It's been an interesting week for spin, contradictions, media gaffes and missteps relating to our economy and all matters dovetailing with it. One could say that efforts to obfuscate our economic reality have reached a tipping point, where the facts are just overwhelming the spin.
Earlier today, I read Bonddad's excellent diary (and, yes, I've been pretty tough on the guy of late): Do We Need Another WPA? But, then I thought to myself, how can the term "recovery" be used in an environment that would tolerate a 20% (US Labor Dept's BLS' U.6 Index) unemployment rate, five points worse than where we were at in 1939? It just doesn't make sense. It's a veritable contradiction in terms. That's not a "recovery!"
After reviewing an article that appeared in the UK's Telegraph this week by highly-respected columnist Ambrose Evans Pritchard, regarding an absolutely brutal speech concerning the boondoggle known as TARP that investment banker Michael Patterson (a recipient of TARP funds who purchased Michigan's Flagstar Bank earlier this year) gave at the Qatar Investment Forum the other day, we learned that Patterson issued a letter on Friday denying Pritchard's account of his speech (as in a 180-degree denial). And, the Telegraph "yanked" the story. Here's the original coverage of the piece, since it's no longer available: "
TARP Beneficiary Says Sham Bailouts Help Speculators."
Here's Naked Capitalism's account of this:
We posted last night on a Telegraph story, in which one Michael Patterson, head of a private equity firm that used TARP funds to buy a Michigan bank, said some less than positive things about it at an conference.
If you go to the link to the story now, guess what? The Telegraph has yanked it.
Tyler Durden had the presence of mind to put up the entire piece on his blog. Patterson has been issuing requests for retraction, claiming "factual errors" and the Telly complied. Patterson has had his "representatives" which I assume means attorneys, send a copy of the letter that Patterson sent to the Telegraph effectively disclaiming the entire content of the artice. . Durden has said he is willing to correct any factual errors (as opposed to deep sixing the entire story).
Patterson spoke at the Qatar Investment Forum. He has no reason to expect confidentiality; the remarks were made in a public forum with no restrictions placed on the attendees. Durden is soliciting input from fellow panelists and attendees as to what Patterson really said.
Truth be told, I had copied Evans-Pritchard's original Telegraph piece when it first appeared, but I'll let Zero Hedge do the talking on this one, Mark Patterson: "It's A Sham. The Banks Are Insolvent."
"The taxpayers ought to know that we are in effect receiving a subsidy. They put in 40pc of the money but get little of the equity upside," said Mark Patterson, chairman of MatlinPatterson Advisers...
Mr Patterson said the US Treasury is out of its depth and seems to be trying to put off drastic action by pretending that the banking system is still viable.
"It's a sham. The banks are insolvent. The US government is trying to sedate the public because they are down to the last $100bn (£66bn) of the $700bn TARP funds. They think they're doing this for the greater good of society," he said, speaking at the Qatar Global Investment Forum.
--SNIP--
MatlinPatterson said private equity and hedge funds were deluding themselves in hoping to go back to business as usual after the trauma of the last 18 months.
--SNIP--
"The US government has thrown 29pc of GDP at this crisis compared to 8pc in the early 1930s. The Fed's balance sheet has risen from $900bn to $2.7 trillion to bail out the system. America has to do it because the only way out is to debase the currency, but that is going to lead to some very high inflation three years down the road," he said.
Now, remember, this was, supposedly, from someone (who is now denying he said these things) who benefitted to the tune of tens of millions of dollars from the TARP program!
So, after reading all this, I thought I'd take a look at some other, recent MEDIA FICTION versus FACT regarding our economy...
INDUSTRIAL PRODUCTION FICTION:
Larry Summers, according to Bloomberg (whose headlines of late don't really jive with the content of their stories), tells us the: "U.S. Economy Is No Longer in `Freefall,' Summers Says." Which is totally believeable as long as you don't read the article.
U.S. Economy Is No Longer in `Freefall,' Summers Says
By Chua Kong Ho
May 16 (Bloomberg) -- The U.S. economy is no longer in "freefall," Lawrence Summers, director of the White House National Economic Council, said today in a pre-recorded video shown at a forum in Shanghai.
--SNIP--
Industrial production contracted at the slowest pace in six months, as output at U.S. factories, mines and utilities decreased 0.5 percent in April after dropping 1.7 percent in March, Federal Reserve figures showed yesterday. The Reuters/University of Michigan preliminary index of consumer sentiment rose to 67.9 in May from 65.1 in April.
