Friday, May 29, 2009

Great Recession Roundup — May 29, 2009

Items of Interest:

Paul Krugman / NY Times:
Op-Ed Columnist: The Big Inflation Scare -- Does the big inflation scare make any sense? Basically, no. And I suspect that the scare is at least partly about politics rather than economics...

Economics Blog / Economics Roundtable: US Dollar and Inflation
Tim / The Mess That Greenspan Made: Krugman: Fear of inflation baseless
Brad DeLong / Grasping Reality with Both Hands: Paul Krugman on Inflation Fears: Economists Should Know Better
William Anderson / Mises Economics Blog: Krugman: Inflation? Not!
Bureau of Economic Analysis:
Gross Domestic Product -- Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 5.7 percent in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to preliminary estimates released by the Bureau of Economic Analysis. In the ...
Jack Healy / NY Times: A Slight Upgrade in 1st-Quarter G.D.P.
Tim / The Mess That Greenspan Made: U.S. economy less bad in Q1
The End of GM

DealBook / NY Times:
U.A.W. Members Ratify G.M. Contract Concessions — The United Automobile Workers union said Friday afternoon that hourly employees at General Motors had overwhelmingly ratified a cost-cutting deal that would help smooth the automaker's path through bankruptcy...

DealBook / NY Times:
G.M. Bondholders Urged to Accept New Debt Deal — Advisers to General Motors bondholders representing $27 billion in the automaker's debt urged investors on Friday to support a debt swap negotiated this week with the Obama administration...

DealBook / NY Times:
After 93 Years, G.M. Shares Go Out on a Low Note — Anyone who grew up thinking of General Motors stock as a blue-chip investment probably wept a little on Friday. G.M.'s shares closed at 75 cents a share on what was likely to be its final day of trading before the company seeks bankruptcy protection...
Editorial / Los Angeles Times: GM and the U.S. Taxpayer
Steven Pearlstein / Washington Post: The Extraordinary Auto Intervention
Daniel Gross / Slate: Here Come the GM Bankruptcy Parasites
David Sokol, a top aide and possible successor to billionaire investor Warren Buffett as CEO of Berkshire HathawayMichael McKee / Bloomberg:
Buffett Aide Sokol Says Housing, Economy Aren’t Near Recovery -- The U.S. housing market is nowhere near recovery and signs of stabilization are premature, said David Sokol, a top aide to billionaire investor Warren Buffett who oversees the nation’s second-largest real estate brokerage.

Sokol was among money managers who told an investment conference in New York the economy is still deteriorating and they don’t have a lot of confidence in President Barack Obama’s economic policies.

“We’re not seeing the green shoots,” said Sokol, head of MidAmerican Energy Holdings Co., which owns HomeServices of America Inc. “We don’t see improvement.” ...

Homes in the process of foreclosure are creating a “shadow backlog” of unsold properties that will continue to hang over the market...
Jeff Matthews Is Not Making This Up: “No Green Shoots Here”...A Message from Warren Buffett’s (Likely) Successor.

Thursday, May 28, 2009

Great Recession Roundup — May 28, 2009

Items of Interest:

New York Times:
New G.M. Plan Gets Support From Key Bondholders — As General Motors moved closer to a bankruptcy filing, possibly early next week, attention on Thursday turned again to the bondholders, the most important group that the company has yet to win over for its efforts to start fresh...

Micki Maynard / DealBook: U.A.W. Defends Itself and Takes On G.M. Bondholders
Ryan Avent / The Washington Independent: Some Good News for ‘Government Motors’

GM Said to Plan June 1 Bankruptcy as Debt Plan Gains -- General Motors Corp., the world’s largest automaker until its 77-year reign ended in 2008, plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said...

