But we’ll also do more to retrofit America for a global economy. That means updating the way we get our electricity by starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation. It means expanding broadband lines across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world. And it means investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.
And last but not least, cash to the starving states, and to taxpayers:
Finally, this recovery and reinvestment plan will provide immediate relief to states, workers, and families who are bearing the brunt of this recession. To get people spending again, 95% of working families will receive a $1,000 tax cut – the first stage of a middle-class tax cut that I promised during the campaign and will include in our next budget. To help Americans who have lost their jobs and can’t find new ones, we’ll continue the bipartisan extensions of unemployment insurance and health care coverage to help them through this crisis. Government at every level will have to tighten its belt, but we’ll help struggling states avoid harmful budget cuts, as long as they take responsibility and use the money to maintain essential services like police, fire, education, and health care.
It somehow doesn't sound as bold when you've been hearing essentially the same thing for a year, but hey, it's a step forward. Read the whole speech here.
The WSJ reports, but GM denies ... that the country's largest automaker will merge with one of its most troubled. Per ABC News:
The White House described the condition of the country's carmakers today as "fragile," as negotiators struggled to hammer out a possible financial bailout package before the auto giants collapse.
Pressure grew for a deal as Chrysler announced Wednesday it will close all 30 of its manufacturing facilities in North America until Jan. 19. Chrysler's move to conserve cash will suspend production of its cars and trucks for the greater part of the month, affecting about 46,000 members of the United Auto Workers.
The Chrysler shutdown comes on the heels of a warning to dealers that the automaker may halt financing for stocking showrooms. Many dealers say that buyers are out there but that loans are unavailable, resulting in a 20 percent to 25 percent loss in sales. Meanwhile, Chrysler is burning through more than $1 billion a month.
And General Motors, which also faces the possibility of collapse without a federal rescue, said Wednesday it will delay construction of a factory in Flint, Mich., set to produce the plug-in electric Chevy Volt, in order to conserve cash.
The Wall Street Journal reported today that Cerberus Capital Management LP, which owns Chrysler, had resumed merger talks with General Motors in an effort to shed some of the expense and to convince Washington it is ready for drastic changes.
But GM promptly issued a statement denying that merger talks had restarted.
GM and Chrysler had been in talks earlier this year to combine in order to survive the recession and slowing U.S. sales, but financing emerged as one of the biggest obstacles
But isn't part of the problem that GM is already too big, and too stuffed with too many brands? And isnt' that one of the reasons the bohemoth has failed to innovate? Just asking...
Okay, I'm getting sick of "Morning Joe." Between Joe's water carrying for the RNC, Mika's unintelligible babble and kissing up to the right, and that annoying Coutney Hazlett (why anyone would take her opinion that Clint Eastwood isn't a good actor more seriously than, say, Clint Eastwood... is beyond me.) But perhaps the most annoying aspect of "Joe" is Erin Burnett, the serially upbeat Wall Street analyst. Today, she even managed to do the unemployment numbers headline WITHOUT TELLING US WHAT THE UNEMPLOYMENT NUMBERS ARE. Which of course, forced me to turn to the serially upbeat Reuters, who proferred the following headline:
Jobless claims fell by 21,000 last week
Now, before you run out and buy stock in Bernie Madoff's company to celebrate. Here's the actual story:
Initial claims for state unemployment insurance benefits fell 21,000, to a seasonally adjusted 554,000 in the week ended December 13 from an upwardly revised 575,000 the previous week. State offices were closed for at least one day near the end of November because of the Thanksgiving holiday, distorting the holiday week and the following week's numbers.
A Labor Department official said there were no special factors influencing the report. Analysts polled by Reuters had forecast 558,000 new claims versus a previously reported figure of 573,000 the week before.
In other words, unemployment claims "fell" this week because a) last week's number was TOO LOW when first reported, and b) this week's number wasn't quite as bad as expected. Your headline should have read:
"Holy, shit! Another 554,000 people filed for unemployment last week!!!"
And by the way, Reuters had more sunny "good news":
Continuing claims fell to 4.38 million in the week ended December 6 after scaling a 26-year of 4.43 million the previous week.
God, is everyone writing for "Morning Joe"??? The Labor Department lays reality out with a lot more seriousness, and you'll never guess where the biggest job losses Toyota Central:
States reported 933,652 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending Nov. 29, an increase of 258,601 from the prior week.
... The largest increases in initial claims for the week ending Dec. 6 were in North Carolina (+26,596), California (+22,963), Georgia (+20,237), Pennsylvania (+20,090), and Tennessee (+12,170), while the largest decreases were in Wisconsin (-8,593), Iowa (-3,424), North Dakota (-895), Arkansas (-514), and Idaho (-320).
WASHINGTON – An alarming half-million American jobs vanished virtually in a flash last month, the worst mass layoffs in over a third of a century, as economic carnage spread ever faster and the nation hurtled toward what could be the hardest hard times since the Great Depression.
Underscoring Friday's dismaying signs of a rapidly deteriorating economy, General Motors announced yet more job cuts, and a record number of homeowners were reported behind on mortgage payments or in foreclosure.
Somehow Wall Street found a silver lining, betting that so much bad news would force fresh government action to revive the foundering economy. The Dow Jones industrial rose 259 points.
Yeah. Leave it to Wall Street to find job losses attractive. It means productivity, or something like that... The bad news keeps on coming:
Staring at 533,000 lost jobs, economists were anything but hopeful. Since the start of the recession last December, the economy has shed 1.9 million jobs, and the number of unemployed people has increased by 2.7 million — to 10.3 million now out of work.
Some analysts predict 3 million more jobs will be lost between now and the spring of 2010 — and that the once-humming U.S. economy could stagger backward at a shocking 6 percent rate for the current three-month quarter.
"The economy is in a free fall," said Richard Yamarone of Argus Research. "It is as if someone flicked off the switch on hiring."
"It's a mess," said Mark Zandi, chief economist at Moody's Economy.com. "Businesses, battening down the hatches, are concerned about their survival and are cutting workers."
The Labor Department report showed monthly jobs losses of 533,000 spread across the economy, hitting construction firms, computer makers, auto dealers, clothing stores and banks and insurance companies alike.
The new data translate the steady stream of pink slip notices coming from companies as diverse as financial titans like the Carlyle Group to discount retailers like Linen 'n Things into evidence of broad economic weakness. The headline number alone -- the worst monthly job loss since Dec., 1974, amid a steep downturn and in the wake of an oil embargo by Arab states -- is likely to raise fresh concerns about the depth and length of an ongoing recession.
The number literally took my breath away this morning. And add to it the 422,000 Americans who stopped bothering to job hunt and the 600,000 manufacturing jobs we've lost this year, and you start to get a sense of the depth of the problem. Oh, and guess who noticed that we're in a recession? The bystander:
WASHINGTON – President George W. Bush publicly acknowledged for the first time Friday that the U.S. economy is in a recession and worried aloud that Detroit's Big Three automakers may not all survive their mounting troubles.
Four days after the long-suspected existence of a recession was made official, Bush used the word himself.
"Our economy is in a recession," Bush said flatly, speaking to reporters on the South Lawn only hours after the release of a government report showing the biggest month of job losses in 34 years. "This is in large part because of severe problems in our housing, credit and financial markets, which have resulted in significant job losses."
