Posts
http://www.marketoracle.co.uk/Article22011.html
http://www.thedailybell.com/1328/Steve-Forbes-on-Overseas-Wars-the-Coming-Gold-Standard-and-the-Rise-of-Citizen-Agitation.html
http://www.financialsense.com/contributors/d-sherman-okst/why-we-are-totally-finished
http://www.bloomberg.com/news/2010-08-25/roubini-sees-u-s-growth-below-1-chance-of-double-dip-recession-at-40-.html
http://www.wnd.com/index.php?pageId=195493
http://www.nationalreview.com/battle10/244695/bennet-bombshell-trillions-debt-nothing-show-it-michael-sandoval
http://www.thenewamerican.com/index.php/usnews/congress/4413-obama-needs-your-401k-to-balance-his-budget
http://www.newswithviews.com/Kincaid/cliff446.htm
Monday, August 30, 2010
Saturday, August 21, 2010
Title says it all ...
Obamanomics is why there is no recovery
Examiner Editorial
August 13, 2010
How many more months must Americans endure near-double-digit unemployment, little or no new-job creation, economic stagnation, a topsy-turvy stock market, and sagging consumer confidence before Washington politicians concede the "summer of recovery" is mostly a mirage?
They've spent nearly $8 trillion since 2007, including nearly $2 trillion on economic stimulus programs and an equal amount for the Troubled Asset Relief Program and similar bailouts. They've effectively nationalized Fortune 500 corporations, taken over the health care sector, and set the regulatory stage for more bailouts and takeovers, but the needle is still stuck. Worse, recovery isn't likely for many months ahead because those same politicians are planning more of the same failing policies.
Consider that entrepreneurial small businesses are the job-creation machine of a free-enterprise economy. But these firms are about to get smacked with significant tax rate increases that will keep most of them struggling just to survive. President Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi will let the Bush tax cuts of 2001 and 2003 expire as scheduled Jan. 1, 2011. The current 33 percent tax rate on individuals will go to 36 percent, and the current 35 percent rate will increase to 39.5 percent. Those are individual rates, but the majority of small-business profits are taxed as income to individuals.
According to Internal Revenue Service data,30 million tax returns reporting small-business income were filed in 2008, showing net business profits of $631 billion. Americans for Tax Reform pointed out Friday that "large chunk of this net profit -$457 billion - faced taxation in households making more than $200,000 per year. A majority of small business profits will face a tax rate hike under the Obama-Pelosi-Reid plan." So, those millions of small-businesses will soon have even less money to invest in expanding existing product lines or services, as well as job-creating new ventures.
As for the big corporations that are hoarding billions of dollars that would otherwise be flowing into new investments and fueling renewed economic growth, there is no mystery why they are putting off making such decisions. Who can blame them after seeing the nationalization of General Motors and Chrysler, or the moratoria under which hundreds of large and small energy firms were forced to stop drilling in the Gulf of Mexico and on land in places like Wyoming?
Also, an explosion of new anti-business regulations to further hobble the economy is coming soon, thanks to Obama-Reid-Pelosi policies. As ATR's Grover Norquist told The Examiner, "You don't know what the law will be next month, or if you will even be allowed to own your business. The only thing you can be sure of is they will raise your taxes. You would be a fool now to go out and hire somebody new."
Examiner Editorial
August 13, 2010
How many more months must Americans endure near-double-digit unemployment, little or no new-job creation, economic stagnation, a topsy-turvy stock market, and sagging consumer confidence before Washington politicians concede the "summer of recovery" is mostly a mirage?
They've spent nearly $8 trillion since 2007, including nearly $2 trillion on economic stimulus programs and an equal amount for the Troubled Asset Relief Program and similar bailouts. They've effectively nationalized Fortune 500 corporations, taken over the health care sector, and set the regulatory stage for more bailouts and takeovers, but the needle is still stuck. Worse, recovery isn't likely for many months ahead because those same politicians are planning more of the same failing policies.
Consider that entrepreneurial small businesses are the job-creation machine of a free-enterprise economy. But these firms are about to get smacked with significant tax rate increases that will keep most of them struggling just to survive. President Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi will let the Bush tax cuts of 2001 and 2003 expire as scheduled Jan. 1, 2011. The current 33 percent tax rate on individuals will go to 36 percent, and the current 35 percent rate will increase to 39.5 percent. Those are individual rates, but the majority of small-business profits are taxed as income to individuals.
According to Internal Revenue Service data,30 million tax returns reporting small-business income were filed in 2008, showing net business profits of $631 billion. Americans for Tax Reform pointed out Friday that "large chunk of this net profit -$457 billion - faced taxation in households making more than $200,000 per year. A majority of small business profits will face a tax rate hike under the Obama-Pelosi-Reid plan." So, those millions of small-businesses will soon have even less money to invest in expanding existing product lines or services, as well as job-creating new ventures.
As for the big corporations that are hoarding billions of dollars that would otherwise be flowing into new investments and fueling renewed economic growth, there is no mystery why they are putting off making such decisions. Who can blame them after seeing the nationalization of General Motors and Chrysler, or the moratoria under which hundreds of large and small energy firms were forced to stop drilling in the Gulf of Mexico and on land in places like Wyoming?