Joann Muller & Brian Wingfield / Forbes: GM Skids Toward Bankruptcy
Ted Reed / What Will Cure Automakers Is Selling Cars
1 in 8 US Homeowners Are Late Paying or In ForeclosureCNBC:
1 in 8 Homeowners Late Paying or In Foreclosure -- One of eight U.S. households with a mortgage ended the first quarter late on loan payments or in the foreclosure process in a crisis that will persist for at least another year until unemployment peaks, the Mortgage Bankers Association said on Thursday...
Diana Oleck / CNBC Realty Check:
It's Prime Time In Foreclosures -- It’s not like we didn’t know it was coming, but apparently it’s coming with a vengeance.

Prime fixed-rate loans have finally leapfrogged those nasty subprimes to take the lead in the race to foreclosure. The foreclosure rate on primes has in fact doubled in the last year, and almost half of the overall increase in foreclosure starts in the first quarter of this year was due to the increase in primes.

I got a call yesterday from Scott Scredon at the Consumer Credit Counseling Services in Atlanta. He says they’ve seen a distinct change in callers. “We’re getting calls from engineers and attorneys and post graduate students,” he says. “Many of these people run through their 401Ks and their savings and start living off credit cards and then they call a counseling agency for help. So it’s a new kind of person we’re seeing today, but it’s a sign of the times.” ...

Calculated Risk: New Home Sales: The Distressing Gap
Mortgage Market Locks Up

Mr. Mortgage Live:
Potential Consequences of 5.5% Mortgage Rates -- Yesterday, the mortgage market was so volatile that banks and mortgage bankers across the nation issued multiple midday price changes for the worse, leading many to ultimately shut down the ability to lock loans around 1pm PST. This is not uncommon over the past five months, but not that common either. Lenders that maintained the ability to lock loans had rates UP as much as 75bps in a single day. Jumbo GSE money — $417k - $729,750 — has been blown out completely with some lender’s at 8%. I have seen it all in the mortgage world — well, I thought I had.

A good friend in the center of all of the mortgage capital markets turmoil said to me yesterday “feels like they [the Fed] have lost the battle…pretty obvious from the start but kind of scary to live through it … today felt like LTCM with respect to liquidity.”
Mish's Global Economic Analysis: Mortgage Market Locks Up
Derek Thompson / The Atlantic - Business:
The Graph That Will Solve the Financial Crisis -- Here's a pie chart that puts into perspective the size of the Fed's involvement in the financial crisis. The entire circle represents approximately 8 trillion dollars. Yes, $8,000,000,000,000. The blue quadrant represents federal lending including expansion of swap lines to the tune of about $2 trillion. The purple quadrant comprises housing related purchases ($1.45 trillion) and buying $1.8 trillion of commercial paper. You can see a more itemized breakdown here.

Federal government spending $8 trillion dollars on financial crisis
Timothy Lavin / The Atlantic:
The Fed's Cash Machine -- As the housing collapse has turned into a financial crisis, and the financial crisis into an economic calamity, the government has tried furiously to keep the country free of breadlines and trash-can fires. Two of its interventions—the $700 billion bank bailout known as TARP and the $787 billion stimulus package—have inspired levels of partisan acrimony and journalistic scrutiny befitting a war vote. But neither of those initiatives, expensive as they are, approach the civic munificence displayed by the Federal Reserve...
FDIC's bad loan sale program stalling: sources -- A program to cleanse U.S. banks of bad loans has been stalled by recovering markets and fears among investors and banks of being hit by new government rules mid-game, sources familiar with the program said.

A pilot sale of $1 billion worth of whole loans by the Federal Deposit Insurance Corp, a U.S. bank regulator, may not take place next month as planned, the sources said.

However, the Treasury Department is pressing ahead with a parallel program to create public-private investment funds that would buy failed mortgage securities from banks.

A Treasury official said the launch of the Public Private Investment Program (PPIP) was on still track for a launch in late June or early July, but declined to comment on whether the whole loans portion of the effort would be delayed...
E. Klein / Washington Post:
Is the Geithner Plan DOA? -- The Wall Street Journal reports that the Public-Private Investment Program -- better known as Geithner's Plan -- might never live at all...