"To be sure, the lull that we're seeing now does not assure that a foundation for continued recovery has been established," Summers said. "It does not assure that when recovery comes, it will be sufficiently rapid to reduce unemployment on a significant scale."
Bold type is diarist's emphasis.
So, things are getting 'better,' but 'a foundation for recovery may not be established,' and 'unemployment could continue to get worse.'
Alrighty then... well, just don't look too closely at the story and you'll concur that all's well with the world. Unfortunately for Larry Summers, John Williams over at Shadow Stats had this to say about U.S. industrial production on Friday:
INDUSTRIAL PRODUCTION FACT:
Industrial Production Is in Depression. The Federal Reserve reported that seasonally-adjusted April industrial production fell by 0.5% (down 0.3% net of revisions) for the month, after a revised 1.7% (previously 1.5%) decline in March. The year-to-year decline in activity held at 12.5% for April, versus 12.5% (previously 12.8%) decline in March. Such remained the weakest showing for the series since war-time production was shut down after World War II.
With annual change down 12.5% and with a peak-to-trough (April is the short-lived current trough) contraction at 16.0%, the industrial sector of the economy (including manufacturing, mining and utilities) is in a depression. A depression is defined (SGS) as a recession where the peak-to-trough economic contraction exceeds 10%.
Bold type is diarist's emphasis.
In last weekend's lead-up to a "major healthcare reform meeting" at the White House the spin was mighty thick throughout the blogosphere:
HEALTHCARE REFORM FICTION:
Health Care Deal In The Works?
May 10 2009, 6:31 pm by Marc Ambinder
The White House just held an embargoed briefing for reporters about a new health care cost initiative that will be announced tomorrow. I'll respect the embargo, even though the Associated Press has got the basics of it in a dispatch: representatives from major health care stakeholders have agreed to a comprehensive, multi-faceted outline (still and outline) of $2 trillion in cost-reductions. This is big -- and I'm not talking about the news. I'm talking about the dealmaking between unions, corporations, the health insurance companies and hospitals. And there all going to be at the White House tomorrow. What's the bottom line political significance of all of this: it means that the White House is gonna get health care reform, this year.
By Thursday, however...not so much...
HEALTHCARE REFORM FACT:
Health Care Leaders Say Obama Overstated Their Promise to Control Costs
By ROBERT PEAR
Published: May 14, 2009
WASHINGTON -- Hospitals and insurance companies said Thursday that President Obama had substantially overstated their promise earlier this week to reduce the growth of health spending.
--SNIP--
They say they agreed to slow health spending in a more gradual way and did not pledge specific year-by-year cuts.
--SNIP--
"There's been a lot of misunderstanding that has caused a lot of consternation among our members," said Richard J. Umbdenstock, the president of the American Hospital Association. "I've spent the better part of the last three days trying to deal with it."
--SNIP--
...the executive vice president of the hospital association, said: "The A.H.A. did not commit to support the `Obama health plan' or budget. No such reform plan exists at this time..."..."The groups did not support reducing the rate of health spending by 1.5 percentage points annually..."
He and other health care executives said they had agreed to squeeze health spending so the annual rate of growth would eventually be 1.5 percentage points lower.
And, then there was this gem in it:
Nancy-Ann DeParle, director of the White House Office of Health Reform, said "the president misspoke" on Monday and again on Wednesday when he described the industry's commitment in similar terms. After providing that account, Ms. DeParle called back about an hour later on Thursday and said: "I don't think the president misspoke. His remarks correctly and accurately described the industry's commitment."
The story went on to provide similar quotes from four or five other healthcare industry representatives present at the meeting.
Stories trumpeting an increase in consumer confidence levels simultaneously contradict themselves. NOTE: This story was originally entitled: "US Stocks Steady On Consumer Confidence Report." Notice it's headline now:
CONSUMER SENTIMENT FICTION:
"Stocks Barely Budge As Investors Await New Signals," originally headlined:
"US Stocks Steady On Consumer Confidence Report"
Jack Healy
NY Times April 28, 2009
...Shares of department stores and other retailers, cable companies and other consumer companies paced the rest of the market after the Conference Board reported that its consumer confidence index rose in April.
The index rose to 39.2 this month, from 26.9 in March, as people said their economic situation had not significantly worsened, and that their expectations for the future had improved. Fewer people said business conditions were bad, and they said they expected more jobs to be available in the months ahead.