Also, an explosion of new anti-business regulations to further hobble the economy is coming soon, thanks to Obama-Reid-Pelosi policies. As ATR's Grover Norquist told The Examiner, "You don't know what the law will be next month, or if you will even be allowed to own your business. The only thing you can be sure of is they will raise your taxes. You would be a fool now to go out and hire somebody new."
Good news, finally people are waking up to the fact that a lot of the practices in the real estate finance industry were, well illegal.
Homeowners' Rebellion - Could 62 Million
Homes Be Foreclosure-Proof?
A committed movement to tear off the predatory mask called
MERS could yet turn the tide for struggling homeowners
By Ellen Brown
From Yes! Magazine
8-18-10
Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.
Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles-and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere "nominee"-an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff's legal ability to foreclose.
That means hordes of victims of predatory lending could end up owning their homes free and clear-while the financial industry could end up skewered on its own sword.
California Precedent
The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E-11. The court held thatMERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:
Since no evidence of MERS' ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another.Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.
In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the "Boyko" decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:
Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.
The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:
This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee's Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.
While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.
What Could This Mean for Homeowners?
Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS' technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.
An August 2010 article in Mother Jones titled "Fannie and Freddie's Foreclosure Barons" exposes a widespread practice of "foreclosure mills" in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.
In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders' case in 2004. Five years later, she says, some of the homeowners she's helped are still in their homes. According to a Huffington Post article titled "'Produce the Note' Movement Helps Stall Foreclosures":
Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action 'quiets' all other claims). Charney says she's helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.
Criminal Charges?
Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used "the artifice of MERS to sabotage the judicial process to the detriment of borrowers;" that "to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;" that the scheme depended on "the MERS artifice and the ability to generate any necessary 'assignment' which flowed from it;" and that "by engaging in a pattern of racketeering activity, specifically 'mail or wire fraud,' the Defendants . . . participated in a criminal enterprise affecting interstate commerce."
Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or "whistle blower" to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for "wrongfully bypass[ing] the counties' recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located." The complaint notes that "MERS claims to have 'saved' at least $2.4 billion dollars in recording costs," meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.
By Their Own Sword: MERS' Role in the Financial Crisis
MERS is, according to its website, "an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans." Or as Karl Denninger puts it, "MERS' own website claims that it exists for the purpose of circumventing assignments and documenting ownership!"
MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:
Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder's office where documents reflecting any ownership interest in real property are kept....
After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible .... The servicer was interested in only one thing - making a profit from the foreclosure of the borrower's residence - so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the 'beneficiary' under millions of deeds of trust in Nevada and other states.
Axing the Bankers' Money Tree
If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chroniclearticle by attorney Sean Olender following the October 2007 Boyko [pdf] decision:
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .
Nationalization of these giant banks might be the next logical step-a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.
The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a "people's bank," making low interest loans to consumers and businesses through branches all over the country.
With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.
Homes Be Foreclosure-Proof?
A committed movement to tear off the predatory mask called
MERS could yet turn the tide for struggling homeowners
By Ellen Brown
From Yes! Magazine
8-18-10
Mortgages bundled into securities were a favorite investment of speculators at the height of the financial bubble leading up to the crash of 2008. The securities changed hands frequently, and the companies profiting from mortgage payments were often not the same parties that negotiated the loans. At the heart of this disconnect was the Mortgage Electronic Registration System, or MERS, a company that serves as the mortgagee of record for lenders, allowing properties to change hands without the necessity of recording each transfer.
Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles-and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof.MERS was convenient for the mortgage industry, but courts are now questioning the impact of all of this financial juggling when it comes to mortgage ownership. To foreclose on real property, the plaintiff must be able to establish the chain of title entitling it to relief. But MERS has acknowledged, and recent cases have held, that MERS is a mere "nominee"-an entity appointed by the true owner simply for the purpose of holding property in order to facilitate transactions. Recent court opinions stress that this defect is not just a procedural but is a substantive failure, one that is fatal to the plaintiff's legal ability to foreclose.
That means hordes of victims of predatory lending could end up owning their homes free and clear-while the financial industry could end up skewered on its own sword.
California Precedent
The latest of these court decisions came down in California on May 20, 2010, in a bankruptcy case called In re Walker, Case no. 10-21656-E-11. The court held thatMERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank could not collect on its claim. The judge opined:
Since no evidence of MERS' ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another.Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.
In support, the judge cited In Re Vargas (California Bankruptcy Court); Landmark v. Kesler (Kansas Supreme Court); LaSalle Bank v. Lamy (a New York case); and In Re Foreclosure Cases (the "Boyko" decision from Ohio Federal Court). (For more on these earlier cases, see here, here and here.) The court concluded:
Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.
The broad impact the case could have on California foreclosures is suggested by attorney Jeff Barnes, who writes:
This opinion . . . serves as a legal basis to challenge any foreclosure in California based on a MERS assignment; to seek to void any MERS assignment of the Deed of Trust or the note to a third party for purposes of foreclosure; and should be sufficient for a borrower to not only obtain a TRO [temporary restraining order] against a Trustee's Sale, but also a Preliminary Injunction barring any sale pending any litigation filed by the borrower challenging a foreclosure based on a MERS assignment.