WSJ: Plan to Buy Banks' Bad Loans Founders
Steve Benen / Washington Monthly:
THERE IS NO CAR-DEALER CONSPIRACY -- A whole lot of right-wing blogs are worked up today over a report about the political affiliations of Chrysler dealers who've been shut down. … Rep. Vern Buchanan (R-Fla.), who has a dealership that will close, called this “an outrage.”
Jonah Goldberg / The Corner: Targeting GOP Car Dealers?
Ryan Powers / Think Progress:
Fox News Embraces Right-Wing Theory That Obama Is Forcing GOP-Owned Car Dealerships To Close — Citing a handful of right-wing bloggers yesterday afternoon, the Washington Examiner reported ominously, “Evidence appears to be mounting that the Obama administration has systematically targeted Chrysler dealers …
Mark Tapscott / Washington Examiner:
Furor grows over partisan car dealer closings
Tom Maguire / JustOneMinute: Dealergate — It's going to take a lot of digging to see if there is gold in Dealergate.
Rabble Rouser Reverend Amy / NO QUARTER: Payback's A Bitch
Steve M. / No More Mister Nice Blog: REPUBLICAN CRACK-UP WATCH
Kenneth R. Timmerman / Republican Donors Hit by Chrysler Closings
Joey Smith / Chrysler Dealership Campaign …: Robert Gibbs Press Conference (Chrysler Closings)
Eric Dondero / Libertarian Republican: STUNNING REVELATION!! …
Mish's Global Economic Trend Analysis:
Initial Unemployment Claims Dip Slightly; Continuing Claims Approach 6.8 Million, 17th Consecutive New Record -- The peak in initial claims might be in but the peak in unemployment is nowhere close. Continuing claims hit 6.788 million, setting a record for the 17th straight week.

The peak in initial claims might be in but the peak in unemployment is nowhere close. Continuing claims hit 6.788 million, setting a record for the 17th straight week...

Wednesday, May 27, 2009

Great Recession Roundup — May 27, 2009

Items of Interest:

projected U.S. budget deficits from 2008 to 2019John Taylor / Financial Times:
Exploding debt threatens America -- Standard and Poor’s decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. Let us hope they wake up.

Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years...

Mark Thoma / Economist's View: Starve the Beast (Recession Edition)
Andrew Sullivan / The Daily Dish: Deal With The Debt! — Or face serious inflation.
Curtis Dubay / The Foundry: Out of Money? Value-Added Tax Next Up
Ryan Avent / The Washington Independent: America Unable to Talk About Debt Without Losing It
Steve Verdon / Outside The Beltway: John Taylor on U.S. Debt
Fausta / Fausta's Blog: Andres Velasco's plan: Save for a rainy day

Brian Wesbury & Robert Stein / Forbes: America's Debt Is Still Triple A
Zubin Jelveh / The Stash: How Long Can Rates Say Low Without Inflation?
Joe Weisenthal / Clusterstock: Why Quantitative Easing Fails
Barry Ritholtz / Big Picture:
Dollar's Slide Begins to Hurt Foreign Investors -- Will the greenback turn out to be the Achilles heel of the US economy?
U.S. Inflation to Approach Zimbabwe Level, Faber Says -- The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said...
Edward Harrison / naked capitalism: Guest post: Marc Faber says “I am 100% sure that the U.S. will …
Ryan Chittum / Nut Says Moon Is Made Of Cheese, Bloomberg Reports
Felix Salmon: Hyperbole watch, Bloomberg edition
Washington Post:
Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look -- Levy Viewed as Way to Reduce Deficits, Fund Health Reform

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity...
Diana Oleck / CNBC Realty Check:
High-End Foreclosures Are Next -- I heard a startling statistic from the National Association of Realtors this morning…no not that home sales are actually increasing, but something about the high end of the market.

Chief economist Lawrence Yun said that the supply of existing homes for sale over $750,000 has reached a forty-month supply. Yep, that means it would take well over three years at the current place to sell off all of those homes.