Still, consumers are more pessimistic than they were last November, when the financial crisis was erupting, and their hopes about jobs could change if unemployment continues to increase...
Note: Use of the word, "probably," headlining stories where the reality is "probably not," if you look further below.
Retail Sales in U.S. Probably Steadied as Confidence Climbed
By Courtney Schlisserman
May 13 (Bloomberg) -- Retail sales in the U.S. probably steadied in April as consumers gained confidence the economic slump may be easing, economists said before reports today.
Purchases were unchanged after dropping 1.2 percent in March, according to the median estimate in a Bloomberg News survey. Excluding automobiles, sales probably rose 0.2 percent, after a 1 percent decrease in March, the survey showed.
Lower borrowing costs, a rebound in stocks and smaller job losses last month led to the biggest jump in sentiment in three years, making it more likely spending will see sustained gains in the second half of 2009. Even so, an unemployment rate that is projected to remain elevated for years may make for a subdued economic recovery.
As most retailers and many economists will tell you, the slight bounce in consumer spending that was realized over a month or two of the first quarter was due, primarily, to income tax refunds.
CONSUMER SENTIMENT FACT:
U.S. Economy: Retail Sales Unexpectedly Fall for Second Month.
U.S. Economy: Retail Sales Unexpectedly Fell in April
By Courtney Schlisserman
May 13 (Bloomberg) -- Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash.
The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Other reports showed companies continued to cut stockpiles as demand slowed, and climbing oil costs pushed up prices for imported goods.
Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers' ability to spend for years, analysts said. Stocks dropped for a third day as the reports indicated any recovery from the worst recession in at least half a century is likely to be subdued.
"It looks like consumers are losing momentum heading into the second quarter and that is a very worrisome development," said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. "They have very significant headwinds and number one among them is that the labor market is far from turning the corner."
As John Williams also provides us with a heavy dose of reality as far as consumer spending is concerned:
On a three-month moving-average basis, the April and March annual real declines were 8.91% and 8.72%, respectively. Along with the declines of the last several months, the April annual decline in the moving-average remains at the low for the two historical retail series of the post-World War II era.
Stories such as this clog up the financial press these days, concerning a miniscule blip in new home starts: "Home Starts, Leading Index Probably Rose: U.S. Economy Preview." The reality is new home sales only account for roughly 5%-10% of overall home sales. And, this story isn't about sales, but starts, trumpeting roughly a 2% rise...which makes sense when you account for seasonally-related issues.
REAL ESTATE FICTION:
Home Starts, Leading Index Probably Rose: U.S. Economy Preview
By Bob Willis
May 17 (Bloomberg) -- Builders probably broke ground on more houses in April and a measure of the U.S. economic outlook rose for the first time in almost a year, adding to signs the recession was abating, economists said before reports this week.
Housing starts increased 2 percent to an annual rate of 520,000 last month, according to the median forecast of economists surveyed by Bloomberg News before a Commerce Department report on May 19. The index of leading economic indicators probably climbed 0.8 percent, figures from the Conference Board may show.
An easing in the housing slump, now in its fourth year, is an essential element of most forecasts for an economic recovery later this year. Rising stock prices and improving consumer confidence are among the components of the leading index that are stoking speculation the economy will begin to grow again in the next six months.
With almost 25% of the population "upside-down" in their mortgages--owing more than their property's worth--foreclosures are expected to rise significantly throughout the remainder of 2009. Exacerbated by more than 500,000 foreclosed properties not even publicized on the banking industry's balance sheets as well as an ongoing increase in the unemployment rate into 2010, at the very least, this downward spiral will not be abating for at least many, many months, if not years.
REAL ESTATE FACT:
"U.S. Home Prices Continued to Decline in February."
By DAVID STREITFELD and JACK HEALY
Published (Online): April 28, 2009 Published (Print): April 29, 2009
...The Case-Shiller data show that housing markets across the United States are still suffering. Half of the 20 metropolitan areas in the index posted record year-over-year declines. In all, the 20-city index was down 2.2 percent from January.
From Atlanta to San Francisco to Chicago, not one of the 20 cities posted a gain in home prices from January to February, and values in all but five cities dropped by double digits from a year earlier.
--SNIP--
Economists said housing prices would probably continue to fall as Americans, worried about rising unemployment and the recession, put off big financial decisions like buying a home.
