Amidst a backdrop which includes an already-watered-down financial regulatory reform bill with at least four major loopholes in it--before it even hits the Senate, where it's anticipated by many that it will be nothing less than eviscerated--and healthcare legislation that
may potentially morph into little more than a travesty, I find myself continually being reminded of the ongoing half-truths and illusions (a/k/a
propaganda) that are being conveyed about these (and related) matters as fact, on three fronts: 1.) in the MSM, 2.) in the blogosphere, and 3.) as it comes from the oligarchical netherreaches, parroted, obfuscated and or otherwise finagled by those in D.C. and corporate America.
As Paul Krugman reminds us in Monday's NY Times, "Disaster and Denial"--for and by, respectively, Main Street, as supported and encouraged by a few dozen Blue Dogs and "New" Democrats in the House, along with about 10 or 12 centrist, Democratic U.S. senators, and as previously endorsed, bought and paid for by the status quo--rules the legislative day.
Disaster and Denial
By PAUL KRUGMAN
New York Times
Published Online: December 13, 2009 Published In Print: December 14, 2009
...Given this history, you might have expected the emergence of a national consensus in favor of restoring more-effective financial regulation, so as to avoid a repeat performance. But you would have been wrong.
--SNIP--
In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it." As Democrats have pointed out, three days before the House vote on banking reform Republican leaders met with more than 100 financial-industry lobbyists to coordinate strategies. But it also reflects the extent to which the modern Republican Party is committed to a bankrupt ideology, one that won't let it face up to the reality of what happened to the U.S. economy.
So it's up to the Democrats -- and more specifically, since the House has passed its bill, it's up to "centrist" Democrats in the Senate. Are they willing to learn something from the disaster that has overtaken the U.S. economy, and get behind financial reform?
Let's hope so. For one thing is clear: if politicians refuse to learn from the history of the recent financial crisis, they will condemn all of us to repeat it.
Monday's news cycle starts off with the White House "getting tough," engaging in a premeditated scolding of the banksters, supposedly twisting their arms to lend to Main Street. From Monday's Washington Post: "Obama presses bank chiefs to lend more."
Obama presses bank chiefs to lend more
White House to push for greater regulation, curbs on executive pay
By Binyamin Appelbaum
Washington Post Staff Writer
Monday, December 14, 2009
President Obama, who lashed out Sunday at "fat cat bankers" who "still don't get it," plans to gather the heads of major banks at the White House on Monday to urge them to make more loans and to accept the necessity of greater regulation.
Obama convened a similar meeting with bank executives in March, and the need for a replay highlights the lack of progress in the interim. The banking industry has reduced lending for five consecutive quarters, even as it has regained profitability thanks to vast public aid.
The administration's success in rescuing banks stands in starker contrast every day with the financial problems of many Americans, most of all the lack of new jobs, and Democrats made restless by the disparity are mounting pressure on the White House.
Meanwhile, the prospects for financial reform legislation have been clouded by industry groups that convinced moderate and conservative Senate Democrats that some proposals would unduly suppress financial innovation and limit economic growth.
The president and his advisers have responded in recent days with a burst of heated rhetoric, arguing that the government rescued the banking industry and that banks now are failing to show proper gratitude.
Yes, this would make sense as long as you ignore Monday's other economic lede, wherein Citigroup--still in possession of more than $301 billion in non-TARP, taxpayer bailout commitments which may not even be released, according to the story--is somehow going to be enabled to "payoff" it's $45 billion TARP debt with about $20 billion in cash and some questionable preferred stock manipulation, thus becoming unencumbered of TARP-related restrictions, so that they may boldly go where almost all of the other too-big-to-fail firms now saunter: off into the land of even-bigger-than-too-big-to-fail and "fuck-you-money" bonuses without any additional windfall taxation, as if everything that's happened within our economy over the past couple of years was just a bad dream. (Completely turning their backs upon the ongoing nightmares still playing out for the remaining 99% of U.S. society, just like every other TBTF TARP recipient before them.) It's all right here: "Citigroup Said to Near Agreement on TARP Repayment."
Citigroup Said to Near Agreement on TARP Repayment
By Bradley Keoun
Dec. 14 (Bloomberg) -- Citigroup Inc. is nearing an accord with the Treasury Department and regulators that would let the bank repay its $20 billion of bailout funds and escape government pay limits, people familiar with the matter said.
