Items of Interest:
William Greider / The Nation:
The Future of the American Dream -- As Franklin Roosevelt understood, Americans will postpone immediate gratification and endure hard sacrifices--if they must--so long as they are convinced the future can be better than the past. But we face a far more difficult problem at our moment in history. What do you promise people who have been told they can have anything they want, who are repeatedly congratulated for living in the best of all possible circumstances? How do you tell them "the good times," as we have known them, are not coming back? Americans need a new vision that helps them deal with reality, a promising story of the future that helps them let go of the past...
David Goldman / Inner Workings:
The American Banana Republic and the Zombie Economy -- Don’t zombies come from places where they grow bananas?
Over a year ago (in a “Spengler” essay) I characterized Barack Obam as a third world anthropologist profiling the United States ...
Was that an exaggeration? We will find out, but Obama has gone a lot further than any of his predecessors toward making America a banana republic... Obama is proceeding on the banana republic model...
Edward Jay Epstein / Vanity Fair:
The Czar's Rules Apply at Chrysler -- The latest casualty of the economic crisis is the rule of law...
The Last Hurrah and Seven Lean Years -- A large rally here is far more likely to prove a last hurrah … a codicil on the great bullishness we have had since the early 90s or, even in some respects, since the early 80s. The rally, if it occurs, will set us up for a long, drawn-out disappointment not only in the economy, but also in the stock markets of the developed world...
I expect that, at least for the seven lean years and perhaps longer, the developed world will have to settle for about 2% real GDP growth (perhaps 2.25%) down from the 3.5% to which we used to aspire in the last 30 years...
Let me end this section by emphasizing once again the difference between real wealth and the real economy on one hand, and illusionary wealth and debt on the other. If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efﬁcient hands. Debt is accounting, not reality. Real economies are much more resilient than they are given credit for. We allow ourselves to be terriﬁed by the “ﬁnancial-industrial complex” as Eisenhower might have said, much to their advantage.
State reaches $60m subprime deal with Goldman Sachs -- More than 700 Massachusetts homeowners struggling with subprime mortgages will have their monthly payments reduced - some by as much as 35 percent - as part of a $60 million settlement Attorney General Martha Coakley reached with Goldman Sachs Group Inc.
Goldman Sachs owns those homeowners' mortgages through subsidiaries and has agreed to rewrite the terms of their loans in order to stave off legal action by Coakley. The attorney general has been investigating the role investment banks played in promoting subprime mortgages that borrowers ultimately couldn't afford...
discussion:Dealbreaker : Goldman Not Above Subprime
Banks Brace for Unprecedented Credit Card Write-Offs -- It used to be easy to guess how many Americans would have problems paying their credit card bills. Banks just looked at unemployment: Fewer jobs meant more trouble ahead.
The unemployment rate has long mirrored banks’ loss rates on card balances. But Eddie Ward, 32 and jobless, may be one reason that rule of thumb no longer holds. For many lenders, losses are now starting to outpace layoffs...
Steve Bainbridge / ProfessorBainbridge.com:
Paul Ingrassia / Wall Street Journal: How Ford Restructured Without Federal Help
GM CEO: Bankruptcy probable, but he hopes to avoid it — Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now ...
Where U.S. Homeowners Are Most In Debt -- Ten metro areas with the most underwater mortgages.
"Water, wealth, contentment, health" is the motto of Modesto, Calif., a mid-size Central Valley city of 210,000. Problem is, it hasn't been a positive year by any of those measures.
The state is in a two-year drought. The violent crime rate is 45% higher than the national median, according to the FBI. This is not a particularly healthy place to live.
As for wealth and contentment, Modesto ranks as the worst city for homeowner debt. Household wealth has been reset to 2001 levels while housing prices have declined 57% since the peak in 2005, and 30% in the last year alone. This has dunked 81% of the last five years' mortgages underwater...
House-Price Drops Leave More Underwater -- The downturn in home prices has left about 20% of U.S. homeowners owing more on a mortgage than their homes are worth, according to one new study, signaling additional challenges to the Obama administration's efforts to stabilize the housing market.
The increase in the number of such "underwater" borrowers comes amid signs that falling prices are making homes more affordable for first-time buyers and others who have been shut out of the housing market. But falling prices also make it more difficult for homeowners who get into financial trouble to refinance or sell their homes, and for others to take advantage of lower interest rates...