While not binding on courts in other jurisdictions, the ruling could serve as persuasive precedent there as well, because the court cited non-bankruptcy cases related to the lack of authority of MERS, and because the opinion is consistent with prior rulings in Idaho and Nevada Bankruptcy courts on the same issue.
What Could This Mean for Homeowners?
Earlier cases focused on the inability of MERS to produce a promissory note or assignment establishing that it was entitled to relief, but most courts have considered this a mere procedural defect and continue to look the other way on MERS' technical lack of standing to sue. The more recent cases, however, are looking at something more serious. If MERS is not the title holder of properties held in its name, the chain of title has been broken, and no one may have standing to sue. In MERS v. Nebraska Department of Banking and Finance, MERS insisted that it had no actionable interest in title, and the court agreed.
An August 2010 article in Mother Jones titled "Fannie and Freddie's Foreclosure Barons" exposes a widespread practice of "foreclosure mills" in backdating assignments after foreclosures have been filed. Not only is this perjury, a prosecutable offense, but if MERS was never the title holder, there is nothing to assign. The defaulting homeowners could wind up with free and clear title.
In Jacksonville, Florida, legal aid attorney April Charney has been using the missing-note argument ever since she first identified that weakness in the lenders' case in 2004. Five years later, she says, some of the homeowners she's helped are still in their homes. According to a Huffington Post article titled "'Produce the Note' Movement Helps Stall Foreclosures":
Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action 'quiets' all other claims). Charney says she's helped thousands of homeowners delay or prevent foreclosure, and trained thousands of lawyers across the country on how to protect homeowners and battle in court.
Criminal Charges?
Other suits go beyond merely challenging title to alleging criminal activity. On July 26, 2010, a class action was filed in Florida seeking relief against MERS and an associated legal firm for racketeering and mail fraud. It alleges that the defendants used "the artifice of MERS to sabotage the judicial process to the detriment of borrowers;" that "to perpetuate the scheme, MERS was and is used in a way so that the average consumer, or even legal professional, can never determine who or what was or is ultimately receiving the benefits of any mortgage payments;" that the scheme depended on "the MERS artifice and the ability to generate any necessary 'assignment' which flowed from it;" and that "by engaging in a pattern of racketeering activity, specifically 'mail or wire fraud,' the Defendants . . . participated in a criminal enterprise affecting interstate commerce."
Local governments deprived of filing fees may also be getting into the act, at least through representatives suing on their behalf. Qui tam actions allow for a private party or "whistle blower" to bring suit on behalf of the government for a past or present fraud on it. In State of California ex rel. Barrett R. Bates, filed May 10, 2010, the plaintiff qui tam sued on behalf of a long list of local governments in California against MERS and a number of lenders, including Bank of America, JPMorgan Chase and Wells Fargo, for "wrongfully bypass[ing] the counties' recording requirements; divest[ing] the borrowers of the right to know who owned the promissory note . . .; and record[ing] false documents to initiate and pursue non-judicial foreclosures, and to otherwise decrease or avoid payment of fees to the Counties and the Cities where the real estate is located." The complaint notes that "MERS claims to have 'saved' at least $2.4 billion dollars in recording costs," meaning it has helped avoid billions of dollars in fees otherwise accruing to local governments. The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum. Similar suits have been filed by the same plaintiff qui tam in Nevada and Tennessee.
By Their Own Sword: MERS' Role in the Financial Crisis
MERS is, according to its website, "an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans." Or as Karl Denninger puts it, "MERS' own website claims that it exists for the purpose of circumventing assignments and documenting ownership!"
MERS was developed in the early 1990s by a number of financial entities, including Bank of America, Countrywide, Fannie Mae, and Freddie Mac, allegedly to allow consumers to pay less for mortgage loans. That did not actually happen, but what MERS did allow was the securitization and shuffling around of mortgages behind a veil of anonymity. The result was not only to cheat local governments out of their recording fees but to defeat the purpose of the recording laws, which was to guarantee purchasers clean title. Worse, MERS facilitated an explosion of predatory lending in which lenders could not be held to account because they could not be identified, either by the preyed-upon borrowers or by the investors seduced into buying bundles of worthless mortgages. As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:
Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder's office where documents reflecting any ownership interest in real property are kept....
After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible .... The servicer was interested in only one thing - making a profit from the foreclosure of the borrower's residence - so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the 'beneficiary' under millions of deeds of trust in Nevada and other states.
Axing the Bankers' Money Tree
If courts overwhelmed with foreclosures decide to take up the cause, the result could be millions of struggling homeowners with the banks off their backs, and millions of homes no longer on the books of some too-big-to-fail banks. Without those assets, the banks could again be looking at bankruptcy. As was pointed out in a San Francisco Chroniclearticle by attorney Sean Olender following the October 2007 Boyko [pdf] decision:
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
. . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .
Nationalization of these giant banks might be the next logical step-a step that some commentators said should have been taken in the first place. When the banking system of Sweden collapsed following a housing bubble in the 1990s, nationalization of the banks worked out very well for that country.
The Swedish banks were largely privatized again when they got back on their feet, but it might be a good idea to keep some banks as publicly-owned entities, on the model of the Commonwealth Bank of Australia. For most of the 20th century it served as a "people's bank," making low interest loans to consumers and businesses through branches all over the country.