The trouble is manifold: Jumbo loans are pricier and more difficult to get, job losses are mounting, and buyers in that price home are generally move-up buyers, so they have to sell their own homes first...

Tuesday, May 26, 2009

Great Recession Roundup — May 26, 2009

Items of Interest:

NY Times:
Home Prices Continued Their Decline in March -- Home sales may be up in many parts of the country but prices continue to scrape along the floor, raising fresh doubts about the recovery of a critical sector.

Prices in 20 major metropolitan areas dropped by 18.7 percent in March when compared with the same month a year ago, according to the Standard & Poor’s Case-Shiller Home Price Index that was released Tuesday. That was about the same as February and just shy of January’s record plunge of 19 percent.

“Foreclosures have picked up, and that seems to be pushing prices down,” said David M. Blitzer, chairman of S.& P.’s index committee. “The recession is really biting.” ...

Standard & Poors:
Nationally, Home Prices Began 2009 with Record Declines

Homes: Almost 20% cheaper -- The home price slide accelerated during the first three months of 2009, according to a report issued Tuesday...

The Big Picture:
Why a Housing Recovery Requires Lower Prices
More Job Losses = Greater Foreclosures

S&P/Case-Shiller Home Price Index - through March 2009----
Housing Hitting Bottom Means Fewest Starts Since 1945 -- The slump in the U.S. housing market that caused the median value of homes to decline 24 percent since 2006 may bottom next month without any prospect of a rebound for another year, according to estimates from chief economists at Fannie Mae and Freddie Mac, the Mortgage Bankers Association and national realtors and homebuilder groups.

Existing home sales probably won’t reach pre-boom levels until the third quarter of 2010 and housing starts won’t surpass 1 million until 2011, a barrier last broken six decades ago, the economists said...
NY Times:
Job Losses Push Safer Mortgages to Foreclosure -- As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

In the latest phase of the nation’s real estate disaster, the locus of trouble has shifted from subprime loans — those extended to home buyers with troubled credit — to the far more numerous prime loans issued to those with decent financial histories...
Unemployment at 8 Percent Is the New Normal as Growth Slows -- Americans may have to get used to unemployment greater than 8 percent for the first time since 1983 and an economy that won’t grow much beyond 2 percent as a consequence of the lost confidence in consumer credit that shattered financial markets.

By this time next year, “the market will realize that potential growth for the U.S. is no longer 3 percent, but is 2 percent or under,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview with Bloomberg Radio.

“We are transitioning to what we call at Pimco a new normal,” El-Erian said...
Greenspan Says Banks Still Have a ‘Large’ Capital Requirement -- Former Federal Reserve Chairman Alan Greenspan signaled that the financial crisis has yet to end even as borrowing costs tumble, warning that U.S. banks must raise “large” amounts of money.

“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said...

Greenspan’s comments suggest he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests on the 19 biggest U.S. lenders...
Wall Street Journal:
Millionaires Go Missing — Maryland's fleeced taxpayers fight back. Here's a two-minute drill in soak-the-rich economics: — Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy...
Conor Clarke / The Atlantic Business Channel: Why The Wall Street Journal Should Like Progressive Taxes
Brink Lindsey /
Nostalgianomics -- Liberal economists pine for days no liberal should want to revisit.

“The America I grew up in was a relatively equal middle-class society. Over the past generation, however, the country has returned to Gilded Age levels of inequality.” So sighs Paul Krugman, the Nobel Prize–winning Princeton economist and New York Times columnist, in his recent book The Conscience of a Liberal.

The sentiment is nothing new. Political progressives such as Krugman have been decrying increases in income inequality for many years now. But Krugman has added a novel twist...

Friday, May 22, 2009

Great Recession Roundup — May 22, 2009

Items of Interest:

Floyd Norris / New York Times:
U.S. Jobless Rate May Soon Top Europe's -- For many years, unemployment in the United States was lower than in Western Europe, a fact often cited by people who argued that the flexibility inherent in the American system — it is easier to both hire and fire workers than in many European countries — produced more jobs.