Under the plan, which may be announced as soon as today, the U.S. bank would raise about $20 billion of capital, said three people briefed on the plan, who declined to be identified because the talks are private. A partial offering of the Treasury's 7.7 billion shares may be coordinated with New York- based Citigroup's effort to raise capital, the people said.
Chief Executive Officer Vikram Pandit is pressing for an exit from the Troubled Asset Relief Program to avoid being the only large bank left on "exceptional assistance," a Treasury designation reserved for companies including American International Group Inc. and General Motors Co. that are surviving on taxpayer aid. Bank of America Corp. exited last week after paying back $45 billion of bailout funds.
"It is important to get back to normal and if they pay back the TARP money they aren't so much under the pressure of public opinion," said Roger Groebli, Singapore-based head of financial market analysis at LGT Capital Management, which oversees about $75 billion.
--SNIP--
Citigroup also plans an early termination of guarantees from the Treasury, Federal Deposit Insurance Corp. and the Federal Reserve on $301 billion of the bank's riskiest securities, mortgages, auto loans, commercial real estate and other assets, the people said. Citigroup paid $7 billion in advance for the guarantees, which last five to 10 years, depending on the type of underlying assets. The matter remains under discussion, the people said, adding that the terms or timing could still change.
After reading the whole article, it's important to note that nowhere is it mentioned that Citi will definitely go through with the early termination Treasury, FDIC and Federal Reserve guarantees. And, in fact, these programs remain up and running for all eligible banks to participate (in), regardless of their TARP status. (I placed the last sentence within the blockquote, above, in bold type, for emphasis of this reality.)
These ironies are beyond the pale, regardless of any attempts by Washington to feign consternation otherwise. We are supposed to believe that, despite a trillion dollars in off-balance-sheet assets still hanging out to dry, many pundit comments about the "Bank Profits Mirage," and ongoing, on-the-record efforts by folks such as Bernanke and Geithner to demand that banks retain more loan loss reserves, we are now going to "make" these banks lend more money to Main Street, too? (I'm completely ignoring the comment about putting a saddle on Wall Street salaries, which would become moot for Citi once they're released from the TARP program, as well.)
Today's announced release of Citi from the TARP program facilitates the exact OPPOSITE of today's White House pronouncements.
At best today's White House meeting is just a demonstration of the President's good intentions. But, let's face facts, given other truths, the event is really just kabuki for the masses.
All of the above now being known to us, it's still virtually guaranteed that we'll be bombarded with happy news about "Citi's payback of TARP funds" (which will be conflated with "the bailout," when the truth is the TARP program represents only 5% to 10% of actual taxpayer bailout commitments--see farther down below for more detail), along with the MSM regaling us today about how we're "getting tough with Wall Street."
But, upon closer review of the facts, latest MSM pronouncements mean far, far less than they may, at first, appear.
Herein is my attempt to cut through some of the misinformation...
A POINT OF CONTEXT
Around 3-1/2 months ago, George Washington posted a lengthy tome on his blog, entitled: "The Rising Tide of Unemployment in America: How Bad Will It Get, And What Can We Do?" After re-reading it tonight--and I strongly recommend it for anyone trying to obtain some context for where we are today, versus where we were less than four months ago--especially within the context of the real economic news of the past few days, I found the impetus for what I'm now posting, herein.
IMHO, truth be told, for all intents and purposes, a very strong argument may still be made--strictly based upon the facts--that, even now, in December 2009, things really aren't improving...matters are "stabilizing," which is double-speak for bottom-bouncing, and/or many statistics are just getting worse more slowly (and, many in this community, in D.C., and in the world of economic punditry, said that we wouldn't be "here"). Well here we, indeed, are...
CONFLATING TARP WITH "THE BAILOUT"
The MSM and the blogs (and even some of the folks in D.C.) are conflating the TARP program with the overall Wall Street bailout. In fact, TARP represents only a small fraction of the actual cost and Wall Street bailout effort, in general.
Kossack theran posted a great diary about the massive differences between the overall bailout and the TARP program realities less than 12 hours ago, in a diary entitled: "The bailout saved the banks; so how big is the bailout?"
The myth that the losses from our Wall Street bailout are going to be modest is exactly that--it's a false myth. Including the trillions of dollars that have already been committed to prop up the mortgage marketplace, alone, the actual taxpayer funds that have been spent to support the banksters have been quite massive. We're talking two to three trillions of dollars--not "committed" or "set aside"--ALREADY down the drain.