While repeatedly listing the serious problems in the economy, the White House has refused to embrace the actual term until Monday, when a panel for the National Bureau of Economic Research said the recession began last December and is ongoing.
Thanks, Dubya. Real helpful.
This will put a new complexion on the proposed auto bailout. It now, clearly, has to happen. The economy, and the states, simply cannot handle another 3 million unemployed, heaped on top of the millions already out here on a limb. And TPM points out, via the New York Times, that the news is even worse than it looks.
Lame Duck Teasury Secretary Henry Paulsen insisted on talking again today, as did his boss, sending the markets south, as happens every time either of these clods drops jaw. Meanwhile, the latest brand new proposal out of George Bush's Washington sounds as lame as the first twothree ten. And as usual, it's focused on handouts to Paulsen's friends in the banking industry. The idea is artfully cloaked in the pretense of "helping Main Street":
The Federal Reserve and Treasury moved today to boost consumer spending and lower home mortgage rates, committing up to $800 billion to make it easier for households to borrow money for cars, tuition bills and new homes as part of a broad effort to rekindle economic growth.
The new program puts the balance sheet of the country's central bank behind two critical but troubled parts of the economy -- consumer spending and housing. It is largely separate from the $700 billion Troubled Asset Relief Program, administered by the Treasury Department and focused on shoring up the country's financial system.
Ah, that sounds lovely. But what this really is, is a bailout of wealthy investors:
A Treasury news release noted that in 2007, about $240 billion in car, student and other consumer loans had been packaged by the companies that issued them into larger securities and sold to investors, who then benefit from the flow of payments from borrowers. That system of packaging and reselling loans keeps money flowing to banks and other lenders, allowing them to make even more money available to consumers.
However it all but stopped over the past two months, leading to rising interest rates, a downturn in lending -- and a risk that economic growth could be dragged down even further.
The Fed said it would provide up to $200 billion to investors who put the money toward consumer loans in the form of credit cards, auto loans and student loans, as well as some forms of small business lending.
In other words, Uncle Sam is about to write a big, fat check to erase the risk that big investors took when they bought junk credit card and mortgage debt. Then, magically relieved of the burden of that bad paper, banks will suddenly decide to start lending packagable money again. Tada! But wait, there's more:
The Fed's consumer lending program is partially backed by $20 billion from the TARP, which will be used to absorb losses on the program up to that amount. The Fed loans to investors will earn interest and also a fee from those who take advantage of it.
Paulson said the initial $200 billion "is a starting point" and could grow over time.
In addition to consumer spending, the Fed announced it would buy up to $100 billion in mortgages held by Fannie Mae, Freddie Mac and the Federal Home Loan Bank in an effort increase the flow of money into the housing markets and lower interest rates. The Fed will also buy another $500 billion in bundles of mortgage-backed securities issued by the agencies.
The fact that TARP money is wrapped up in this is just one problem. The federal government is clearly going to have to become the spender of last resort, given that consumers aren't secure enough in our jobs to start buying things (or gassing up) any time soon. But for the government to use tax money to eliminate investment risk, and to bail out big investors, is criminal. Oh, and the banks that have been getting these shovels full of your money? They've been using them to bail out THEIR investors too, by paying dividends (something they plan to keep doing for the next three years), and they've been using their TARP money to pay bonuses to their executives, and even (hello, Citibank and Wells Fargo,) to buy other banks. I'd like to see the Big Three automakers even think about doing anything like that.
Meanwhile, the administration continues to reject a reasonable proposal from the head of the FDIC, which would directly help struggling homeowners stay out of foreclosure, while protecting taxpayers, all at a cost of just $40 billion -- a fraction of the $7 trillion estimated cost of all these serial bailouts of the rich.
The Paulsen regime's eagerness to hand out taxpayer cash to the investor class on their way out the door is so brazen, it's like a bank robbery in broad daylight, with the police holding open the vault door. And Paulsen and Bush used alarmism, and threats of a "Great Depression II" to scare Americans into going along with the $700 billion (and climbing) bank bailout. Meanwhile, the U.S. auto industry, with 3 million "regular folks' jobs" in the balance, isn't worthy of help. Fancy that.
From the Iraq money pit to the Bush tax cuts for the top 1 percent income earners to the Wall Street bailout, the Bush administration has been one, eight year long mugging; a reverse Robin Hood spree in which we, the middle class working people, are being robbed blind, right before our eyes, in order to give to the rich.
The bank that no one knew was failing lost half its stock value last week, and with $800 billion in deposits, and a heap of mortgages and other assets in jeopardy, Citibank is one of those "too big to fail" institutions. So here comes the bailout:
NEW YORK (CNNMoney.com) -- The U.S. government on Sunday announced a massive rescue package for Citigroup - the latest move to steady the banking giant, whose shares plunged in the past week on fears about its exposure to toxic mortgage securities.
The plan has two key features:
First, the U.S. Treasury and the Federal Deposit Insurance Corporation (FDIC) will backstop some losses against more than $300 billion in troubled assets.
Second, the Treasury will make a fresh $20 billion investment in the bank. The government has already injected $25 billion into Citigroup as part of the $700 billion bailout passed by Congress in October.
The government will take a stake in the bank, and President Lame Duck said this morning that more Citigroup style rescues could be in the cards. Okay... but wasn't Citigroup (which Dubya mistakenly called "Citicorp" during his brief press availability this morning) the same megabank that almost went to court with Wells Fargo over both banks' desire to buy smaller, equally troubled Wachovia? Let's take a walk back to October 6:
NEW YORK/WASHINGTON (Reuters) - Wells Fargo & Co and Citigroup Inc agreed on Monday to a 44-hour truce in their fight over regional bank Wachovia Corp after a weekend of legal wrangling.
Wells Fargo and Citigroup have been battling over the bank since Wells Fargo announced an offer Friday that bested Citigroup's proposal a week ago.
As part of their agreement on Monday to suspend all litigation, effective immediately, the three banks also said they would cease any formal discovery activities.
The increasingly bitter dispute has drawn in U.S. Federal Reserve officials looking to broker a deal. Sheila Bair, chairman of the Federal Deposit Insurance Corp (FDIC), said she expected an agreement "that serves the public interest" to be reached Monday, although the FDIC is not involved in the negotiations.
A person familiar with the situation said the various options discussed in the talks with the government included dividing up Wachovia between the two feuding companies. The source added that Wells Fargo would still like to buy all of Wachovia.
Citi, which announced a preliminary agreement to buy Wachovia's banking assets for $2.2 billion a week ago, was considering an offer for the entire bank, among other options, a person close to Citi said.
The source said Citi has no appetite to buy Wachovia's assets without some sort of government guarantee -- unlike Wells Fargo, which made a $15 billion counterbid for the entire bank on Friday. ...
... Citi said on Monday it is seeking more than $60 billion of damages from Wells Fargo. Citi said Wachovia would have collapsed on September 30 without its agreement to acquire most of its assets. ...
So let me get this straight: Just over a month ago, Citigroup was in a position to spend $2.2 billion buying Wachovia, and countless sums on lawyers to sue Wells Fargo for trying to buy it first, and now, they're broke? What gives? At the time of the ank dispute, Citi's shares were trading down 5.1 percent to $17.41. This morning, it opened at $5.99, having fallen 60 percent in a single week. And the bank is about to get $20 billion in cash from the fed. I guess they blew that $2.2 billion on something more pleasing than Wachovia?