Some economists expect housing prices to fall another 5 to 10 percent before they hit a bottom; others say that prices could decline by as much as a third. According to the National Association of Realtors, the median price of a home in the United States, which peaked above $230,000 in 2006, has fallen to $175,200...
The next section of this diary was going to be entitled: "TARP And Federal Reserve Facts." But, the reality here is there are very few TARP and Federal Reserve facts!
TROUBLED ASSET RELIEF PROGRAM ("TARP") AND FEDERAL RESERVE FICTION:
Just about everything you're hearing. Here's why...
TROUBLED ASSET RELIEF PROGRAM ("TARP") AND FEDERAL RESERVE FACTS:
There's virtually no oversight, period! Here's the story from Naked Capitalism: "Federal Reserve Inspector General Unable To Answer Basic Questions On Where The Trillions Went."
Federal Reserve Inspector General Unable To Answer Basic Questions On Where The Trillions Went
Yves Smith
Naked Capitalism
Tuesday, May 12th, 2009
Rep. Alan Grayson asks Inspector General Coleman of the Federal Reserve some very basic questions of about various Fed programs and activities and gets nowhere. And the worse is that the IG isn't stonewalling, but instead is clearly completely clueless. Watching the video, you get the impression that Coleman can't name a program beyond the TALF.
But there is a possibly more important issue at stake. The interview is with the Inspector General of the Federal Reserve Board of Governors. The programs are actually at the Federal Reserve Bank of New York. For reasons I cannot fathom, the Board of Governors is subject to Freedom of Information Act requests, while the Fed of New York has been able to rebuff them.
So I take Coleman's inability to answer key questions to be a feature, not a bug. The Fed of New York probably can answer Congressional questions, is taking care to limit what it conveys to the Board so as to keep the information from Congress and the public. Note in the questioning the emphasis on "high level reviews..." (See the video, linked above.)
So, has the Federal Reserve ever been audited? The answer to that question, per Wikipedia, is: "No:" "Has The Federal Reserve Ever Been Audited?"
Also per Shadow Stats, the government's resorted to totally gaming the numbers as far as the TARP and our deficit's concerned...
Trillions upon trillions into a black hole.
Obama Administration Changes Rules in Order to Reduce Reported Deficit Level. Under mounting global criticism for its fiscal excesses, and with Treasury auctions looking like they are going to need heavier Federal Reserve support, the Obama Administration has taken some "corrective" action, by changing the accounting rules for the reporting of federal deficit. The changes only reduce the reported level of the federal deficit; they do not impact the Treasury's excessive funding needs. The "Highlight" of yesterday's (May 12th) Monthly Treasury Statement for April 30, 2009 was:
"The administration has reclassified prior month expenditures related to the Emergency Economic Stabilization Act (EESA--also known as TARP). Consistent with statutory requirements of the Federal Credit Reform Act and EESA, TARP purchases are now being accounted for on a net present value basis, taking into account market risk. Accordingly, budget outlays have been reduced and direct loan financing activity correspondingly increased by $175 billion."
While this gimmick already was in play in the Administration's budget forecasts, going forward (more than halving the projected "outlays" for a likely second TARP package), the funds expended indeed are outlays and impact directly the U.S. Treasury's borrowings. While such gimmicking would be lucky to skirt along the boundaries of generally accepted accounting principles (GAAP)-based accounting -- given the inability of the government to assess "market risk" within the bounds of reality -- such has not been the nature of the monthly deficit reporting. On this basis, other questions arise, too, as to the monthly accounting tied to the handling of Fannie Mae and Freddie Mac.
Now, about that meager STIMULUS for Main Street. We know trillions were poured down a black hole in a few "New York minutes," but what about that few hundred billion for the other 99.9% of us? As the WaPo notes in their editorial from Friday, much of it won't be allocated until 2011! I think there's a bit of a DISPARITY here, don't you? (See immediately below.)
STIMULUS FICTION:
The Stimulus Program is kicking in and we're already starting to see "Green Shoots."
STIMULUS FACT
Stimulus Dollars Starting to trickle ever so slowly into the economy
Washington Post Editorial
Friday, May 15, 2009
YOU MAY RECALL President Obama urging Congress to pass the stimulus bill immediately because the economy so desperately needed money. The massive recovery bill was passed, and, recently, a few "green shoots" have been popping up -- indicating that, perhaps, the worst may be over. Is it a result of the stimulus? Tough to say, but, given the amount of money that has actually gone out the door, probably not.