With the strengthened position of Wall Street following the 2008 bailout and the tepid 2010 banking reform bill, the U.S. is far from nationalizing its mega-banks now. But a committed homeowner movement to tear off the predatory mask called MERS could yet turn the tide. While courts are not likely to let 62 million homeowners off scot free, the defect in title created by MERS could give them significant new leverage at the bargaining table.
Friday, August 20, 2010
I keep saying the Republican party has left me, not the other way around.
The GOP's Lost Brand
By Randall Hoven
This is not your father's America, nor is it your father's Republican Party. You have been betrayed. But if you call it betrayal, you won't be called ungrateful; you'll be called nuts -- as in wingnuts.
Conservatives and liberals alike assume the U.S. is, or was before Obama, leader of the free world and a bastion of free-market economics. Conservatives griped that ObamaCare would be socialism, nationalizing one-seventh of the economy. Liberals griped that laissez-faire capitalism in the U.S. is what drove us, and then Europe, into the Great Recession.
Here is the truth. Health care in the U.S. was already socialist back when Obama was voting "present" in the Illinois State Senate. Government in the U.S. was already spending one-fourteenth of the economy on health, about the same as, or even more than, Canada and the U.K., countries known for not only universal health care, but single-payer health care.
And what did a Republican president do when he had a Republican-majority House and Senate? He saddled Medicare, a system about to go bankrupt, with a new entitlement, prescription drugs, adding another 1% to 2% of GDP to the federal government burden. In round numbers, that is about $1 trillion over a decade in the very years the Medicare trust fund will be empty. (Like most other entitlement programs, the additional spending would happen after the president signing the legislation would leave office.)
And how was this generosity rewarded? President Obama said, when defending himself against charges of socialism, "And it wasn't on my watch that we passed a massive new entitlement, the prescription drug plan, without a source of funding."
He then went on to get his own new $1-trillion health entitlement passed. (Apparently, you are not a socialist if the guy before you was.)
Health care is not the only thing. When all government spending is tallied up, government in the U.S. spent 38.6% of GDP in 2008. That was before Obama was sworn in. Australia spent less (33.7%). South Korea spent less (30.9%). Slovakia spent less (33.9%). Switzerland spent less (32.6%). Canada, that liberal country to our north with single-payer health care, spent only a little more (39.6%). At the moment, in 2010, government in the U.S. is spending about 45% of GDP, or just about the European average.
Spending doesn't capture everything, you say? OK. The Heritage Foundation tallied up ten broad measures of economic freedom across 183 countries. The result? The U.S. is no longer a "free country." It is now "mostly free," along with Macau, Cyprus, Georgia, Botswana, and eighteen other countries. We are behind the "free" countries of Australia, New Zealand, Ireland, Switzerland, and even Canada (as well as the perennial Hong Kong and Singapore in the top two spots). We are one notch above Denmark (78.0 to 77.9). And those rankings were tallied before ObamaCare was law.
Waiting for the cavalry, the Republican Party, to save you? That party had everything, the presidency, House, and Senate, from 2003 through 2006. It gave us the new trillion-dollar prescription drug entitlement, Campaign Finance Reform, No Child Left Behind and whopping new ethanol mandates. It outlawed normal light bulbs (again, to take effect after the signing president leaves office).
And when this confederacy of dunces fought ObamaCare, on what grounds did it fight it? That ObamaCare would cut Medicare. Medicare spending is what is bankrupting our government and our country! It has to be cut (over time). We can do that Obama's way, government rationing, or we can do that a responsible way.
Did Republicans offer a responsible way to tame Medicare? Well, a Republican did: Paul Ryan, with his Roadmap. And in February 2010, after a year of Obama's high-pressure sales and years after Republicans lost Congress, Ryan's Roadmap had all of nine co-sponsors. Nine. Out of 178 Republicans in the House. As for the rest, it was "Don't cut my Medicare!"
As far as individual "Republicans," let me just drop the names of Jim Jeffords, Arlen Specter, Lincoln Chafee, and Charlie Crist. I don't think those traitors are the only ones ready to defect. The Republican Party seems to have a gift for losing critical members at the very moments their votes count most (see Jeffords, Jumpin' Jim). They will rail against gay marriage and flag-burning with gusto when talking to the folks back home. But when it comes to bailouts, stimuli, or new government programs and regulations, there always seem to be just enough Republican votes to get the job done. Sometimes, Republicans even do it themselves (prescription coverage, TARP, etc.).
I can't say it any better than Governor Chris Christie: "Republicans have to rebrand themselves credibly with the candidates they run, and what they espouse, as the person who will keep an eye on the cash register, who will rein in the spending and the debt."
Republicans used to have the brand of fiscal conservatism. That brand of Republican won the most electoral votes in history just 26 years ago. It took over the House of Representatives, for the first time in forty years, just sixteen years ago. With majorities in Congress, it cut capital gains tax rates, ended welfare, ended the byzantine farm program, cut federal spending to its lowest level since 1966, and ran surpluses -- just ten years ago.
We want that brand of Republicans back.
We are not nuts to want that. It is not nuts to think government can and should spend less than 40% of everything. It is not nuts to want our country to be "free" and not just "mostly free" with France and Botswana. It is not nuts to think that the way "a bill becomes a law" should be the way a bill becomes a law. It is not nuts to think the U.S. Constitution puts some restraints on the federal government. It is not nuts to agree with our founders.