That is no longer the case. Unemployment in the United States has risen to European averages, and seems likely to pass them when international data for April is calculated...

John Quiggin / Crooked Timber: Refuted economic doctrines #8: the superiority of flexible labor markets
Pastorius / THE ASTUTE BLOGGERS: U.S. Jobless Rate May Soon Top Europe's
Ken Houghton / Angry Bear: UnReal Business Cycle
scenes from dead malls at flickr.comWall Street Journal:
Recession Turns Malls Into Ghost Towns -- Malls, those ubiquitous shopping meccas that sprang up in the 1950s, are dwindling in number, with many struggling properties reduced to largely vacant shells.

On the low-income east side of Charlotte, N.C., the 1.1-million-square-foot Eastland Mall recently lost a slew of key tenants, including a Dillard's and, next month, a Sears. Sales per square foot at the venue fell to $210 in 2008 from $288 in 2001...
related: dead malls
Labelscar [retail history blog]
They forclosed on 'The Shire.' Bilbo Baggins is saddened.

Greg Steckler -- the sole resident, with his wife and mother-in-law, of Bend's hobbit-themed Shire development -- plays with his dog, Wally.The Oregonian:
After storybook boom, Bend faces a tough chapter -- Once upon a time not so long ago, developers seeking magic money poured $4 million into a "Lord of the Rings" subdivision here complete with hobbit holes and thatch-roof houses.

This month Umpqua Bank, which foreclosed on The Shire, unloaded the moribund development for just $750,000.

It's hardly the storybook ending J.R.R. Tolkien might have written for a project that symbolized the extremes of Bend's legendary boom. But central Oregon has become the Middle Earth of unemployment -- at 17 percent...
Paul Krugman / New York Times:
Blue Double Cross -- That didn’t take long. Less than two weeks have passed since much of the medical-industrial complex made a big show of working with President Obama on health care reform — and the double-crossing is already well under way. Indeed, it’s now clear that even as they met with the president, pretending to be cooperative, insurers were gearing up to play the same destructive role they did the last time health reform was on the agenda...
John Aravosis / AMERICAblog News: Blue Double Cross
Cup O' Joe: Dear Paul Krugman
Mark Thoma / Economist's View: Paul Krugman: Blue Double Cross

Thursday, May 21, 2009

Great Recession Roundup — May 21, 2009

Items of Interest:

Jobless Claims in U.S. Decreased 12,000 to 631,000 — More Americans than forecast filed claims for unemployment insurance last week, and the total number of workers receiving benefits rose to a record, signs the job market continues to weaken even as the economic slump eases...

United Kingdom Outlook Revised To Negative On Deteriorating Public Finances; 'AAA/A-1+' Ratings Affirmed -- Standard & Poor's has revised the outlook on the United Kingdom to negative from stable. -- The 'AAA' long-term and 'A-1+' short-term sovereign credit ratings were affirmed. -- The outlook revision is based on our view that, even factoring in further fiscal tightening, the U.K.'s net general government debt burden may approach 100% of GDP and ...
Standard & Poor's cuts U.K. outlook to negative from stable -- Standard & Poor's on Thursday lowered its credit outlook on the U.K. to negative from stable for the first time ever in view of the country's swelling debt, which may expand even as the economy recovers...

Financial Times:
Overview: UK debt alert a reminder for markets -- “The elephant in the room is the US,” said David Simmonds, head of research and strategy at ABN Amro. “There is a sense somewhere in this that S&P may be using the ratings outlook conversation around the UK as a key trial balloon for a potentially explosive US discussion further down the track.” ...