If the Henry Paulson press conference yesterday bugged you, you're not alone. I'm still not clear on what, exactly, this guy has done with $300 billion of the $700 billion, or was it $1.2 trillion, he was shoveled by Congress to "save the banks." Now, we're not buying their worthless assets? Oh, and there has been no oversight? Brilliant! Now, there's a big push on, including from the in-coming administration, to bail out the Big Three U.S. auto-makers, whose bad decisions and bad products (try selling a Hummer in Europe. I dare you) over three decades or so got them into the mess they're in. All are headed to Capitol Hill with tin cups in hand, but many in the real world are asking why they should get another $25 billion in government loans (they got that amount before. Did you know that?) from the same taxpayers they've been screwing with their crappy cars?
And as they will, Wall Street Journal types want the bailout, but they want the pensioners, who slaved away in the plants for a quarter century and were promised a decent retirement, to take one for the team. Figures. And Michigan's attractive governor, who can't run for president because she's Canadian, might be in line to be the nation's "car czar," something she earned by being a loyal Obamacrat during the campaign. Great for her. She deserves it. Now, back to the bailout. Why should we do it? (And why not just let the automakers declare bankruptcy, like millions of Americans have had to do? A pro-bankruptcy argument here, and GM's rebuttal to that here.) Five arguments you'll hear today:
1. Detroit is "too big to fail." The industry employs, directly or indirectly, more than 3 million Americans. If GM, Ford and Chrysler (who the hell buys a Chrysler anymore...?) go down, they take their workers, and the restaurants, supermarkets, stores and schools their families patronize, with them. As Dem strategist Peter Fenn puts it:
Let's put aside the 3 million jobs that would be lost in the first year, that 1 in 10 American jobs depend on the industry, that there would be lost wages of $150.7 billion or we would lose $156 billion in taxes paid over three years. Let's look down the road. Do we really want to deep six the cornerstone of American manufacturing when only 13% of the world's population drives cars and this is one of the greatest growth industries of the 21st century?
2. It's not a bailout, it's an opportunity. Any bailout pushed through Congress would likely force Detroit to do what it has resisted for generations: retool and modernize, produce "green" cars that get 40 mpg, and yes, even the electric car they bought up and killed during the 1980s.
3. We must save the workers to save the Obama agenda. Ford has announced it's "temporarily" closing 11 more plants. And GM parts suppliers, even NASCAR, hang in the balance if the Big Three fail. If a failed U.S. auto industry ripples through the economy, it could multiply the potential job losses from 3 million to three times that number. Try doing anything on Obama's list with a cratering tax base.
4. We're not doing much else with the money. The bank bailout is already a hot mess. Henry Paulson can't seem to figure out what else to do, so we might as well do this.
5. 2012. Michigan is a reliable blue state. Democrats owe them, and will need them to re-elect President Obama in four years, especially with a Mitt Romney re-run looming. Okay, a crass argument, but politics is crass.
From the NYT this morning, a leak the president did not approve of:
The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President Bush in a meeting at the White House to support immediate emergency aid.
Mr. Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Mr. Obama and Congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Mr. Bush has long fought, people familiar with the discussion said.
The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers to tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.
... Mr. Obama went into his post-election meeting with Mr. Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Mr. Obama said. But Democrats also indicate that neither Mr. Obama nor Congressional leaders are inclined to concede the Colombia pact to Mr. Bush, and may decide to wait until Mr. Obama assumes power on Jan. 20.Separate from his differences with Mr. Bush, Mr. Obama has signaled to the automakers and the unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles.
The question remains whether Detroit, which made its own bed, let's not forget, but which employs nearly 3 million Americans, can wait that long. General Motors stock price is wading into Radio One territory (well, it's not quite that bad, but shares did fall below $3...) and there's a good chance the shares might actually become worthless. And the ripple effect from auto industry layoffs is kicking retailers in the gut.
Meanwhile, back to that presidential pique: Drudge reports that Dubya ain't happy with the leaks about his meeting with the Big O (no word yet on how Laura did with his "good bride...")
Bush advisers view the leaks as an effort to undermine the president's remaining days in office.
"Senator Obama may not be familiar with a long-standing tradition of presidents holding their private conversations, private," a senior adviser explained to the DRUDGE REPORT.
Developing indeed. But it's not as if the White House didn't release its own information about the meeting, even if it was entirely benign and fluffy. And Bush's continued hawking of the Colombia free trade deal seems entirely out of step, while the nation's homeowners, employers and employees are facing an immediate crisis, which importing more coffee and bananas at low, low prices can't possibly solve. Kind of lets you know how we got here.
An automobile industry in nuclear meltdown, with General Motors, once America's largest employer, bleeding cash and preparing for more layoffs (although Michigan's governor, Jennifer Granholm, declared herself heartened after meeting with Pres. Elect Obama today.)
A dismal dollar and financial markets mired in bearishness.
So, what to do?
Obama addressed that very subject in his first press conference, as president-elect today:
"We are facing the greatest economic challenge of our lifetime and we're going to have to act swiftly to resolve it," Obama said, as his team of economic advisers, who include top businessmen and well-regarded former government officials, stood in a line behind him.
Obama was speaking after two days in which Wall Street has plunged around 10 percent. The market, which has fallen because of negative economic news and poor corporate results, recovered a bit on Friday and finished the day nearly 3 percent higher.
The brief news conference in Chicago followed a meeting with his 17-member transition economic advisory board on how to tackle the worst economic crisis confronting the United States since the Great Depression of the 1930s.
The economic advisory board includes former Treasury secretaries Robert Rubin and Lawrence Summers, former Labor secretary Robert Reich, former chair of the National Economy Council Laura Tyson, former Federal Reserve Chairman Paul Volcker and billionaire investor Warren Buffett.
SECOND STIMULUS SOON
Obama said he wanted the Democrat-controlled U.S. Congress to pass a second stimulus package as soon as possible to stabilize the economy, which analysts say may be in deep recession by the time he is inaugurated on January 20.
"We are going to need to see a stimulus package passed either before or after the inauguration. I want to see a stimulus package sooner rather than later."
A little truthiness: who caused the subprime crisis?
McClatchy does us all a service, by setting the record straight:
As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.
Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.
Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.
Federal Reserve Board data show that:
More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.
Furthermore, though they have become the whipping banks of the right:
Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.
This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.
To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.
But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.
Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.
About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.
But what about the infamous Community Reinvestment Act (the CRA)? Isn't THAT Carter-era abomination to blame for the subprime crisis? Why, no...
Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.
Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."
Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.
What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.
These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.
As much as I love the folks at McClatchy, I said the exact same thing a month ago, in this fantabulous video:
The Dow keeps plummeting, (below 8,000 -- losing nearly half its value this year...) along with the global markets. It's a crisis that it seems no entity, no agency of government can stop. General Motors' stock fell below FIVE DOLLARS for the first time in 60 years. FIVE... Jesus... analysts are projecting that the big three U.S. auto makers cannot all survive. At least one will go away completely, or be absorbed by another company... President Bush is making noises about doing something, but honestly, events have overtaken him, and everybody else... World finance chefs are holding an emergency meeting. Good luck with that.
BTW one astute blogger posted a chart plotting McCain's poll numbers against the S&P 500.
Fascinating. Clearly, this guy is going to need more than Bill Ayers to get back into the race. Or not:
As Pollster’s Steve Lombardo says, “The economic situation has virtually ended John McCain’s presidential aspirations and no amount of tactical maneuvering in the final 29 days is likely to change that equation.”