Government agencies have thus far spent $29 billion of the $787 billion stimulus package, and less than that has gone out in tax cuts. What has been spent has mostly gone to Medicaid and unemployment insurance -- real "shovel-ready" programs in that they are already in place. It is true that just knowing that money has been authorized ($88 billion so far) can allow projects to get started and jobs to be created. Nonetheless, of the $20 billion approved for spending so far for the Education Department, for instance, 97.2 percent remains unspent. Of the $10 billion approved for the Transportation Department, a full 99.7 percent is still left to be spent.
--SNIP--
That risk was heightened in this case because the administration decided against a traditional package, one based on the three Ts: timely, temporary and targeted. Instead, it opted for a more ambitious, long-lasting package; one quarter of the funds are not even slated to be spent until 2011 or beyond. That decision had both economic and political rationales. Because the recession looked likely to be a long one, a longer-lasting package seemed sensible. It also provided Mr. Obama an opportunity to get started on many of his campaign promises, from improving health information technology to advancing alternative energy. The administration argued that this spending, even if not so stimulative, would help the economy grow in a healthier way once growth did resume.
Economics being what it is, we'll never know with certainty whether this package was optimal. The administration is ramping up arguments that millions of jobs are being saved or created, but it is impossible to gauge what would have happened without the stimulus package or with a more targeted one. The Federal Reserve Board has found that money for the most part is going to states with the greatest need. However, an Associated Press study found that within states, stimulus dollars are more likely to be misdirected to localities with better employment situations. A "transformational" investment stimulus package may turn out to be a good fit for this deep recession, and we hope most of the dollars will be spent productively. But as the economy limps along, it would be nice to get the money out a bit faster.
Ya' think?
But, even when it does get to the states, it's going to be used to make-up for massive budget shortfalls in most of them...
Study: Stimulus Blunted By State Budget Shortfalls
Dean Baker
Date: May 4, 2009 7:31 PM
A new report finds that a keystone of the Obama administration's effort to
end the recession -- the $787 billion stimulus package -- will be
significantly hampered by budget shortfalls in state and local governments,
and that another round of stimulus spending might be necessary to counteract
the housing crash.
The report (PDF<http://www.cepr.net/documents/publications/stimulus-2009-05.pdf>)
by the Center for Economic and Policy Research <http://www.cepr.net> says
that state and local budget deficits to the tune of $100 billion a year will
offset the stimulative effect of the president's American Recovery and
Reinvestment Act. Stimulus dollars used to cover deficits will have no
stimulative effect, and the benefit of stimulus money well-spent will be
offset if states increase taxes or decrease spending to close budget gaps,
the report says.
State budget shortfalls "are bigger than anticipated because the downturn's
steeper," said the report's author, Dean Baker, in an interview with the
Huffington Post. "The downdraft is greater so the net effect of the stimulus
ends up being less."
And, lo and behold: "Despite Stimulus Funds, States to Cut More Jobs, Budget Shortfalls Prompt Mass Layoffs"
Despite Stimulus Funds, States to Cut More Jobs, Budget Shortfalls Prompt Mass Layoffs
By Alec MacGillis
Washington Post Staff Writer
Tuesday, May 12, 2009
Eleven weeks after Congress settled on a stimulus package that provided $135 billion to limit layoffs in state governments, many states are finding that the funds are not enough and are moving to lay off thousands of public employees.
The state of Washington settled on a budget two weeks ago that will mean 1,000 layoffs at public colleges and several times that many in elementary and high schools.
The governor of Massachusetts, who cut 1,000 positions late last year, just announced 250 layoffs, with more likely to come soon.
Arizona has already laid off 800 social service workers this year and is facing the likelihood of deeper cuts over the next two. The state no longer investigates all complaints of child or elder abuse.
--SNIP--
The layoffs are one early indication of how the stimulus funding could be coming up short against the economic downturn. As the stimulus plan was being drawn up, there was agreement among the White House, congressional Democrats and many economists that a key goal was to keep states from making big layoffs at a time when 700,000 Americans were losing their jobs every month.
The articles goes on to tell us:
--the final, Senate version of the Stimulus Bill included $25 billion less in state funds than the House version.
Ray Scheppach, executive director of the National Governors Association, told a Senate committee last month that states are facing a $200 billion deficit over the next two years. At least a dozen states, including California, Georgia and New Jersey, have ordered furloughs of workers, and increasingly, layoffs loom as the next step.