As I write this, the government has already invested a little north of $800 billion in direct allocations to Wall Street, including many of the banks that have--and I quote--"paid off the TARP funds," at least since our economy started turning downwards in 2007. Most coverage in the MSM--and even most diaries posted on this blog--conflate TARP with the overall bailout, itself. In fact, the TARP program is but one of 20+ taxpayer-supported, bailout-related programs serving Wall Street that are currently in place, today. So, while a total of more than $12 trillion in taxpayer commitments, not including approximately $6 trillion (again, plus or minus) in "implied commitments" by the feds with regard to our government-sponsored entities (i.e.: "GSE's"), such as Fannie Mae, Freddie Mac, the FHA, and the Ginnie Mae (bond) program, among others, are currently on the line (i.e.: we just commenced the process to post yet another 200 billion in "real dollars" to Fannie and Freddie, a couple of weeks ago), the reality is we've already spent in excess of $2 to $3 trillion dollars (at a minimum) supporting the highly-profitable endeavors of the likes of JPMorgan, Citi, Bank of America, Goldman Sachs, and Morgan Stanley, et al.
While the overall $12- to $18-trillion Wall Street committment that has been made by our government is, most certainly, greatly exaggerated--at least in terms of what the final tab to taxpayers will be--the other side of that coin is just as bad. Conflating the TARP program with the overall bailout, and then stating the overall cost may be less than $100 billion, is nothing short of absurd when one looks at the facts. And, it's that downplaying of the realities of our outlays, to date, which have been the recent focus of the MSM--and even many in this community--which belies our myopic focus upon TARP at the expense of these greater truths (and exponentially greater amounts of taxpayer commitments), too (IMHO).
ALL of this quite factual information is regularly updated and available by clicking right here, courtesy of former Goldman Sachs Managing Director Naomi Prins. PLEASE TAKE A MOMENT TO SKIM THROUGH IT. It's an eye-opener, to say the least.
UPDATE: (h/t to Kossack disrael) "CNN's Bailout Tracker."
When we read MSM reports about statements from Treasury Secretary Tim Geithner, such as those contained within a story from this past Friday, "Geithner Says Treasury Faces Losses From Autos, AIG," it's kind of important to have an accurate macro perspective about the disparity between what our government is actually doing for Wall Street versus what's happening in this regard on Main Street, IMHO.
Speaking of Main Street, it's also interesting to note that as far as our gross domestic product's (GDP's) concerned, the conventional wisdom is that we must have growth of 2.75% or more in the GDP for the overall employment situation to improve. So, again, when stories such as the one linked in the previous paragraph appear, which tell us that the CW among economists is for a 2.6% improvement in GDP for 2010, that not-so-tacitly reminds us--sans spin--that the consensus is for little or NO job growth (in fact, below, Krugman and others tell us jobless stats could get worse, and I definitely agree) THROUGHOUT much of 2010, too. (Checkout the Chart in the link in THIS paragraph for supporting information for my statement.)
From the Geithner story, linked two paragraphs, above:
Geithner Says Treasury Faces Losses From Autos, AIG
By Rebecca Christie and Robert Schmidt
Dec. 10 (Bloomberg) --
...The world's largest economy expanded at a 2.8 percent annual rate in the fourth quarter after shrinking for a year. The economy will expand 2.6 percent in 2010, according to the median forecast of 58 economists surveyed by Bloomberg News this month. The jobless rate will average 10 percent next year...
Also from that article...we have this (albeit) technically correct disinformation...
...Stocks rose today after government reports showed fewer Americans on average filed claims for jobless benefits over the past four weeks and the trade deficit unexpectedly narrowed in October. The Standard & Poor's 500 Index was up 0.7 percent to 1,103.35 at 11:10 a.m. in New York. The index has jumped 63 percent from its low for the year on March 9.
UNDERLYING QUESTIONS ABOUT STOCK MARKET PERFORMANCE
And, before we continue to excessively cheer market performance, here's one infrequently-stated-but-major note of caution (h/t Thought Offerings.com via Zero Hedge) in the underlying realities of these markets: "Dividends Are Still Trending Worse Than The Great Depression." (It's certainly worthwhile to checkout the graphics that accompany this post by clicking on the link in the previous sentence.)