"If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy."
- Thomas Jefferson, 1802
"I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it."
- Ben Franklin, 1766
"Towards the preservation of your government, and the permanency of your present happy state, it is requisite, not only that you steadily discountenance irregular oppositions to its acknowledged authority, but also that you resist with care the spirit of innovation upon its principles, however specious the pretexts."
- George Washington, 1796
"However specious the pretexts." Specious: showy, having deceptive attraction or allure, having a false look of truth or genuineness. Sound like any teleprompter reader you know?
Here's how it works: If we want expanded entitlements, more government programs, macro-economic tinkering, more federal government intrusion into education, agriculture, energy, etc., we will vote Democrat. We don't need Republicans for that. That is the Democrats' brand; let them have it. What we need is someone to oppose all that.
"Tell Americans the truth, offer them a choice, and count on them to do what's right."
- Rep. Paul Ryan.
Our fathers' Republican said, "Government is not a solution to our problem; government is the problem." If you find that too distasteful to swallow, a bit too Tea-Party for you, please don't run for office as a Republican. Because Democrats are already a dime a dozen, and a cheap imitation of one is on nobody's November shopping list.
By Randall Hoven
This is not your father's America, nor is it your father's Republican Party. You have been betrayed. But if you call it betrayal, you won't be called ungrateful; you'll be called nuts -- as in wingnuts.
Conservatives and liberals alike assume the U.S. is, or was before Obama, leader of the free world and a bastion of free-market economics. Conservatives griped that ObamaCare would be socialism, nationalizing one-seventh of the economy. Liberals griped that laissez-faire capitalism in the U.S. is what drove us, and then Europe, into the Great Recession.
Here is the truth. Health care in the U.S. was already socialist back when Obama was voting "present" in the Illinois State Senate. Government in the U.S. was already spending one-fourteenth of the economy on health, about the same as, or even more than, Canada and the U.K., countries known for not only universal health care, but single-payer health care.
And what did a Republican president do when he had a Republican-majority House and Senate? He saddled Medicare, a system about to go bankrupt, with a new entitlement, prescription drugs, adding another 1% to 2% of GDP to the federal government burden. In round numbers, that is about $1 trillion over a decade in the very years the Medicare trust fund will be empty. (Like most other entitlement programs, the additional spending would happen after the president signing the legislation would leave office.)
And how was this generosity rewarded? President Obama said, when defending himself against charges of socialism, "And it wasn't on my watch that we passed a massive new entitlement, the prescription drug plan, without a source of funding."
He then went on to get his own new $1-trillion health entitlement passed. (Apparently, you are not a socialist if the guy before you was.)
Health care is not the only thing. When all government spending is tallied up, government in the U.S. spent 38.6% of GDP in 2008. That was before Obama was sworn in. Australia spent less (33.7%). South Korea spent less (30.9%). Slovakia spent less (33.9%). Switzerland spent less (32.6%). Canada, that liberal country to our north with single-payer health care, spent only a little more (39.6%). At the moment, in 2010, government in the U.S. is spending about 45% of GDP, or just about the European average.
Spending doesn't capture everything, you say? OK. The Heritage Foundation tallied up ten broad measures of economic freedom across 183 countries. The result? The U.S. is no longer a "free country." It is now "mostly free," along with Macau, Cyprus, Georgia, Botswana, and eighteen other countries. We are behind the "free" countries of Australia, New Zealand, Ireland, Switzerland, and even Canada (as well as the perennial Hong Kong and Singapore in the top two spots). We are one notch above Denmark (78.0 to 77.9). And those rankings were tallied before ObamaCare was law.
Waiting for the cavalry, the Republican Party, to save you? That party had everything, the presidency, House, and Senate, from 2003 through 2006. It gave us the new trillion-dollar prescription drug entitlement, Campaign Finance Reform, No Child Left Behind and whopping new ethanol mandates. It outlawed normal light bulbs (again, to take effect after the signing president leaves office).
And when this confederacy of dunces fought ObamaCare, on what grounds did it fight it? That ObamaCare would cut Medicare. Medicare spending is what is bankrupting our government and our country! It has to be cut (over time). We can do that Obama's way, government rationing, or we can do that a responsible way.
Did Republicans offer a responsible way to tame Medicare? Well, a Republican did: Paul Ryan, with his Roadmap. And in February 2010, after a year of Obama's high-pressure sales and years after Republicans lost Congress, Ryan's Roadmap had all of nine co-sponsors. Nine. Out of 178 Republicans in the House. As for the rest, it was "Don't cut my Medicare!"
As far as individual "Republicans," let me just drop the names of Jim Jeffords, Arlen Specter, Lincoln Chafee, and Charlie Crist. I don't think those traitors are the only ones ready to defect. The Republican Party seems to have a gift for losing critical members at the very moments their votes count most (see Jeffords, Jumpin' Jim). They will rail against gay marriage and flag-burning with gusto when talking to the folks back home. But when it comes to bailouts, stimuli, or new government programs and regulations, there always seem to be just enough Republican votes to get the job done. Sometimes, Republicans even do it themselves (prescription coverage, TARP, etc.).