Western Washington University in Bellingham is bracing for 400 layoffs of staff members and adjunct faculty. The college is the largest employer in its county.
"There was all the talk at the time about how the stimulus package wasn't big enough, and that is true here," said faculty union president Bill Lyne. "It's barely letting us keep our noses above water."
So, we're being told everything's "levelling off" and pointing towards "recovery." To that I ask, for whom, exactly? Just today, Bonddad asks us, while also using the term, "recovery," and noting that the middle and lower classes need help, desperately, in: "Do We Need Another WPA?"
Do We Need Another WPA?
by bonddad [Subscribe]
Sun May 17, 2009 at 10:04:11 AM EDT
Regardless of when this recession ends, the malaise of working and middle class America will not be relieved until wages increase, and employment rates return to a robust level. Since unemployment is a lagging indicator, the news on that score is grim. Almost every analyst believes that there will be another "jobless recovery" such as those that followed the 1990 and 2001 recessions. Even after GDP bottomed and those recessions technically ended, there was an average 17 month increase in unemployment of .9% (or a 15% percent increase in the rate) followed by a 13.5 month decrease back to the rate at the "bottom" of the recession. If that pattern holds true again, then even if this recession bottoms shortly, unemployment will be 10.1% by July, rise to 11.3% by December 2010, and take until at least early 2012 to decrease back under 10%.
--SNIP--
It is safe to say that there will be major social and political consequences from an unemployment rate over 10% for 2 1/2 or more years -- and that's under the optimistic scenario that in GDP terms, the recession bottoms shortly. As ... U3 and U6 unemployment since 1900 shows, such a rate would surpass 1981-82 and be second only to unemployment during the Great Depression itself.
--SNIP--
.....In short, this is not an environment when people ramp up spending.
But, with the current insufficient Stimulus funds being scheduled for outlay for over two years, the idea that there'll be a second Stimulus program appears to have tacitly been dismissed! Just ask Paul Volcker, he'll tell ya': "Volcker Says Economy `Leveling Off,' No Need for More Stimulus."
Volcker Says Economy `Leveling Off,' No Need for More Stimulus
By Michael McKee
April 29 (Bloomberg) -- The U.S. economy is "leveling off at a low level" and doesn't need a second fiscal stimulus package, said former Federal Reserve Chairman Paul Volcker, one of President Barack Obama's top economic advisers.
Volcker, head of Obama's Economic Recovery Advisory Board, said the 6.1 percent decline in first-quarter gross domestic product reported by the government today was "expected." More recent data show the contraction in housing, business spending and inventories has slowed, and stimulus spending is only just beginning to hit the economy, he said.
--SNIP--
"I'm not here to tell you the economy is going to recover very strongly in the short run," Volcker said. "There is reason to believe that it should be leveling off, at a low level."
--SNIP--
"I do not think there are grounds for great optimism," Volcker said. "It is going to take a while, I think, to have a strong recovery."
That will keep the government involved in the financial system, and the administration will provide the capital needed to keep banks afloat, he said.
"There's a visible commitment by the government to support these so-called systemically important institutions at this point..."
So, we may all talk about "recovery" and "...when this recession ends..." but that, in and of itself, has little to do with the well-being of Main Street. It is little more than spin. Calling an end to the pain being felt on Main Street--clearly not a systemically important institution in the eyes of those managing our economy right now--is, perhaps, the biggest spin of all.
"U.S. banking crisis may last until 2013: S&P."
U.S. banking crisis may last until 2013: S&P
By Jonathan Stempel
NEW YORK (Reuters) - A day after saying big U.S. banks probably needed to raise only one-fourth the capital demanded by the government, Standard & Poor's said the nation's banking crisis has "merely entered a new phase" and might not end before 2013.
The credit rating agency said the industry is being propped up by hundreds of billions of dollars of government support, especially for lenders considered too important to the financial system to fail.
While efforts to spur lending, take bad assets off banks' balance sheets, and restart the market for packaging and selling securities may help the sector, S&P said banks will have a tough time surviving absent a bigger capital cushion than regulators require.
"There's nothing to say that this banking crisis can't go on for another three or four years," S&P Managing Director Tanya Azarchs said.
Hmmm..."another three or four years?" That'd be right around when President Obama's current Stimulus program will be concluding its handout of their currently-budgeted funds.
Maybe by then we could discuss Bonddad's WPA idea with the next President.