Dividends Are Still Trending Worse Than The Great Depression
Thoughtofferings.com
December 5, 2009
....Earnings have dropped more rapidly than during the Great Depression (dramatically so if you count reported rather than operating earnings), but they appear to have begun a recovery much sooner than occurred back then. Trailing 12-month dividends are still falling slightly faster than during the Great Depression, which is particularly remarkable given how much more severe deflation was then compared to now. These trends underscore that contrary to some claims, this is no crisis of confidence!
Since dividend changes tend to lag earnings changes, rising earnings could mean dividends will level out and start increasing soon (and in fact the quarterly fall in dividends from Q2 to Q3 was small). However, if earnings are being over-reported thanks to factors such as relaxed accounting rules or optimistic loan loss assumptions, dividends should ultimately reveal the truth about underlying cash flows.
And while we should all hope that this recovery can be sustained, there is a significant probability (details of which I hope to discuss in a separate post) that this is a temporary upturn in a longer term depression. A renewed fall in GDP, persistent unemployment, and intensifying deflationary pressures would not be good news for any fledgling recovery in earnings and dividends.
Bold type is diarist's emphasis.
...speaking of suspicious, Enron-like corporate earnings reports, stagnant unemployment and insufficient jobs creation...
THE HARSH TRUTHS ABOUT UNEMPLOYMENT AND JOB CREATION
Krugman: "The jobs deficit."
The jobs deficit
NY Times Blog
Paul Krugman
December 10, 2009, 11:07 am
It was truly amazing the way last week's employment report was hailed by many people as a sign that our troubles are over. Here we are, having suffered huge job losses, and needing to make up the lost ground -- and a report showing that we're still losing jobs, but not as fast, is grounds for celebration?
Anyway, I thought it might be useful to create a sort of benchmark for the level of job growth that would really count as good news. I start from the fact that we've lost about 8 million jobs since the recession began -- that's the official number plus the preliminary estimate of the coming benchmark revision. I then take EPI's estimate that we need to add 127,000 jobs a month. EPI points out that when you put these numbers together, they say that to return to pre-crisis unemployment within two years we'd have to add 580,000 jobs a month. That's not going to happen...
Krugman tells us, just to keep up with population growth, it'll take 7 years (84 months) of adding 127,000 per month, plus another 300,000 jobs per month, above and beyond that, over the next 5 years, to get us to the 18,000,000 million jobs we'd need to add to our economy, just to make up the ground we've lost over the past decade.
He calls it a "useful benchmark," to put things in perspective. But, there is a tiny amount of hope in his brief commentary, since he also reminds us that during President Clinton's eight-year tenure in office we added 20 million jobs to our economy.
Krugman carries Thursday's blog post into his column in Friday's NY Times, too; but, he's also pointing a finger at Ben Bernanke, telling us the Federal Reserve has to "...lose that complacency, shrug off that fatalism and start lending a hand to job creation..." pronto: "Bernanke's Unfinished Mission."
Bernanke's Unfinished Mission
By PAUL KRUGMAN
Published In Print: December 10, 2009 Published Online: December 11, 2009
...There's a good chance that unemployment will rise, not fall, over the next year. But even if it does inch down, one has to ask: Why isn't the Fed trying to bring it down faster?
Some background: I don't think many people grasp just how much job creation we need to climb out of the hole we're in. You can't just look at the eight million jobs that America has lost since the recession began, because the nation needs to keep adding jobs -- more than 100,000 a month -- to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment.
How big? My back of the envelope calculation says that we need to add around 18 million jobs over the next five years, or 300,000 jobs a month. This puts last week's employment report, which showed job losses of "only" 11,000 in November, in perspective. It was basically a terrible report, which was reported as good news only because we've been down so long that it looks like up to the financial press.
So if we're going to have any real good news, someone has to take responsibility for creating a lot of additional jobs.
Bold type is diarist's emphasis.
IMHO, anyone looking at these realities may only come to the conclusion that we have a very long, long way to go before things get appreciably better, at least as far as our economy's concerned. More likely than not, things could very well get quite a bit worse, along the way to "better," too. And, as I noted in a diary from a few days ago, "Structural Change: 'Tragedy Wrapped In A Weird Complacency,' " the truth is, this is all about a basic structural change in our economy], so a lot of the old rules are being rewritten as I type.
For instance, "in a recovery," this is not supposed to happen; see: "Unemployment Insurance Weekly Claims Report." Was Bloomberg covering the same story...from Mars? See: "Initial Jobless Claims Average in U.S. Falls to One-Year Low."