Meanwhile, Barack Obama slams McCain for "stoking anger and division" at a time like this ... Italy's Silvio Berlusconi walks back from his suggestion that world markets simply be closed.
The Dow got hammered again today. Nothing the Fed or the feds are doing is working... and with credit in seizure, J.D. Powers fears the global automobile market may completely implode by next year. So what's the problem? This from a good old fashioned conservative:
"The crisis we are entering is not due to a lack of credit. The core of the problem was our dependency on credit in the first place. A lack of credit is a symptom of our dependency on it. It is a crisis of Consumer Capitalism, the idea that Consumption can be the major source of growth in an economy. We must somehow transition to Producer Capitalism again. We have an entire economy, almost worldwide, based upon debt and consumption. It could not last because over time every dollar of debt created creates less and less GDP growth in the economy. Therefore, more and more debt must be created just to keep the same rate of economic growth. We are now literally consuming our economy to its death. The efforts to "get liquidity going" and the like, while maybe easing conditions in the very short term, weeks, are only going to make the collapse greater. It is simply adding more kindling to the bonfire of debt that is already raging."
Every so often, a member of the "conservative movement" offers us a clarifying moment, that illustrates the fundamental differences between the values and ideas of the two major political parties. (Phil Gramm declaring Americans "whiners" for not appreciating how well the economy is doing ... for rich people like him; John "seven homes" McCain declaring that "the fundamentals of the economy are strong," while Rome is literally burning all around him, being just two examples.) This morning on "Morning Joe," CNBC host, GOP booster, laissez-faire economics guru and John McCain sympatico Larry Kudlow, offered up such a moment.
Asked to explain the current crisis on Wall Street and Main Street, Kudlow declared that it's not the fault of the investment banks and hedge fund guys who packaged, bought and sold subprime mortgages for sport and profit, driving up demand for bad loans and incentivizing shady lending, or even the banks themselves, and their coterie of crooked appraisers and greedy mortgage brokers. It wasn't the Republican Congresses who systematically stripped the system of regualtions, thanks in large part to John McCain's buddy Phil Gramm. It wasn't the speculators or the flippers buying second, third, and even fourth homes and condos, or the price-gouging builders raising prices $30,000 a month here in Florida, or the greedy developers and brokers pushing home ownership with "no money down" as the latest fashion trend, or the combined speculative market that juiced up of home values beyond all reason. Nope. Those people are well off, and therefore they're better than you.
No, my friends, it turns out our current economic crisis, led by the massive mortgage meltdown, is the fault of liberals, who literally forced banks to lend mortgage money to poor people so they could assuage their "liberal guilt," and of course, it's also the fault of those icky, horrible poor people themselves. How dare they want to live like the rest of us! Why, they're POOR! ... and that's supposed to mean something in America!
Never mind that percentage-wise, home ownership among the poor is literally negligible, and that a huge part of the housing crisis is the LACK of affordable homes for people with little income, or that the majority of these 3-bedroom, $500,000 homes that are really worth $250,000 are being sold not to the poor, but to the middle class, often at teaser rates that mean their mortages literally can double after six or seven years.
Forget all that, and listen to Larry. He knows that it really was those bloody awful poor people, and the whimpering liberals who pamper them, at the expense of the downtrodden, helpless banks.
After a few minutes of this, Joe Scarborough was literally dumbstruck.
"Okay, so you're saying it's the poor people's fault," he deadpanned. Kudlow sputtered, but he had already said too much.
Going into the break, Scarborough sneered that coming up in the next segment, they'd explain how poor people were behind the JFK assassination, too.
Update: An astute commenter at TPM finds this link that delves into the role the SEC's lax oversight played in bringing us to the brink. An excerpt:
As we learn this morning via Julie Satow of the NY Sun, special exemptions from the SEC are in large part responsible for the huge build up in financial sector leverage over the past 4 years -- as well as the massive current unwind
Satow interviews the above quoted former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.
You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.
Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.
Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley.
As Mr. Pickard points out that "The proof is in the pudding — three of the five broker-dealers have blown up."
So while the SEC runs around reinstating short selling rules, and clueless pension fund managers mindlessly point to the wrong issue, we learn that it was the SEC who was in large part responsible for the reckless leverage that led to the current crisis.
The financial crisis continues to ripple across the globe this morning, from Moscow to London to New York City. Stocks took a dive this morning on Wall Street, even after the Fed agreed to bail out AIG, the nation's largest insurance company. The FDIC -- you know, the one that insures the money you have in the bank, up to $100,000? It's running short of cash, meaning that, in the AP's words, "the taxpayer may be the lender of last resort."
Meanwhile, maybe Sarah Palin can get on this right away: Russia is threatening to seize part of the oil-rich Arctic. Yep. Seize it.
And last but not least, no, Gerald Warner, it's not just you...
I don't know if I agree with E.J. Dionne about the innate intelligence of the American voter, but here you go:
All of a sudden, the culture war seems entirely beside the point, an unaffordable luxury in a time of economic turmoil. What politicians actually believe about the economy, what fixes they propose, whether they side with the wealthy few or the hurting many -- these become the stuff of elections, the reasons behind people's votes.
And nothing more exposes the hypocrisy of financial elites riding the coattails of those who revere small-town religious values than a downturn that highlights the vast gulf in power between the two key components of the conservative coalition. Even cultural conservatives will start to notice that McCain's tax policies are geared toward the wealthy investing class and Obama's toward the paycheck crowd. Even the most ardent friends of business have begun to argue that a re-engagement with sensible regulation is essential to restoring capitalism's health.
For some time, McCain's strategists figured they could deflect attention from the big issues by turning Palin into a country-and-western celebrity and launching so many ill-founded attacks on Obama that the truth would never catch up. The McCain strategists' approach reflected a low opinion of average voters, and some Obama supporters began worrying that their opinion might be right.
But those so-called average voters understand the difference between low- and high-stakes elections. They develop a reasonably good sense of who is telling the truth and who is not. And though it sometimes takes a while -- and a shock like this week's economic news -- these voters almost always turn on politicians who manipulate cultural symbols as a way to escape the consequences of their policies.
We'll see if he's right. I surely hope he is. But I suspect that even in the face of clear evidence that the GOP, McCain's party (whether he wants to admit it these days or not ...) is, and will continue to, pursue policies that benefit the monied elite at their expense, many lower-middle and middle class white voters, especially in the industrial heartland and certainly in the south, will continue to vote social issues and "culture," especially with a black man on the "European" ticket. These voters don't get, or simply don't care, what Republican party policies do to them, or to their finances, because they culturally ignore government. What they want is a president who "shares their values," and with whom they are personally comfortable. After that, the government can do its worst. They just keep trodding on. That, unfortunately, is America -- or at least a good 50 percent of it.
... especially since a sizable share of the American public seems prepared to return the same people to power who got us into this mess, just so they can see their "values" reflected in the white woman ... I mean, "house..."
When George W. Bush was an oil man (and not a very good one,) he named one of his companies Arbusto, meaning "little Bush" in Spanish. Others in the industry derisively called the company "El Busto," because it had a little meeting its prime directive: finding oil in Texas.