I can't say it any better than Governor Chris Christie: "Republicans have to rebrand themselves credibly with the candidates they run, and what they espouse, as the person who will keep an eye on the cash register, who will rein in the spending and the debt."
Republicans used to have the brand of fiscal conservatism. That brand of Republican won the most electoral votes in history just 26 years ago. It took over the House of Representatives, for the first time in forty years, just sixteen years ago. With majorities in Congress, it cut capital gains tax rates, ended welfare, ended the byzantine farm program, cut federal spending to its lowest level since 1966, and ran surpluses -- just ten years ago.
We want that brand of Republicans back.
We are not nuts to want that. It is not nuts to think government can and should spend less than 40% of everything. It is not nuts to want our country to be "free" and not just "mostly free" with France and Botswana. It is not nuts to think that the way "a bill becomes a law" should be the way a bill becomes a law. It is not nuts to think the U.S. Constitution puts some restraints on the federal government. It is not nuts to agree with our founders.
"If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy."
- Thomas Jefferson, 1802
"I am for doing good to the poor, but I differ in opinion of the means. I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it."
- Ben Franklin, 1766
"Towards the preservation of your government, and the permanency of your present happy state, it is requisite, not only that you steadily discountenance irregular oppositions to its acknowledged authority, but also that you resist with care the spirit of innovation upon its principles, however specious the pretexts."
- George Washington, 1796
"However specious the pretexts." Specious: showy, having deceptive attraction or allure, having a false look of truth or genuineness. Sound like any teleprompter reader you know?
Here's how it works: If we want expanded entitlements, more government programs, macro-economic tinkering, more federal government intrusion into education, agriculture, energy, etc., we will vote Democrat. We don't need Republicans for that. That is the Democrats' brand; let them have it. What we need is someone to oppose all that.
"Tell Americans the truth, offer them a choice, and count on them to do what's right."
- Rep. Paul Ryan.
Our fathers' Republican said, "Government is not a solution to our problem; government is the problem." If you find that too distasteful to swallow, a bit too Tea-Party for you, please don't run for office as a Republican. Because Democrats are already a dime a dozen, and a cheap imitation of one is on nobody's November shopping list.
This is why GAAP rules need to be applied to the Federal budget.
U.S. deficit forecast masks true scope of problem
Aug 19, 2010 16:59 EDT
If America ran its books more like a business, the real state of its finances would be clearer. U.S. budget scorekeepers now predict a $1.34 trillion deficit for 2010, a tad less than forecast in March. Still, it’s an enormous gap. And the headline number lowballs the shortfall.
To be fair, the Congressional Budget Office does its best. The unit is the closest thing associated with Congress to an independent and impartial fiscal judge. As the debate over the costs of healthcare reform showed, the CBO’s analysis affects not only public perception of policy but also its substance.
Yet the CBO still operates under rules set by Congress. And those constraints, whether by design or chance, result in an undeservedly rosy U.S. budget picture. For instance, the CBO calculates that the federal government will run up an additional $6.2 trillion in debt by 2020, raising the U.S. debt-to-GDP ratio to about 69 percent — a high but perhaps tolerable level.
But assuming various tax breaks are extended rather than expiring — an increasingly likely-looking scenario — debt would actually balloon to $11 trillion, or 90 percent of GDP. And if discretionary government spending rises in line with nominal GDP rather than the consumer price inflation used by the CBO, that would tack on another $2 trillion of borrowing. Throw in a few other more realistic assumptions, and the debt-to-GDP ratio ends up in scary territory north of 100 percent by 2020.
Then consider that America’s numbers are reported on a cash-in, cash-out basis. They make no provision for future liabilities such as Medicare and social security. As with companies’ financial figures, it pays to read the footnotes. In a little-noticed report, the U.S. Treasury does annually put out the data needed to calculate America’s liabilities according to business accounting principles. If the government were setting aside the money today needed to fund those liabilities fully, the 2010 deficit would be more like $4.3 trillion, according to the Shadow Government Statistics website.
These are the sorts of numbers CBO budgeteers should ideally be highlighting. If they of all people can’t tell it how it is, politicians will never get real with taxing and spending.
Aug 19, 2010 16:59 EDT
If America ran its books more like a business, the real state of its finances would be clearer. U.S. budget scorekeepers now predict a $1.34 trillion deficit for 2010, a tad less than forecast in March. Still, it’s an enormous gap. And the headline number lowballs the shortfall.
To be fair, the Congressional Budget Office does its best. The unit is the closest thing associated with Congress to an independent and impartial fiscal judge. As the debate over the costs of healthcare reform showed, the CBO’s analysis affects not only public perception of policy but also its substance.
Yet the CBO still operates under rules set by Congress. And those constraints, whether by design or chance, result in an undeservedly rosy U.S. budget picture. For instance, the CBO calculates that the federal government will run up an additional $6.2 trillion in debt by 2020, raising the U.S. debt-to-GDP ratio to about 69 percent — a high but perhaps tolerable level.
But assuming various tax breaks are extended rather than expiring — an increasingly likely-looking scenario — debt would actually balloon to $11 trillion, or 90 percent of GDP. And if discretionary government spending rises in line with nominal GDP rather than the consumer price inflation used by the CBO, that would tack on another $2 trillion of borrowing. Throw in a few other more realistic assumptions, and the debt-to-GDP ratio ends up in scary territory north of 100 percent by 2020.