Initial Jobless Claims Average in U.S. Falls to One-Year Low
By Shobhana Chandra
Dec. 10 (Bloomberg) -- Fewer Americans on average filed claims for jobless benefits during the past four weeks, signaling companies are gaining confidence as the economy recovers.
The four-week average declined to a one-year low of 473,750 last week from 481,500, Labor Department figures showed today in Washington. Initial jobless claims, which are more volatile, unexpectedly rose by 17,000 to 474,000 in the week ended Dec. 5...
--SNIP--
"This is consistent with only moderate job losses and a very strong signal that firing is tapering off," said Zach Pandl, an economist at Nomura Securities International Inc. in New York. "A gradual improvement in the labor market is going to be positive for consumer spending."
Bold type is diarist's emphasis.
Note the not-so-astute pundit comment. Unfortunately, someone forgot to give him this "memo": "Emergency Jobless Claims Surge By Most Ever In Prior Week."
Emergency Jobless Insurance Claims Surge By Most Ever In Prior Week
Submitted by Tyler Durden on 12/10/2009 09:16 -0500
The number you won't hear mentioned anywhere in the Mainstream Media: 327,729. That is how many people shifted to Emergency Unemployment Compensation programs in the last week alone, hitting an all time record high of 4.2 million! So as everyone is focused on the benign picture of initial claims in the last week which was "only" 474,000, the number of people rolling off continuing benefits has exploded and is now a stunning 592,579 only in the last two week. Look for this number to keep going into the stratosphere as the 6 month continuing claims cliff keeps getting hit by more and more people who are unemployed and keep looking not only for believable change, but actual jobs to go with it.
And here is the chart (diarist's note: click on story link) that the administration would love to keep under lock and seal: the cumulative number of people on Emergency Insurance. At this rate those collecting EUC will surpass those on continuing claims (5.5 million) within a month.
Bold type is diarist's emphasis.
Looking at this more positively, as highly-respected University of Oregon economist Mark Thoma reminds us, it could take us up to seven years to return to 5% unemployment, given historical analysis of recent recessions. It's all right here: "Why it May Take Almost Seven Years for Unemployment to Reach Five Percent." A very sound analysis, IMHO. Click on the link in the previous sentence, and read the relatively simple math to understand how Thoma arrived at these results. However, Thoma tells us...
Why it May Take Almost Seven Years for Unemployment to Reach Five Percent
Economist's View (via BNet)
By Mark Thoma | Dec 11, 2009 |
Since seven years is far, far too long to wait to return to something like full employment, and since we have the means to do something about it, we should move quickly to give labor markets the boost that they need.
And, as far as consumer spending's concerned, please read these stories, from the past few days....
ADDRESSING MYTHS ABOUT INCREASED CONSUMER SPENDING
First and foremost, all year-over-year comparisons you're reading in the MSM and concerning government provided data relate to a reference to last Fall, when we experienced the biggest drop in consumer spending in generations. Frankly, it's all downhill from there, but here's the most compelling analysis I've seen of this, to date (checkout the graphics links on this, they're a real wake-up call, IMHO): "Retail Bull."
Retail Bull
December 12, 2009
Wall Street Examiner
By Lee Adler
The Wall Street media was in a frenzy over the "better than expected" news on retailing from the Commerce Department on Friday. It's all a matter of perspective. Yes, the data was up strongly month to month, and yes, it was higher than last November when the economy seized up following the stock market panic, but when you look at the big picture, there isn't much to get excited about.
CHART: Non-Seasonally-Adjusted Retail Sales
The government and the media always report seasonally adjusted data with no mention of the fact that it is not the actual number. When we look at the actual data, rather than the phonied up seasonally adjusted number, we see that the reported gain of 1.3% is the usual hype. There's no substance to it. To be fair, we would expect that there's some seasonal influence between October and November, so let's look at the previous 10 years change from October to November as a basis of comparison. That should give us some inkling as to whether things are really on the upswing.
This year, there was virtually no change in actual sales from October to November, rising from $344.8 billion to $345 billion, for a gain of 0.05%. In the 10 years prior to this year, the average gain in actual retail sales, not seasonally adjusted, from October to November was 0.75%, with a range of -3.88% (2008) to +2.44% (2007). In non recession years, the gain was usually between 2% and 2.5%.This year's performance was worse than all except 2001, 2003, 2004, and 2008. A flat performance is not a disaster, but given the absolute level, neither is it evidence of recovery.