When El Busto's little brother was running Florida, he spent eight years exsanguinating state revenues by slashing taxes on wealthy Floridians and corporations (while cutting Medicaid and other healthcare benefits for the poor, disabled and elderly, and raising tuition at the state's colleges), and privatizing everything he could get his hands on, from state payroll services to prisons. Now that the state has a shiny new, totally not gay, Republican governor, we're supposed to be reaping the windfall of the twin Bush booms -- the national one that was supposed to be brought on by Dubya's aggressive tax cutting, and the local one that was supposed to be the "smart Bush brother's" legacy to Charlie Crist. Well ... a funny thing happened on the way to the boom: Florida, it seems, went bust. From today's Miami Herald:
TALLAHASSEE -- The top job-loss state in the nation. Shrinking wages. Collapsing population growth. Record home foreclosures.
Florida's economy is not just firmly and bleakly in the red ---- it will likely stay that way until next June, according to the state government's top economists who issued their most pessimistic financial forecast in years.
With few exceptions, the economists' Wednesday forecast shows that most economic indicators will do worse in this budget year when compared to a forecast they issued in February.
At the heart of the problem is the falling housing market, upon which Florida's economy has a Monopoly game-like reliance. The economists projected new housing construction will fall to about 60,000 units this year -- a decrease of 78 percent from a high of nearly 283,000 in 2005.
Total statewide construction expenditures, including public buildings, are expected to decrease by $10.6 billion, or 21.5 percent.
The most dire fact of all: Florida lost more jobs in the past 12 months -- 74,700 -- than any other state in the nation. And the economists predict that more people in construction, government, manufacturing, financial services, transportation and warehousing will be out of work soon.
''We were No. 1 in jobs created in the entire country,'' said Clyde Diao, one of Gov. Charlie Crist's economists, referring to the booming economy in 2005. ``Now, if you count the District of Columbia, we're 51.''
Frank Williams, the Department of Revenue's chief economist, agreed: ``We're No. 1 in job losses. Absolutely.''
Were it not for employment gains in the health, education and the low-paying services fields, they said, the job-loss numbers would be far higher. Construction lost 77,000 jobs and manufacturing lost 23,000 in the last year. By month's end, the experts project, Florida's job-loss rate will be higher the nation's for the first time since 2002.
Which leads us to another little problem for the Sunshine State. Smarter Bush's tax cut mania really caught on, especially with Florida homeowners, who have never missed an opportunity to lower their property taxes, at all costs. In January, Florida homeowners pushed through a constitutional amendment that slashed property taxes statewide, mostly for wealthy homeowners, by increasing the homestead exemption, while netting about $200 bucks for the average homesteader. But the pain from those cuts is now being felt statewide, as counties struggle to find places to cut. Take the Miami-Dade school system (the nation's fourth largest), which is struggling to slice $284 million from its budget to close a yawning deficit, without sending teachers to the picket lines. The county school board is considering everything from slashing its workforce to deleting school bus routes to close the gap. The county narrowly escaped cutting school police this week, when Superintendent Rudy Crew, who was apparently hoping to become Secretary of Education in a Hillary Clinton administration, according to a state official who asked not to be named, tabled a proposal to cut the force. Statewide, Floridians are seeing the real world cost of tax cuts in the parks that are having to close early, cuts to desperately needed affordable housing and economic development progams, and inevitably, future cuts to police and fire services and pension benefits.
Florida's legislature has already slashed $6 billion from the budget, which according to the state constitution, must be balanced. Most of that money has come out of the hides of schools, services for the elderly and the poor, and Florida's infrastructure. The state is busy privatizing roads everywhere it can, to pass more costs onto already burdened drivers, who are paying some of the highest gas prices in the country. Home prices in the state are cratering, and yet Miami-Dade County (the largest county in Florida) still has a glut of unbought homes and condos. Downtown Miami is dotted with silent cranes and half built high rises that are a soaring symbol of Florida's economic meltdown, which TIME Magazine recently chronicled in an article asking whether Florida has become the "Sunset State." And even with the glut of housing, Miami-Dade and other counties are in the middle of an affordable housing crisis and a foreclosure crisis (Florida is second only to California in home defaults.) Indeed, a new NPR/Kaiser Family Foundation poll shows half of Floridians struggling on multiple fronts: falling home prices, a credit crunch, and soaring fuel and food prices. (Low icome housing and worker's rights advocate Gihan Pereira, co-founder of the Miami Workers Center, this week called Florida "the canary in the coal mine," and indeed the state's troubles have been an ominous economic harbinger for the nation.)
And what can our fair governor, who has gone so far as to promise to hand over Florida's beaches to Chevron AND marry a woman in order to become John McCain's running mate, do to turn things (including his veep prospects) around?
"This time next year, we wouldn't expect to be a whole lot better than we are right now," said Amy Baker, coordinator of the Office of Economic & Demographic Research, who headed the economic estimating conference. "The question is, does it continue on beyond that, or does it start improving?"
And Florida's prospects are further clouded by past failures, particularly during the Bush years, to invest in education, in order to create more potential high wage job earners, rather than relying on low wage service and tourism industry jobs to fill the bill. Florida continues to languish near the bottom in high school graduation rates (we have the sixth lowest rate in the U.S.), and according to the Alliance for Excellent Education, "if the dropouts from Florida's Class of 2008 had stayed in school and earned diplomas, the economy of the Sunshine State could have enjoyed an additional $25.3 billion in wages, taxes and productivity over those former students' lifetimes." The sad news for Florida is that the state for years was one of those "high growth, high poverty" states at the greatest risk of economic decline, and now that the decline has come, the state's tax cutting leaders have few cards to play.
Governor Crist promised last year that the latest tax cuts would, produce a real estate-driven "sonic boom" that would send Florida's economy into growth overdrive. It's turned out to be more of a sonic bubble. And it has officially burst. |
The sharp decline in America's standing the in the world since the Bush administration came into power is bad enough, but a new study suggests that the real, and breathtaking, American decline after nearly eight years of Robber Baron era politics has been in our status as a developed nation. From the Guardian:
Despite spending $230m (£115m) an hour on healthcare, Americans live shorter lives than citizens of almost every other developed country. And while it has the second-highest income per head in the world, the United States ranks 42nd in terms of life expectancy.
These are some of the startling conclusions from a major new report which attempts to explain why the world's number-one economy has slipped to 12th place - from 2nd in 1990- in terms of human development.
It gets worse. According to the The American Human Development Report, which is funded by groups like Oxfam America and the Rockefeller Foundation, countries that are beating us in things like long life and infant mortality are doing it with far lower levels of government spending.
Japanese, for example, can expect to outlive Americans, on average, by more than four years. In fact, citizens of Israel, Greece, Singapore, Costa Rica, South Korea and every western European and Nordic country save one can expect to live longer than Americans.
More findings that will curl your hair:
The average Asian woman lives to be 89 years old, while the average African-American woman can expect to live until 76, a 13 year gap. For men, the gap between Asians and African-Americans is 14 years.
One in six Americans has no health coverage. That adds up to 47 million people.
The US ranks 42nd in global life expectancy and 34th in terms of infants surviving to age one. "The US infant mortality rate is on a par with that of Croatia, Cuba, Estonia and Poland. If the US could match top-ranked Sweden, about 20,000 more American babies a year would live to their first birthday."
"The US has a higher percentage of children living in poverty than any of the world's richest countries. In fact, the report shows that 15% of American children - 10.7 million - live in families with incomes of less than $1,500 per month."