Nick Timiraos / Developments blog WSJ:
Affluent Homeowners: Underwater and Sinking Fast -- The tide is rising for high-end borrowers.
Some traditionally stable housing markets are facing new stress as rising numbers of affluent homeowners find that they have little to no equity in their homes...
One big worry: Negative equity situations could spur more foreclosures and short sales, particularly as more affluent homeowners lose their jobs or take new ones that pay less. Short sales accounted for around 12% of all home sales in both of those California markets last year...
Foreclosure Firestorm Ahead? -- May could be the month that shows just how bad the numbers will get.
Mark Hanson of the Field Check Group, who works with ForeclosureRadar.com, writes, “there is a Pigzilla the size of a freight train in the python and it has worked its way to the lower intestines.” Hanson claims that foreclosures did not surge in April because the banks simply didn’t have the capacity to process all the distressed loans after all the moratoria had caused a backlog. Specifically, he points to Chase and its WaMu loans...
Mafia Princess Victoria Gotti facing foreclosure on Long Island mansion -- The Mafia Princess may soon be thrown out of her castle.
Victoria Gotti is a deadbeat on the mortgage for her mansion in Old Westbury, L.I., which was prominently featured in the TV series "Growing Up Gotti."
The daughter of the late Gambino crime boss owes JPMorgan Chase about $650,000 and hasn't made a payment in two years, court papers say...
Shift to Saving May Be Downturn's Lasting Impact -- The economic downturn is forcing a return to a culture of thrift that many economists say could last well beyond the inevitable recovery.
This is not because Americans have suddenly become more financially virtuous or have learned the error of their free-spending ways. Instead, these experts say, Americans may have no choice but to continue pinching pennies...
discussion:Conor Clarke / The Atlantic Business Channel: America: Not Now, Or Ever, A Thrifty CountryMyglesias / Matthew Yglesias: A New Culture of Savings? — I think Catherine Rampbell's article …Bill Anderson / LewRockwell.com Blog: NY Times acknowledges people are saving moreCalculated Risk: NY Times on Saving Rate
- Is the United States About to Go Broke? - Scott Burns, MSN Money
- Should Ben Bernanke Cool It? - Irwin Stelzer, The Weekly Standard
- Stress Tests Are Over. Stress Isn't - Gretchen Morgenson, New York Times
- Addressing the 'Too Big Too Fail' Issue - Michael Hiltzik, Los Angeles Times
- Addressing Overseas Tax Questions - Robert Samuelson, Washington Post
- Irrational Exuberance 3.0 Oozes Into Markets - William Pesek, Bloomberg
- How Long Is This Bull's Legs? - Gary Duncan, Times of London
- Amid the Rubble, 'ShangKong' Will Rise - Jeffrey Garten, Financial Times
- How Ford Lived Without Federal Help - Paul Ingrassia, Wall Street Journal
- Why Is Alan Mulally Enjoying Himself So Much? - Alex Taylor III, Fortune
- How the Crash Will Change New York - Jennifer Senior, New York Magazine
- President Obama's Economics Are Too Democrat - John Tamny, Forbes
- Scary Parallels: Is Obama the Next Bush? - Bill Frezza, RealClearMarkets
- Why the Banks Still Aren’t Fixed after the Stress Tests - Flow Chart
- Three Banks Race To See Stock & Repay TARP Funds - DealBook
- How the Recession May Change New York City - Jennifer Senior, NY Mag
- Collateral Damage and Double Standards - Robert Kuttner, Huffington Post
- Stressing Fannie and Freddie: What Does It Mean? - Bruce Krasting
- Is Larry Summers the Next Gordon Brown? - S. Johnson, Baseline Scenario
- Covered Bonds: Back to the Future?- Marc Chandler, Brown Brothers
- Weekly Economic & Financial Commentary - Wachovia Economics
- Credit Losses, Deleveraging and Risk - Richard Berner, Morgan Stanley
- Major Banks Begin To Move Beyond Stress Tests - USA Today
- Industry Groups Offer to Stem Rising Healthcare Costs - Washington Post
- Cities Cry Foul on Stimulus Cash, Challenge Governors - Wall St. Journal