Adler reminds us that the rate of change has gone positive, but it's because of the period to which we're comparing year-over-year numbers. Adler tells us...
...It is still well within the declining trend that began in 2006. Until that trend is clearly broken, calling this a recovery is nothing more than a semantic game.
Likewise, the idea that the stock market discounts the economy is disproved by this chart. In 2000, 2003, and 2006-07 the annual rate of change in retail sales has led changes in stock market direction. In 2009,the stock market reversal was a little ahead of retail sales. We have to wonder if the players have been placing their bets based on Wall Street propaganda instead of real facts, just as they did from mid 2006 to mid 2007 in the final blowoff of that bull run.
Finally, below is a chart of seasonally adjusted real retail sales, adjusted by the CPI, to factor out the effect of inflation. This chart is only through October, since the CPI for November has not been released yet. The seasonally adjusted gain in November will still be within the flat range that began late last year. It's pretty clear from this chart that during this "recovery" being touted by the Wall Street distribution machine, there has been no unit growth in retail sales. So far,their "recovery" is a sham. Real retail sales remain at a level no better than 7 years ago when there were 20 million fewer people in the US than today.
"CHART: Real Retail And Food Services Sales," Federal Reserve Bank of St. Louis
WALL STREET'S STRIP-MINING OF MAIN STREET'S/CONSUMER CREDIT
The reality is that the collapse of the consumer credit market--brought upon us by the banks, not the consumers, who would buy if they had available credit--was totally thrust upon us by Wall Street, too. The truth is, consumer credit comprises the largest portion of small business credit.
Most major banks do a rather crappy job of mitigating risk, because they--for the most part--apply a "one-size-fits-all-strategy" to risk management, when the truth is risk management is all about knowing your customer.
I know this to be truth since my company processes credit applications for consumers, and we have PLENTY of examples of large regional retailers that, even TODAY, regularly lend to people with poorly-calculated, nationally-based credit scores in the low-500's (which makes them really "bad risks" in the eyes of status quo lenders), and the lending portfolios of these regional retailers' portfolions--even NOW--are performing MUCH better than the chargeoff/loss rates of their much larger retailer and Wall Street counterparts.
Here are a couple of the most recent citations explaining what's happened in lending over the past 24 months, from a few disparate sources--in short, consumer and small business credit has been eviscerated due to pretzel logic and the failure of the Bush Administration, to a great extent, and now the Obama Administration, to put muscle behind their demands to Wall Street to open up credit to some semblance of sanity to Main Street:
"Meredith Whitney Most Pessimistic About Plummeting Credit Card Lines; Fed's Meddling In MBS And Agency Purchases."
"The Consumer's Credit Card Capacity Collapse; R.I.P. U.S. Middle Class Purchasing Power."
Frankly, forget the government numbers (i.e.: the "G19" reports barely scratch the surface of the real story); but even these show a siginificant decline; however, they're all about credit utilization. The real story is about utilitzation rates (what percent of total available credit is actually used) and actual/available credit lines (how much total credit is actually available to a given consumer) .
Like many of the other topics discussed herein, I've posted extensively on this matter in recent weeks. See: "More Gov't, Wall St. And MSM Lies: Consumer Credit, Savings."
Another, recently-noted trend is the transition of formerly subprime consumers into the rapidly-expanding "Rent-to-Own"/"Lease-to-Own" space. Yes, many in our middle class that may no longer obtain traditional credit are being forced to look at usurious rent-to-own options with interest rates comparable to payday lenders. It's a known fact that the rent-to-own industry has grown by leaps and bounds in the past couple of years.
OUR "IMPROVIING" GLOBAL TRADE PICTURE
Unfortunately, again, another year-over-year headfake.
The decline in our trade deficit, from Thursday, at Calculated Risk: "Trade Deficit Declines in October."
Trade Deficit Declines in October
by CalculatedRisk on 12/10/2009 08:59:00 AM
The Census Bureau reports: "The ... total October exports of $136.8 billion and imports of $169.8 billion resulted in a goods and services deficit of $32.9 billion, down from $35.7 billion in September, revised. October exports were $3.5 billion more than September exports of $133.4 billion. October imports were $0.7 billion more than September imports of $169.0billion."
Click on the story link for the graphics which accompany it.
For the important bullett points referenced in this story--and to put everything in some reality-based perspective--here are two inconvenient truths:
1.) It was a sharp drop in oil imports in October which was the "major contributor to decrease in the trade deficit." (Yes, buying less oil is a GOOD thing; contorting that to signify a widely-hyped talking point about economic improvement is something entirely different.)