14% of Americans (40 million people) - "lack the literacy skills to perform simple, everyday tasks such as understanding newspaper articles and instruction manuals."
American enrollment of three and four-year-olds in preschool is at 50%, while most of Europe, Canada, Japan and Russia are at 75%.
In terms of human deveopment, "some Americans are living anywhere from 30 to 50 years behind others when it comes to issues we all care about: health, education and standard of living. For example, the state human development index shows that people in last-ranked Mississippi are living 30 years behind those in first-ranked Connecticut."
"The richest fifth of Americans earn on average $168,170 a year, almost 15 times the average of the lowest fifth, who make do with $11,352."
The U.S. is "far behind many other countries in the support given to working families, particularly in terms of family leave, sick leave and childcare" but first among the 30 richest countries in terms of the number of people in prison, both in absolute and percentage terms. The U.S. "has 5% of the world's people but 24% of its prisoners."
Does it sometimes seem like we're living though a looking glass version of the 1970s? Trouble with Iran (whom the Bush administration is now not quite but sort of talking to) an economy in turmoil, and skyrocketing inflation (which in May and June saw the largest jump since 1982, two years after Ronald Reagan took over management of the country from Jimmy Carter) coupled with stagnant growth, producing the very 1970s-like phenomenon called "stagflation."
Just like the 1970s, oil and gas are at the root of the problem. High gas and diesel prices are being passed on to consumers by every company whose goods are delivered by truck, including food, furniture, hell, everything. And wages have fallen behind inflation, and Americans are being forced to drain their savings and 401K plans just to keep up. Even with rising prices, companies are struggling to stay in the black, and often failing (take the airline industry for instance. It's headed down the drain.) Consumer confidence is way down, even as the right continues to shill for the oil companies and pooh-pooh the problems of ordinary Americans.
And there's a new communal spirit growing in America. It's called borders!
Meanwhile, Congressman Dennis Kucinich uncovers thousands of military veterans who have been denied disability and pension benefits by the Bush administration.
President Bush sought to reassure shaky markets and frightened consumers about worsening economic conditions today, asserting that the U.S. economy is fundamentally sound and urging Congress to quickly pass legislation to shore up mortgage giants Fannie Mae and Freddie Mac....
...The president also played down predictions that large numbers of banks may be on the verge of failure and spoke at length about the federal insurance system that guarantees deposits up to $100,000. Federal regulators last week took over IndyMac Bancorp of California amid a run on the bank's reserves.
"My hope is that people take a deep breath and realize their deposits are safe. I think the system is basically sound," Bush said.
"I'm not an economist, but I do believe we're growing," he said later, adding that the economy is "not growing the way it should."
Maybe Dubya should have bypassed the presser and given his speech directly to his Fed chairman...
The twin problems of slow growth and rising prices are making it difficult for federal policymakers to chart a course for the economy, Federal Reserve Chairman Ben S. Bernanke said today, as he outlined a raft of problems facing the country -- including "ongoing strains" at banks and finance companies and a string of recent job losses and declining home prices.
... or to Wall Street...
Wall Street was lower again today, with major U.S. indexes initially off as much as 1.5 percent. Shares, however, rebounded to near even by midday as news came oil prices fell by more than $8 a barrel, to around $136, as investors weighed the degree to which a global slowdown will undercut demand. Asian and European markets fell overnight.
Or struggling businesses ...
Bernanke described worry about the run-up in the price of oil and other commodities, and said that it may lead businesses to raise prices for goods other than food and energy in the future.
"With businesses facing persistently higher input prices, they may attempt to pass through such costs into prices . . . more aggressively than they have so far," Bernanke said.
DETROIT (AP) — General Motors Corp. said Tuesday it will lay off salaried workers, cut truck production, suspend its dividend and borrow $2 billion to $3 billion to weather a severe downturn in the U.S. market. GM said the moves will raise $15 billion to help cover losses and turn around its North American operations, including $10 billion from internal cost-cutting and $5 billion from selling some assets and borrowing against others. "In short, our plan is not a plan to survive. It is a plan to win," GM Chairman and CEO Rick Wagoner said in a broadcast to employees.
GM's shares fell as much as 6 percent to a new 54-year low of $8.81, then rebounded to $9.94 in midday trading, up 56 cents from Monday's close.
Chief Operating Officer Fritz Henderson said GM wants to reduce its total salaried costs in the U.S. and Canada by more than 20 percent. A large chunk of the reduction, he said, would come from cutting health care benefits for salaried retirees. Those people would get a pension increase from the company's overfunded pension fund to help compensate for Medicare and supplemental insurance, the company said.
Several thousand jobs will be cut through normal attrition and retirements, and through early retirement and buyout offers, Henderson said. The company could resort to involuntary layoffs but does not want to, he said.
(Bloomberg) -- The dollar declined to a record low against the euro on speculation Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson will say credit- market losses are hurting U.S. economic growth.
The currency dropped the most versus the yen since the March collapse of Bear Stearns Cos. and fell to a 25-year low versus the Australian dollar on concern confidence in the debt of Fannie Mae and Freddie Mac will diminish even after the U.S. government pledged support for the firms. The pound surpassed $2 for the first time since July 1 as inflation accelerated.
The economy showed the depth of its twin problems on Tuesday, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel.
The Labor Department reported that soaring costs for gasoline and food pushed inflation at the wholesale level up by a bigger-than-expected 1.8 percent in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.
Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.
Core inflation, which excludes energy and food, was better behaved in June, rising by just 0.2 percent, slightly lower than expectations.
A separate report from the Commerce Department showed that all the economy's problems were weighing on the consumer. Retail sales edged up by a tiny 0.1 percent in June, weaker than had been expected, as consumer spending was held back by a sharp plunge in sales at auto dealerships.
While the Federal Deposit Insurance Corporation (FDIC) is keeping secret its official list of 90 troubled banks, ABC News has obtained other lists prepared by several research groups and financial analysts.
The lists use versions of the so-called "Texas ratio" which compare a bank's assets and reserves to its non-performing loans, based on financial data made public by the FDIC in March.
Analysts say banks with a ratio over 100 per cent would be the most likely to fail, based on what happened to Texas savings and loans during the 1980's.
When Indymac collapsed, 1929 style, last week, it wasn't a sign of things to come, it was a loud, clanging alarm bell that should even alert the Marie Antoinette's on the right (like Phil Gramm,) that the U.S., and indeed the world, economy is in trouble. The bank is being taken over by the feds after pannicky account holders withdrew $1 billion in a run on the bank on Friday.
Depending on which international headline you believe, Indymac FSB is either the second, or the third largest bank collapse in U.S. history. Britain's Sky News had one other interesting tidbit:
IndyMac was founded in 1985 by David Loeb and Angelo Mozilo, who also founded Countrywide, another big mortgage lender whose loans helped fuel the housing boom.
Countrywide was taken over last week by Bank of America Corp.
That says volumes, doesn't it? The bank reopens this morning as Indymac Federal Bank, under control of the FDIC. So what was the largest U.S. bank collapse? For that we go to the Times of London:
NetBank is the largest US bank to fail since the savings-and-loans crisis in the early 1990s. The bank, based in Geor-gia and launched in the late 1990s, had $2.5 billion in assets and was seen as a leading inter-net-only savings bank. The Office of Thrift Supervision, which regulates American lenders, blamed the bank’s demise on thumping loan losses and poor underwriting standards.