David Goldman / Inner Workings:
UKalifornia, or why there’s never going to be a recovery -- Now comes the matter of California. Governing by apocalypse is the only option left to the Governator, who cannot get the Democrats to accept budget cuts and could not persuade the electorate in this week’s referendum to accept tax increases. The state’s misery should be kept in perspective, though. The state’s 25-year bonds yielded 6.43% in late March, and yesterday yielded 5.6%. Like the UK, a deterioration in state finances doesn’t portend anything like default...
PIMCO's Gross: U.S. at risk of losing top AAA rating -- Bill Gross, manager of the world's biggest bond fund, warned on Thursday the United States will eventually lose its top AAA credit rating, a fear that had already spooked financial markets on Thursday and could keep the dollar, stocks and bonds under heavy selling pressure.

The United States will face a downgrade in "at least three to four years, if that, but the market will recognize the problems before the rating services -- just like it did today," Gross told Reuters...
Largest bank failure of '09: Equity firms get BankUnited -- U.S. bank regulators Thursday closed troubled lender BankUnited Financial, Florida's largest bank, and sold its banking operations to a private equity consortium that includes WL Ross & Co.

BankUnited, which had $12.8 billion in assets and $8.6 billion in retail deposits, is the biggest of 34 U.S. banks to fail so far this year.

The Federal Deposit Insurance Corp. said it estimates BankUnited's failure will cost its insurance fund $4.9 billion...
U.S. Prepares to Send GM Into Bankruptcy -- Under the GM draft bankruptcy plan, the company would receive just short of $30 billion in additional federal loans, a source said. A cash injection that large would boost the total U.S. investment in GM to nearly $45 billion...
CalculatedRisk: WaPo: Auto Bankruptcies Next Week: GM in, Chrysler out

Los Angeles Times: Faith in General Motors Has Hurt Small Investors
Sacramento Bee Rips California Taxpayers

Directorblue / Doug Ross:
Sacramento Bee publishes vicious screed bashing taxpayers, gets caught, then scrubs with milquetoast replacement -- Early this morning, the failing Sacramento Bee published a "vicious screed" that pilloried taxpayers for refusing to feed California's insatiable state government.

After a firestorm of criticism over the tone of the op-ed, it was replaced with a mild-mannered critique aimed primarily at state legislators...
La Shawn / La Shawn Barber's Corner:
SacBee Rants Against Voters, Then Lies About Rant -- After a flood of negative comments about the negative editorial, the SacBee published a new one aimed at politicians instead of voters...

The SacBee published the first time the editorial it intended. It wasn’t an error. The paper backtracked after readers criticized the disrespectful screed, then published a new editorial to cover its butt....

Gateway Pundit: Lib California Speaker Karen Bass Says Voters Rejected Tax Hikes …
Cranky / Six Meat Buffet: You Stupid, Stupid California Voters
Noel Sheppard / California Paper Bashes Anti-Tax Hike Voters, Then Scrubs It

McClatchy Watch / CancelTheBee blog:
[This blog is mainly about the spectacular train wreck at The Sacramento Bee and its parent company, the McClatchy Company.]
An editorial board goof has the Sacramento Bee red-faced -- and voters now have a clue what the Bee really thinks about them

Melanie Sill, Sacramento Bee editor is embroiled in more elite journalismReplacement Editorial /
Now Voters Have Judged Leaders; How will leaders take the rebuke?

note: The current Sacramento Bee editor is Melanie Sill, who became infamous for the character defamation, deception, and biased reporting she condoned as editor of the News & Observer during the Duke lacrosse rape hoax (2006-07).

McClatchy Watch / CancelTheBee blog:
Sacramento Bee editor finds 2 enlightened readers -- Sacramento Bee editor Melanie Sill has been "inviting Bee readers into a conversation" -- her annoying phrase -- about the Bee and the role of journalism.

In her column today she highlights two readers who have seen the light -- which of course means they hold the same view Melanie Sill does...

Twitter | Ukraine World

Twitter | Volodymyr Zelenskyy (Ukraine President)

Twitter | Euromaidan Press

Twitter | The Kyiv Independent

Twitter | Ukraine Weapons Tracker

Daily Reckoning