2.) Despite monthly "improvements," both imports AND exports have declined, year-over-year, as they have been during the entire recession. Calculated Riskk concludes: "On a year-over-year basis, exports are off 9% and imports are off 19%."
Similar problems related to the public's perception versus reality as it relates to matters such as consumer credit, consumer spending, housing, and a variety of other issues may also be noted, too. (Available consumer credit has been strip-mined to the tune of 25% in the past 18 months. Approximately 1.2 trillion dollars gone. Another $1.2 trillion-plus is projected to be removed from the mix by the end of 2010.)
Yes, the economy is "improving" so slowly ("getting worse more slowly") that these "improvements" are relatively inconsequential, at least from a politically pragmatic viewpoint. What this bodes for the future of the current administration is something that is either more effectively addressed by them right now, as the calendar turns into 2010...or not.
HOUSING/MORTGAGES
From Mark Zandi..who has advised both the McCain Campaign and the Obama White House: "U.S. housing market meltdown not over yet: Zandi."
U.S. housing market meltdown not over yet: Zandi
Julie Haviv
NEW YORK
Wed Dec 2, 2009 2:15pm EST
NEW YORK (Reuters) - The meltdown of the U.S. housing market is not over yet, and home prices will soon start trekking downward again as a flood of foreclosures looms, a well-known economist said on Wednesday.
Housing Market
Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, said in an interview with Reuters home prices will resume their decline by early next year as foreclosure sales pick up again.
"The housing crash is not over," he said.
--SNIP--
Home prices, as measured by the Standard & Poor's/Case-Shiller U.S. National Home Price Index, will trough in the third quarter of 2010 after declining 38 percent, Zandi said.
The index peaked in the second quarter of 2006 and hit a trough in the first quarter of 2009, a drop of about 32 percent.
Home prices in many regions have been rising. That is because foreclosure sales fell over the summer and fall as mortgage servicers have tried to put stressed homeowners into the Home Affordable Modification Program and other modification plans, he said.
"This lull in foreclosures sales has resulted in the price gains in the past few months," he said.
"Foreclosure sales will increase, and home prices will resume their decline by early 2010 as mortgage servicers figure out who will not qualify for a modification," he said.
Zandi said 7.5 million foreclosure sales will have taken place between 2006 and 2011. The majority of these sales, however, have not emerged yet, with 4.8 million foreclosure sales expected between 2009 and 2011.
Separately from Zandi's commentary, and while I don't have the links for it (you'll just have to take my word), both Barclays and DeutscheBank project that 48% of all U.S. homeowners will be underwater by the end of 2010.
That is an ominous reality, IMHO.
FULL-CIRCLE, BACK TO REGULATORY REFORM
The final stage of the Wall Street regulatory reform sellout is now in play. Bloviations aside, things are not looking great, right out of the gate. (Refer to Krugman's "Disaster and Denial" links at the top of this diary for the general sense of apprehension that abounds.)
The general consensus is that the watered-down House version of the bill will become even more watered-down in the Senate.
As I'm writing this, "Wall Street regulatory reform" is already being "scaled back:" "House Scales Back Proposed Wall Street Rules."
In many quite specific ways, some of the most important financial services regulations in place, even now, are being gutted to provide even less regulatory reform than before the Recession commenced. When it comes to the derivatives aspect of the legislation, already, it's nothing short of a travesty.
Here's Seeking Alpha's take on the derivatives loophole debauchery: "4 Huge Loopholes in the Derivatives Reform Legislation."
4 Huge Loopholes in the Derivatives Reform Legislation
Seeking Alpha
Adam White December 11, 2009
...More than anyone else, Wall Street knows a good investment when they see it. So what is their $344 million buying them? At least 4 humongous loopholes in the derivatives reform legislation being voted on in the House of Representatives this week:
Loophole #1 : Foreign Exchange Exemption: Foreign Exchange exposure represents approximately 8% of total Over-The-Counter (OTC) Derivatives Exposure (see Loophole Calculations spreadsheet for methodology). By exempting Foreign Exchange from clearing, this leaves a big portion of the market uncleared, thereby adding to systemic risk. Think of it this way, would you be happy to know that for every 100 people boarding your airline flight, there were 8 people that did not have to pass through the metal detectors?