Then consider that America’s numbers are reported on a cash-in, cash-out basis. They make no provision for future liabilities such as Medicare and social security. As with companies’ financial figures, it pays to read the footnotes. In a little-noticed report, the U.S. Treasury does annually put out the data needed to calculate America’s liabilities according to business accounting principles. If the government were setting aside the money today needed to fund those liabilities fully, the 2010 deficit would be more like $4.3 trillion, according to the Shadow Government Statistics website.
These are the sorts of numbers CBO budgeteers should ideally be highlighting. If they of all people can’t tell it how it is, politicians will never get real with taxing and spending.
I like his turn of the phrase here
Appeasing the Bond Gods
By PAUL KRUGMAN
Published: August 19, 2010
As I look at what passes for responsible economic policy these days, there’s an analogy that keeps passing through my mind. I know it’s over the top, but here it is anyway: the policy elite — central bankers, finance ministers, politicians who pose as defenders of fiscal virtue — are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.
Hey, I told you it was over the top. But bear with me for a minute.
Late last year the conventional wisdom on economic policy took a hard right turn. Even though the world’s major economies had barely begun to recover, even though unemployment remained disastrously high across much of America and Europe, creating jobs was no longer on the agenda. Instead, we were told, governments had to turn all their attention to reducing budget deficits.
Skeptics pointed out that slashing spending in a depressed economy does little to improve long-run budget prospects, and may actually make them worse by depressing economic growth. But the apostles of austerity — sometimes referred to as “austerians” — brushed aside all attempts to do the math. Never mind the numbers, they declared: immediate spending cuts were needed to ward off the “bond vigilantes,” investors who would pull the plug on spendthrift governments, driving up their borrowing costs and precipitating a crisis. Look at Greece, they said.
The skeptics countered that Greece is a special case, trapped by its use of the euro, which condemns it to years of deflation and stagnation whatever it does. The interest rates paid by major nations with their own currencies — not just the United States, but also Britain and Japan — showed no sign that the bond vigilantes were about to attack, or even that they existed.
Just you wait, said the austerians: the bond vigilantes may be invisible, but they must be feared all the same.
This was a strange argument even a few months ago, when the U.S. government could borrow for 10 years at less than 4 percent interest. We were being told that it was necessary to give up on job creation, to inflict suffering on millions of workers, in order to satisfy demands that investors were not, in fact, actually making, but which austerians claimed they would make in the future.
But the argument has become even stranger recently, as it has become clear that investors aren’t worried about deficits; they’re worried about stagnation and deflation. And they’ve been signaling that concern by driving interest rates on the debt of major economies lower, not higher. On Thursday, the rate on 10-year U.S. bonds was only 2.58 percent.
So how do austerians deal with the reality of interest rates that are plunging, not soaring? The latest fashion is to declare that there’s a bubble in the bond market: investors aren’t really concerned about economic weakness; they’re just getting carried away. It’s hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now we’re being told to ignore what those markets are actually saying because they’re confused.
You see, then, why I find myself thinking in terms of strange and savage cults, demanding human sacrifices to appease unseen forces.
And, yes, we are talking about sacrifices. Anyone who doubts the suffering caused by slashing spending in a weak economy should look at the catastrophic effects of austerity programs in Greece and Ireland.
Maybe those countries had no choice in the matter — although it’s worth noting that all the suffering being imposed on their populations doesn’t seem to have done anything to improve investor confidence in their governments.
But, in America, we do have a choice. The markets aren’t demanding that we give up on job creation. On the contrary, they seem worried about the lack of action — about the fact that, as Bill Gross of the giant bond fund Pimco put it earlier this week, we’re “approaching a cul-de-sac of stimulus,” which he warns “will slow to a snail’s pace, incapable of providing sufficient job growth going forward.”
It seems almost superfluous, given all that, to mention the final insult: many of the most vocal austerians are, of course, hypocrites. Notice, in particular, how suddenly Republicans lost interest in the budget deficit when they were challenged about the cost of retaining tax cuts for the wealthy. But that won’t stop them from continuing to pose as deficit hawks whenever anyone proposes doing something to help the unemployed.
So here’s the question I find myself asking: What will it take to break the hold of this cruel cult on the minds of the policy elite? When, if ever, will we get back to the job of rebuilding the economy?
By PAUL KRUGMAN
Published: August 19, 2010
As I look at what passes for responsible economic policy these days, there’s an analogy that keeps passing through my mind. I know it’s over the top, but here it is anyway: the policy elite — central bankers, finance ministers, politicians who pose as defenders of fiscal virtue — are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.
Hey, I told you it was over the top. But bear with me for a minute.
Late last year the conventional wisdom on economic policy took a hard right turn. Even though the world’s major economies had barely begun to recover, even though unemployment remained disastrously high across much of America and Europe, creating jobs was no longer on the agenda. Instead, we were told, governments had to turn all their attention to reducing budget deficits.
Skeptics pointed out that slashing spending in a depressed economy does little to improve long-run budget prospects, and may actually make them worse by depressing economic growth. But the apostles of austerity — sometimes referred to as “austerians” — brushed aside all attempts to do the math. Never mind the numbers, they declared: immediate spending cuts were needed to ward off the “bond vigilantes,” investors who would pull the plug on spendthrift governments, driving up their borrowing costs and precipitating a crisis. Look at Greece, they said.
