Over the past hour, we have this reality: "
More Banks Will Need Capital."
And, a few hours ago, by way of Dean Baker, this came to light: "Study: Stimulus Blunted By State Budget Shortfalls."
Things are not getting better anytime soon. They're just getting worse a little more slowly than they have over the past six months. Anyone who thinks otherwise is living in denial. Truth is a good thing, and it's good to see it --at least to some extent--actually appearing in the MSM!
In the long run, this can only be a good thing. Meanwhile, life's gonna' suck for a couple of years...at least. Let's deal with that. It's time to extend a hand instead of crossing your arms and shaking your head sideways in denial of the truth.
Stress Tests Identify About Ten; Wells, BofA, Citigroup Face Order to Refill Coffers
By DAMIAN PALETTA and DEBORAH SOLOMON
Wall Street Journal
MAY 5, 2009
WASHINGTON -- The U.S. is expected to direct about 10 of the 19 banks undergoing government stress tests to boost their capital, according to several people familiar with the matter, a move that officials hope will quell fears about the solvency of the financial sector.
The exact number of banks affected remains under discussion. It could include Wells Fargo & Co., Bank of America, Citigroup Inc. and several regional banks. At one point, officials believed as many as 14 banks would need to raise more funds to create a stronger buffer against future losses, these people said, but that number has fallen in recent days.
--SNIP--
Officials say banks that can't tap private markets will be able to raise capital by agreeing to convert some of the government's existing preferred shares into common equity, a move that would leave the government owning chunks of the nation's largest banks...
The folks that have been hurting are feeling even more pain as state budgets get stress-tested even more than the fatcats on Wall Street. It's time for more stimulus dollars. NOW!
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."
According to the report, the "net impact of government actions on the
economy will be limited and will be a full magnitude of order smaller than
the size of the $2.1 trillion demand shortfall created by the collapse of
the housing bubble. The falloff in demand could be as much as 15 times the
net average annual stimulus implied by ARRA and could leave the U.S. with a
net impact as low as 1.1 to 0.7 percent of GDP for 2009 and 2010
respectively..."
John Williams, over at Shadow Stats tells us just today:
No Recovery, As Employment Conditions Weaken
John Williams
ShadowStats.com
May 4, 2009
Recovery Is Not in Play. The Federal Open Market Committee (FOMC) noted in its April 29th press release, that "the economy has continued to contract, though the pace of contraction appears to be somewhat slower..." The FOMC also indicated that "the economic outlook has improved modestly..." The Fed remains extremely cautious in the wording of its statements, and saying that the "outlook has improved" is not the same thing as saying the "economy has improved or is improving," irrespective of the ensuing hype on Wall Street. Again, the FOMC's opening comment was one indicating continued economic contraction. Indeed, the evidence remains of ongoing economic contraction, despite some continued bottom-bouncing in series such as the purchasing managers survey....
...As to the daily hype hitting the markets as to "better-than-expected numbers," keep looking at year-to-year change smoothed over several months, rather month-to-month change that usually lacks statistical significance. As to anything involving existing or pending homes sales, keep mind that the numbers are skewed very heavily by foreclosure activity...
Employment Conditions Remain Dismal. Contrary to some recent stories in the popular press, employment is a coincident indicator of broad economic activity, not a lagging indicator. As such it is used by the Conference Board as one of its coincident indicators in the series of leading, coincident and lagging economic indicators taken over from federal government reporting, some years back. The National Bureau of Economic Research (NBER) -- official arbiter of U.S. recessions -- also uses payroll employment as one element in setting the precise timing of the onset of a recession. Perversely, however, the NBER ignored ongoing employment contractions in order to call early ends to the 1990/1991 and 2001 recessions, and such may have become the basis for citing employment as a lagging indicator...
Later this week, we'll hear of employment at or near 9%. And, that's the US Department of Labor's Bureau of Labor Statistics' U.3 Rate. Actual unemployment, better measured by the BLS' U.6 rate will be around twice that.
Things are just getting worse more slowly. Deal with it. Help your family, friends and neighbors, if you can.
Speak up!