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Thursday, July 9, 2009

Great Recession Roundup — July 9, 2009

Items of Interest:

Ben Rooney / CNNMoney.com:
Fewer than expected file for unemployment — Labor Department says first time jobless claims fell by 52,000 last week to 565,000. But continuing claims rose to another record high.

The number of Americans filing initial unemployment claims fell sharply last week … It was the lowest number since January and was below the consensus estimate of 603,000 from economists surveyed...

Gaius / Blue Crab Boulevard: No Shame — CNN is trying mightily - and shamelessly …
Mish's Global Economic Analysis:
Continuing Claims Soar by 159,000 to New Record; Initial Jobless Claims Skewed By Autos -- The peak in initial claims might be in but the peak in unemployment has not. Moreover, reported continuing claims hit 6.883 million, setting a new all time record. By the way, the real number of continuing claims is closer to 9.4 million as detailed below...
Nouriel Roubini / Forbes:
Brown Manure, Not Green Shoots -- The jobs situation is even worse than the headlines.

The June employment report suggests that the alleged green shoots are mostly yellow weeds that may eventually turn into brown manure. The employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000. With the current rate of job losses, it is very clear that the unemployment rate could reach 10% by later this summer--around August or September--and will be closer to 10.5%, if not 11%, by year-end. I expect the unemployment rate is going to peak at around 11% at some point in 2010, well above historical standards for even severe recessions...
Buffett Likens Economic Stimulus to Viagra — The Legendary Investor Is Critical of the First Stimulus Package, Comparing It to Viagra and Candy — As debate grows about a possible second stimulus package for the flagging American economy, at least one legendary investor is giving the idea his guarded approval...
Gaius / Blue Crab Boulevard: Can You Get It Over The Counter?
Commercial Real Estate Is a ‘Time Bomb,’ Maloney Says -- The $3.5 trillion commercial real estate market is a ticking “time bomb” that may lead to a second wave of losses at large U.S. banks, congressional Joint Economic Committee Chairwoman Carolyn Maloney said.

About $700 billion in commercial mortgages will need to be refinanced before the end of 2010 and “doing nothing is not an option,” Maloney, a New York Democrat, said at a committee hearing today. This “looming crisis” may lead to significant losses for banks, force shopping center and hotel owners into bankruptcy, and impede economic recovery, she said...
Washington Business Journal:
Economist: FDIC gearing up for bank closures -- The Federal Deposit Insurance Corp. is gearing up to handle a large number of bank failures expected as a result of bad mortgages, both in residential and commercial real estate, an economist said Tuesday...
Wall Street Journal:
Subprime Resurfaces as Housing-Market Woe -- In Atlanta, a Foreclosure Dichotomy Threatens Homes Values

The U.S. housing market is facing new downward pressure as holders of subprime-mortgage bonds flood the market with foreclosed homes at prices that are much lower than where many banks are willing to sell.

While nationwide figures are scarce, a review of thousands of foreclosures in the Atlanta area shows that trusts managing pools of securitized mortgages sold six times as many properties as banks during the six months ended March 31. And homes dumped by subprime bondholders sold for thousands of dollars less on average than bank-owned properties, the data show.

Experts say this is a bad omen...
NY Times:
Late Surge Puts Claims Past 15,400 In Madoff Ponzi Case -- The final tally of claims from victims of Bernard L. Madoff’s vast Ponzi scheme comes to more than 15,400, substantially higher than the 8,800 claims that had been filed by the first of June.

The total was included in an interim report filed on Thursday in Federal Bankruptcy Court in Manhattan by Irving H. Picard, the trustee overseeing the liquidation of Mr. Madoff’s estate.

The report, which covers the first six months of the trustee’s tenure, also provided some limited details about his independent examination of the Madoff fraud, which continues to be investigated by federal prosecutors and securities regulators...
Guest Contribution: The Fall of the Toxic-Assets Plan -- Lucian Bebchuk says that the toxic-asset program, which has been curtailed significantly, hasn't made the problem go away.

The plan for buying troubled assets — which was earlier announced as the central element of the administration’s financial stability plan — has been recently curtailed drastically. The Treasury and the FDIC have attributed this development to banks’ new ability to raise capital through stock sales without having to sell toxic assets. But the program’s inability to take off is in large part due to decisions by banking regulators and accounting officials to allow banks to pretend that toxic assets haven’t declined in value as long as they avoid selling them...
GM Will Exit Bankruptcy Court With $48 Billion in Liabilities -- General Motors Corp., which is preparing to sell its best assets to a streamlined new entity, will carry with it liabilities of $48.4 billion, a bankruptcy judge said.

The new GM agreed to take on those obligations to benefit creditors, U.S. Bankruptcy Judge Robert Gerber in New York said in a ruling on July 7 that denied a quick appeal to opponents of the sale. They will be offset by GM’s most competitive assets, such as Cadillac, Chevrolet, Buick and GMC.

Among the liabilities are more than $17 billion of debt to the U.S. and Canadian governments, a workers health trust and unspecified foreign lenders...
Paul Ingrassia / Wall Street Journal: General Motors Gets a Second Chance
LA Times:
In fundamental shift, consumers are saving rather than spending -- The belt-tightening is almost certain to have a negative effect on the U.S. economy, in which about 70% of gross domestic product comes from personal consumption.

The continuing decline in consumers' use of charge cards and other forms of credit reflects an underlying weakness in the U.S. economy that most of the government's recovery plans fail to attack head-on. And it suggests a fundamental shift in the way Americans save and spend that is likely to act as a drag on the economy for at least several years...
ABC News:
Recession Marriage Trend: Living Apart -- For More Married Couples, Staying Employed Means Living in Different Time Zones

After getting laid off from her job as an advertising executive last Thanksgiving, Leslie Singer co-founded the branding consultancy HS Dominion. The hitch: she had to hang her shingle in New York City, two-and-a-half hours from the Madison, Conn., home she shares with her partner of 17 years and their two teenage children...

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