The skeptics countered that Greece is a special case, trapped by its use of the euro, which condemns it to years of deflation and stagnation whatever it does. The interest rates paid by major nations with their own currencies — not just the United States, but also Britain and Japan — showed no sign that the bond vigilantes were about to attack, or even that they existed.
Just you wait, said the austerians: the bond vigilantes may be invisible, but they must be feared all the same.
This was a strange argument even a few months ago, when the U.S. government could borrow for 10 years at less than 4 percent interest. We were being told that it was necessary to give up on job creation, to inflict suffering on millions of workers, in order to satisfy demands that investors were not, in fact, actually making, but which austerians claimed they would make in the future.
But the argument has become even stranger recently, as it has become clear that investors aren’t worried about deficits; they’re worried about stagnation and deflation. And they’ve been signaling that concern by driving interest rates on the debt of major economies lower, not higher. On Thursday, the rate on 10-year U.S. bonds was only 2.58 percent.
So how do austerians deal with the reality of interest rates that are plunging, not soaring? The latest fashion is to declare that there’s a bubble in the bond market: investors aren’t really concerned about economic weakness; they’re just getting carried away. It’s hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now we’re being told to ignore what those markets are actually saying because they’re confused.
You see, then, why I find myself thinking in terms of strange and savage cults, demanding human sacrifices to appease unseen forces.
And, yes, we are talking about sacrifices. Anyone who doubts the suffering caused by slashing spending in a weak economy should look at the catastrophic effects of austerity programs in Greece and Ireland.
Maybe those countries had no choice in the matter — although it’s worth noting that all the suffering being imposed on their populations doesn’t seem to have done anything to improve investor confidence in their governments.
But, in America, we do have a choice. The markets aren’t demanding that we give up on job creation. On the contrary, they seem worried about the lack of action — about the fact that, as Bill Gross of the giant bond fund Pimco put it earlier this week, we’re “approaching a cul-de-sac of stimulus,” which he warns “will slow to a snail’s pace, incapable of providing sufficient job growth going forward.”
It seems almost superfluous, given all that, to mention the final insult: many of the most vocal austerians are, of course, hypocrites. Notice, in particular, how suddenly Republicans lost interest in the budget deficit when they were challenged about the cost of retaining tax cuts for the wealthy. But that won’t stop them from continuing to pose as deficit hawks whenever anyone proposes doing something to help the unemployed.
So here’s the question I find myself asking: What will it take to break the hold of this cruel cult on the minds of the policy elite? When, if ever, will we get back to the job of rebuilding the economy?
So are they smoking dope on Wall Street?
WASHINGTON (MarketWatch) -- Three disappointing, forward-looking reports on the U.S. economy drove investors away from stocks and back into bonds on Thursday, fearful that the economy could stagnate or fall back into recession.
Thursday's releases -- initial jobless claims, leading economic indicators and the Philly Fed index -- were only the latest in a series of reports showing the economic momentum flagging. Of this week's indicators, only one -- industrial production -- showed any growth, and that was due to special factors unlikely to be repeated.
Here's what we learned on Thursday:
Jobless claims ticked higher to the psychological threshold of 500,000, a nine-month high. See full story on jobless claims.
The leading economic indicators increased 0.1% in July, but have been essentially flat since March. See full story on the leading indicators.
And, worst of all, the Philadelphia Fed's survey manufacturing firms indicated that more firms say their business is worsening than say it's improving. See full story on the drop in the Philly Fed index.
Manufacturing has been the backbone of the recovery so far, so if the weakness in the Philly region expands nationally, the economy could stumble.
The headwinds holding back the economy are strengthening just as impact of the inventory cycle and the stimulus are fading. Unless the economy can find its second wind soon, a self-reinforcing downturn could be inevitable.
With Congress paralyzed, the burden of supporting the economy further -- or not -- will fall to the Federal Reserve. Odds are mounting that the Fed will redouble its efforts to pump money into the economy via quantitative easing.
Thursday's releases -- initial jobless claims, leading economic indicators and the Philly Fed index -- were only the latest in a series of reports showing the economic momentum flagging. Of this week's indicators, only one -- industrial production -- showed any growth, and that was due to special factors unlikely to be repeated.
Here's what we learned on Thursday:
Jobless claims ticked higher to the psychological threshold of 500,000, a nine-month high. See full story on jobless claims.
The leading economic indicators increased 0.1% in July, but have been essentially flat since March. See full story on the leading indicators.
And, worst of all, the Philadelphia Fed's survey manufacturing firms indicated that more firms say their business is worsening than say it's improving. See full story on the drop in the Philly Fed index.
Manufacturing has been the backbone of the recovery so far, so if the weakness in the Philly region expands nationally, the economy could stumble.
The headwinds holding back the economy are strengthening just as impact of the inventory cycle and the stimulus are fading. Unless the economy can find its second wind soon, a self-reinforcing downturn could be inevitable.
With Congress paralyzed, the burden of supporting the economy further -- or not -- will fall to the Federal Reserve. Odds are mounting that the Fed will redouble its efforts to pump money into the economy via quantitative easing.
Subscribe to:
Posts (Atom)