NetBank’s problems were made worse by its decision to expand into sub-prime mortgages, leaving it exposed to the meltdown in the US housing market.
ING, the Dutch bank, is taking over NetBank’s customers and $1.5 billion in insured savings deposits. It paid just $15m for the savings book.
And just for Phil Gramm, the Carpe Diem blog helpfully chronicles the history of big, bad, bank failures in the U.S. of A, and concludes that unlike the high water mark for bank failures in the 1980s, today's market really isn't all that bad.
Venezuelan President Hugo Chavez warns of $300 a barrel oil if three U.S. oil giant Exxon Mobile succeeds in pushing through a freeze on that country's assets in a dispute over a nationalized oil project.
Meanwhile, this bud's pour vous: Annheuser-Busch has been sold to Belgium's InBev. The company's St. Louis, MO hometown will become the headquarters for the company's North American division. A-B has about a 50 percent share of the U.S. beer market. The company has said it will retain "key management" and distribution personnel, but has made no representation about other U.S. jobs.
John McCain's chief economic adviser is not only the author of the Enron loophole, he's also an idiot. Let's go to the Moonies for more on that:
In an interview with the Washington Times, Phil Gramm, a former Texas senator who is now vice chairman of UBS, the giant Swiss bank, said he expects Mr. McCain to inherit a sluggish economy if he wins the presidency, weighed down above all by the conviction of many Americans that economic conditions are the worst in two or three decades and that America is in decline.
"You've heard of mental depression; this is a mental recession," he said, noting that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. "We may have a recession; we haven't had one yet."
"We have sort of become a nation of whiners," he said. "You just hear this constant whining, complaining about a loss of competitiveness, America in decline" despite a major export boom that is the primary reason that growth continues in the economy, he said.
"We've never been more dominant; we've never had more natural advantages than we have today," he said. "We have benefited greatly" from the globalization of the economy in the last 30 years.
Mr. Gramm said the constant drubbing of the media on the economy's problems is one reason people have lost confidence. Various surveys show that consumer confidence has fallen precipitously this year to the lowest levels in two to three decades, with most analysts attributing that to record high gasoline prices over $4 a gallon and big drops in the value of homes, which are consumers' biggest assets.
"Misery sells newspapers," Mr. Gramm said. "Thank God the economy is not as bad as you read in the newspaper every day."
Yeah, those 1 million homes in foreclosure? The millions of Americans who are out of work, out of gas money, and behind on their bills? An optical illusion!
Questioned whether Gramm, who has been rumored as a potential Treasury secretary for McCain, would still have a position in his administration, the GOP candidate underscored his unhappiness with his former colleague's comments without directly answering the question.
"I think Sen. Gramm would be in serious consideration for ambassador to Belarus," McCain said with a broad smile. "Though I'm not sure the citizens of Minsk would welcome that."
But in comments clearly prepared for the anticipated Gramm question that would open the press conference, McCain underlined his disagreement.
"I believe that the person here in Michigan who just lost his job isn't suffering from a 'mental recession,'" McCain said, citing Gramm's remarks published in the Washington Times. "I believe that the mother here in Michigan, around the country trying to get enough money to educate her children isn’t 'whining.'"
America, McCain made sure to note, "is in great difficulty."
Former senator Phil Gramm -- under fire for saying the United States has "become a nation of whiners" -- said in an interview today that he meant the nation's leaders were whiners, not its citizens.
But the top adviser to Sen. John McCain repeated his assertion that the economy is not in recession, and he declined to retract the comments quoted yesterday in the Washington Times.
"I'm not going to retract any of it. Every word I said was true," Gramm said.
Yeah, boy! Way to not help out your candidate by backing down!
The real trouble for Mr. Straight Talk is that Gramm's remarks aren't just reflective of his own evil inner core, they're also revelatory of his candidate. Marc Ambinder explains:
McCain has baggage. Begin with his own statements about not undering economics; add to that a few reversals on policy, a very odd phrase about Social Security, a party linkage to President Bush, and pressure from professional conservatives to adopt an approach to economic problems that is more tough-love than lovey-dovey. Phil Gramm is not just an adviser; he's been a close adviser for years, and has influenced McCain's economic policies. Go back to the fundamental paradox of conservatives and economic crises: in many instances, the proscribed solution is to do nothing; the political imperative is exactly the opposite. Usually, a compromise takes the form of half-measures that will pacify the public and not weaken the fundamental architecture of the economy.
Today, Gramm has given voice to an idea that is not uncommon among ideologically conservative economists: the recession is as much a creation of our anxiety about the future as it is a reflection of economic fundamentals.
"Look, the economy is bad. It is far below what we Americans have a right to expect, but we are not in a recession," he said. "We may or may not have one in the future, but based on the data we are not in a recession. But that does not mean all this talk does not have a psychological impact."
Gramm represents one distinct force that is pulling at McCain: orthodox, academics who experience the world through graphs, charts and data. The other is represented on the campaign by policy chief Doug Holtz-Eakin, who experiences the economic world through the language of politics. Holtz-Eakin is more of an Eisenhower Republican than a Kemp Republican, although Gramm has always been a big proponent of a balanced budget. Gramm generally wants government to get out of the way and lets crises work their way out through the market, believing that interventions distort the market. Holtz-Eakin's economic bent is more applied; politics demands that leaders offer solutions, even if solutions are more about quelling anxiety than they are about fixing a problem.
These two approaches have ranked McCain before; Gramm's fingerprints were all over McCain's first attempt to explain the housing crisis: measured, incremental and market-oriented. Didn't work. McCain looked like an ogre, although professional conservatives cheered. Two weeks later, Gramm had little to do with McCain's second swing of the bat, a specific set of proposals designed to help families hit hardest by the crisis. There were echoes of the Grammar, if you will, in the second speech, but the tone was softer and less academic, the proposals were more generous, and the message was unambiguous: McCain understands the pain.
Rush Limbaugh signs an eight year, $400 million deal to continue his top-rated radio show. Premiere Radio Networks: Palm Beach County's property tax rolls (and the underground pill trade), thank you.
Meanwhile, on the other end of the pay scale: U.S. employers cut another 62,000 jobs in June, making it six months in a row of job cuts for the Bush economy. And, says the New York Times:
... as job losses mount, even those still on payrolls have felt the pain: employers are cutting hours for their full-time employees and shrinking salaries, just as workers face record-high prices for gasoline and food.
The unemployment rate stayed steady in June at 5.5 percent, the highest level in four years. The elevated figure dispelled speculation among some economists that last month’s half-percentage point jump, the biggest monthly spike in 22 years, was a statistical anomaly.
...In the last 12 months, the economy had seen a net gain of only 15,000 jobs, the lowest net increase since November 2003.
The Hill reports that both the Obama and McCain campaigns are touting plans to turn the bleak employment picture around.
The Democratic presidential candidate promised that he would “restore broad-based, bottom-up growth that benefits all Americans.”
“I will provide working families with a middle-class tax cut; fight for affordable health care and college tuition; work to help raise workers' wages, and invest in infrastructure, education and a clean energy future to create millions of new jobs,” he said.
Sen. John McCain also noted that Americans are feeling the pain of a struggling economy and said that “Washington can no longer abdicate its responsibility to act.”
“To get our economy back on track, we must enact a jobs-first economic plan that supports job creation, provide immediate tax relief for families, enact a plan to help those facing foreclosure, lower healthcare costs, invest in innovation, move toward strategic energy independence and open more foreign markets to our goods,” the Arizona Republican said.