Loophole #2: End-User Exemption: The swaps dealers have mobilized their corporate clients to oppose mandatory clearing in order to avoid posting margin on their trades. It turns out that Corporate America likes Off Balance Sheet Financing just as much as Wall Street! Because notional values do not represent true exposure and because end-users trade much less frequently and typically leave their trades on until expiration, there is little or no compression of the end-user notionals. Therefore by excluding end-users from clearing, we believe that Congress is excluding between 16% and 21% of all derivatives exposures. Combined with the Foreign Exchange exemption now, these two loopholes result in 24-29% of OTC derivatives going uncleared. The risk to the financial system is growing much larger with every loophole.
Loophole #3 : "Balance Sheet Risk" Exemption: "Balance Sheet Risk" is code for "interest rate hedging through swaps." By exempting anyone using interest rate swaps for hedging balance sheet risk, we estimate that you are excluding about half of all of the dealer-to-financial interest rate derivatives (on top of the previous end-user exemption). This means that under this loophole, another 15% to 16% of all derivatives exposures goes uncleared. Combining all three loopholes together, Congress is effectively exempting between 40% and 45% of all derivatives from clearing.
If all three loopholes are incorporated in the final bill, then just over half of all derivatives will be moved into clearing, while nearly half will escape from mandatory clearing due to successful lobbying in Washington.
Loophole #4 :: Alternative Swaps Execution Facility (ASEF): Congress has also bowed to Wall Street's request to allow them to avoid trading on a public exchange altogether. Instead swaps dealers can use ASEFs instead of exchanges. And the word "execution" in the term ASEF is misleading because Congress has allowed some high-powered lawyer/lobbyists to twist the definition so that "voice brokerage" is an ASEF (meaning calling your client on the telephone) and all the ASEF is used for is confirming or reporting the trade, not actually executing the trade. As a result, 100% of all OTC derivatives can trade through ASEFs. They don't have to trade on a public exchange at all.
So it's clear what $344 million in lobbying buys you. In addition to multiple Congressmen and Senators, it buys you a series of loopholes that allows you to avoid about half of the clearing requirement and all of the trading requirement in the derivatives reform bill. This is a fantastic investment (less than 1%) when derivatives represent $35 billion per year in revenue!
Here's another view of the matter from HuffPo: "A Guide to Financial Regulatory Reform Proposals."
And, yet another set of observations on this from the WSJ: "Loopholes Lurk in Bank Bill."
And, perhaps the best review and ongoing effort on this matter is taking place over at the Economic Populist blog: "What's Happening with the Wall Street Reform and Consumer Protection Act of 2009?"
What's Happening with the Wall Street Reform and Consumer Protection Act of 2009?
Submitted by Robert Oak on Fri, 12/11/2009 - 13:08.
Today the House passed H.R. 4173: Wall Street Reform and Consumer Protection Act of 2009. The vote was 223 to 202 with 27 Democrats joining all of the Republicans in a no vote.
The actual bill is in the Congressional Record, with the latest Congressional actions (not real time).
Here is a list of amendments. The current House Roll Call vote is here.
The House allowed 36 amendments for debate, which severely limits the real number of amendments up for consideration. It appeared to be a strategic move to block the flurry of Republican amendments.
See this post on two amendments to gut the bill.
Earlier this morning, House Speaker Nancy Pelosi posted the latest legislative actiion with the bill summary and the latest selling points on the bill.
We now have a bill managers amendment. This 240 page, hand edited amendment is here, but also attached to this post due to the House Server load.
I've read that the real smoking gun, if there is one, is to be found in the 240-page hand-edited Manager's Amendment--the last link in the blockquote, immediately above.
And, this thing hasn't even made it over the Senate yet?
Of course, this is still a work in progress, so it precludes comment until we have more detail; however, I have enough knowledge of these matters to know, already, that--spin aside--this isn't looking all that great. The writing's clearly on the wall as of this Friday's legislative activity, and it's pathetic--with these matters already morphing into a virtual invitation to the financial sector to engage in behaviors that are more egregious towards the public good than even the current rules and regulations permit, right now.
Yes, I'm beyond apprehensive about this, but for good reason. As we all know, the banks own our legislative process. It's December 2009, and that's just a stated fact of life. If you don't believe me, I'd suggest you refer back up to today's Krugman article, at the top of this diary post.
IMHO, Krugman leaves us with the thought of the day: "For one thing is clear: if politicians refuse to learn from the history of the recent financial crisis, they will condemn all of us to repeat it. "