Both sought to paint the other party as responsible for the woes.
“Last night, President Uribe and the defense minister did brief us that the operation was going to take place today,” said McCain, the presumptive GOP presidential nominee, who was visiting Colombia Wednesday to promote a free trade agreement and to discuss drug trafficking.
“Today, I spoke by phone to President Uribe. He told me some of the details of the dramatic rescue of the people who were held hostage. Three Americans are now free and Ingrid Betancourt is now in good condition,” said McCain. “I’m pleased with the success of this very high-risk operation.”
No word on whether he got wind of the raid from the Bush administration before he planned his trip...
The WaPo, meanwhile, has a story on the Bush administration's shocking and entirely unexpected foreknowledge of a U.S. oil company's plans to do an end-run around the new Iraqi government, by cutting an oil deal with the Kurds:
Bush administration officials told Hunt Oil last summer that they did not object to its efforts to reach an oil deal with the Kurdish regional government in northern Iraq, even while the State Department was publicly expressing concern that such contracts could undermine a national Iraqi petroleum law, according to documents obtained by a House committee.
Last fall, after the deal was announced, the State Department said that it had tried to dissuade Hunt Oil from signing the contract with Kurdish regional authorities but that the company had proceeded "regardless of our advice." Although Hunt Oil's chief executive has been a major fundraiser for President Bush, the president said he knew nothing about the deal.
Yesterday, however, Henry A. Waxman (D-Calif.), chairman of the House Committee on Oversight and Government Reform, released documents and e-mails showing that for nearly four months, State and Commerce department officials knew about Hunt Oil's negotiations and had told company officials that there were no objections. In one note, a Commerce Department official even wished them "a fruitful visit to Kurdistan" and invited them to contact him "in case you need any support."
That guidance contradicted the administration's public posture. The Bush administration made an Iraqi national petroleum law, which has still not been adopted, a top priority last year in the hope it would more tightly bind the country's regions together and open the way for international oil companies to invest in much larger oil fields south of Iraq's Kurdish region. The State Department said, and continues to assert, that it opposes any contract with a regional Iraqi authority in the absence of a national petroleum law.
The Bush administration dabbling in secret oil deals? Say it isn't so!
U.S. unemployment keeps tacking upward, suggesting that we are in, or very near, a very real recession. From CBS Marketwatch:
The U.S. unemployment rate jumped by a half percentage point to 5.5% in May on the biggest increase in seasonally adjusted unemployment in 33 years, the Labor Department reported Friday. Nonfarm payrolls fell by 49,000 in May, the fifth consecutive decrease and in line with expectations of economists. The economy has lost 324,000 jobs so far this year. Unemployment rose by 861,000 to 8.5 million, the government said. The 0.5 percentage point increase in the unemployment rate was a shock, as economists expected a much smaller 0.1 percentage point gain to 5.1%. The jobless rate is the highest since October 2004. It was the biggest percentage point gain in unemployment since 1986.
The folks on CNBC's "Squawkbox" yesterday were hoping for a slight job GAIN. I guess you could say they were a bit off base.
The hardest hit sectors aren't surprising: retail (nobody's buying jack, not even with the stimulus checks -- those are going in the gas tank and to the grocery store, if not to bill collectors...) along with manufacturers, homebuilders and airlines.
Bush is finally right: this really IS like World War II !!!
For the first time since the 1940s, Americans' net equity in our homes is negative.
NEW YORK - The equity Americans have in their most important asset — their homes — has dropped to its lowest level since the end of World War II.
Homeowners’ portion of equity slipped to 46.2 percent in the first quarter from a revised 47.5 percent in the previous quarter. That was the fifth quarter in a row below the 50 percent mark, the Federal Reserve said Thursday.
The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans’ total mortgage debt rose to $10.6 trillion from $10.53 trillion.
You're starting to see the abandoned homes strewn around even this very suburban, once booming neighborhood, meaning that people have mailed the keys to the bank and walked away, leaving an overgrown lawn, and sometimes a purposefully damaged property. Thanks for everything, George.
LONDON (AP) -- BP PLC and Royal Dutch Shell PLC, Europe's two biggest oil producers, posted forecast-busting first-quarter earnings on Tuesday thanks to record crude oil prices that are expected to bolster profits across the industry. The combined profits of $17 billion reignited calls for a windfall tax on oil profits as consumers struggle to pay for food and fuel.
... BP posted a 63 percent surge in first-quarter net profit to $7.6 billion (4.9 billion euros), while Shell reported a 25 percent rise, to a record $9.08 billion (5.81 billion euros).
Revenue at BP jumped 44 percent to $89.2 billion (57.1 billion euros), while sales at Shell soared 55 percent to $114 billion (72.95 billion euros).
Last week ConocoPhillips reported a 16 percent rise in net income to $4.14 billion. Like BP and Shell, the third biggest U.S. producer far outpaced industry expectations. More big profits are expected from the biggest two U.S. companies, Exxon Mobil Corp. and Chevron Corp., when they report first-quarter earnings later this week.
Crude oil hit $111.80 per barrel during the quarter, while gas jumped an average of 22 percent. Crude has pushed even higher since, reaching a record $119.93 per-barrel this week.
BP shares jumped 5.7 percent to 611.5 pence ($12.06, while Shell rose 5.2 percent to 26.03 euros ($40.51).
81 - the percentage of Americans in a new poll that say the country is on the wrong track. That's the worst showing for right track/wrong track EVER in this poll, stretching back to 1986. (Another 14 percent say the country is headed in the right direction, leading to serious questions about what the hell is wrong with the other 5 percent...) In the NYT/CBS poll, most respondents blamed regulators, rather than banks or homeowners, for the current housing crisis, reflecting a tendency for people to "blame up" -- meaning that those with a closest proximity; your neighbor (or yourself) and your neighborhood bank, get less blame. And most Americans oppose bailing out banks, preferring that the government offer individual help to homeowners. Overall, the poll finds Americans pessimistic about jobs, unhappy with both the president and Congress, and slightly preferring either Democratic presidential candidate to John McCain. On the "Ronald Reagan test" question, 78 percent say the country is worse off than it was five years ago (another high for the poll) with just 4 percent saying we're better off. The complete poll is available here.
$40 million - The amount of money Barack Obama raised for his presidential campaign last month. Hillary Clinton's campaign raised half that amount, and her campaign is being completely outspent where it counts: in upcoming primary states like Pennsylvania and North Carolina (In PA, for instance, Hillary has a $500,000 television buy in the field, versus $3 million in television and radio ads for Obama.) To her credit, Clinton has raised $175 million so far in the campaign. Trouble is, Obama has raised $240 million, and her donor base, which has by and large given in larger individual amounts, is getting tapped out, while her fundraisers are expressing exhaustion, rather than enthusiasm.
1,276,000 - The number of individual donors who have contributed to the Obama campaign. According to the Times: "More than 442,000 people contributed to the campaign in March, with more than 218,000 of them giving for the first time. The average contribution in March was $96; the total number of contributors to date comes to 1,276,000."
2 - the point spread between Hillary Clinton and Barack Obama in a new Insider Advantage poll of Pennsylvania voters. I don't know how reliable this poll is, and I'd probably go with the latest Qpac poll myself,) but it's not good news for Camp Clinton, who surely see that the race in this must-win-big state for her, is tightening.