Category: Economy

The Obvious Answer is Because They Don’t Care

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Annie Lowrey of the New York Times looks at the parts of the TARP that were intended to help ordinary homeowners, and it ain’t pretty:

A fund to support homeowners in the communities hit hardest by the collapse of the housing bubble has disbursed just 3 percent of its budget and aided only 30,640 homeowners in the two years since its creation, according to a report released on Thursday by a federal watchdog office.

The Hardest Hit Fund, which was created in the spring of 2010, grants money to state housing finance agencies for efforts to help families that are facing foreclosure. It has “experienced significant delay” because of “a lack of comprehensive planning” by the Treasury Department and limited participation by Fannie Mae, Freddie Mac and the large mortgage servicers, said the report by the special inspector general for the Troubled Asset Relief Program.

“TARP wasn’t supposed to be just a bank bailout,” said Christy L. Romero, the special inspector general for TARP, in an interview. “It was specifically designed with the goal of helping homeowners, and our concern is that that goal may not be met.”

As of the end of 2011, the Hardest Hit Fund had spent $217.4 million out of its $7.6 billion budget, the report found. The program is intended to reach homeowners who are unemployed, or living in areas with high unemployment rates or steeply falling home values.

The report is just the latest to criticize the Obama administration’s efforts to relieve homeowners battered by the nationwide drop in housing prices and the broader recession. The office of the special inspector general has repeatedly criticized Treasury’s management of the Home Affordable Modification Program, Washington’s main initiative to prevent foreclosures.

By this point, they were supposed to have helped 2-3 million, so they are low by a factor of almost 100.

Think about it.  They had $7.6 billion to spend, without any meaningful oversight, but they couldn’t be bothered to spend it.

This was not just an economic opportunity, it was a political one, because when they saved people, they would most likely get their votes, but it just didn’t matter.

This is going on because the Obama administration in the person of Timothy Geithner, the last man standing of Obama’s original economic team, simply don’t care.

The Treasury has already admitted that the homeowner protection programs was primarily about allowing banks to buy time, and extract fees, from desperate homeowners before they wrote down the loans.

Helping homeowners was in the TARP because they needed it to get the votes, but if it ain’t protecting the big banks and big banking, Geithner/Obama ain’t interested.

It’s Jobless Thursday

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And the news is not good, 380K initial claims, up 13K, from last weeks numbers, which were revised up 10K, with the less volatile 4-week moving average rising by 4,250 to 368,500, continuing claims falling 98K to 3.25 m, and emergency claims falling by 20.5K to 2.79m.

We’ve had some pretty good numbers since the beginning of the year, but we’ve also had an unprecedentedly mild winter, which has pushed a lot of “spring time” activities months earlier. See (Anthropogenic Climate Change)

The question now is how much did the good numbers in the first quarter of the year eat the economic activity now.

It’s Jobless Thursday!

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Another really good week, with initial jobless claims falling 5,000 to 359,000, (well sort of, last week’s numbers were revised up from 348K to 364 K, so apples to apples is a little bump up), with the 4 week moving average fell 3,500 to 365K, with continuing claims falling by 41K to 3.34 million, and extended claims fell 79K to 3.24 million.

Of course, there is a proverbial turd in the punch bowl in all of this, which is that all of these figures are seasonably adjusted, and we’ve had the mildest winter in the United States pretty much ever so we might be seeing a lot or economic activity that would normally be in April or May.

I guess we’ll find out then.

Greece is Imploding

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I’m serious. It looks like local scrip is breaking out all over the country as an alternative to the Euro:

In recent weeks, Theodoros Mavridis has bought fresh eggs, tsipourou (the local brandy: beware), fruit, olives, olive oil, jam, and soap. He has also had some legal advice, and enjoyed the services of an accountant to help fill in his tax return.

None of it has cost him a euro, because he had previously done a spot of electrical work – repairing a TV, sorting out a dodgy light – for some of the 800-odd members of a fast-growing exchange network in the port town of Volos, midway between Athens and Thessaloniki.

In return for his expert labour, Mavridis received a number of Local Alternative Units (known as tems in Greek) in his online network account. In return for the eggs, olive oil, tax advice and the rest, he transferred tems into other people’s accounts.

“It’s an easier, more direct way of exchanging goods and services,” said Bernhardt Koppold, a German-born homeopathist and acupuncturist in Volos who is an active member of the network. “It’s also a way of showing practical solidarity – of building relationships.”

Basically, we are seeing a wholesale flight from the regular economy, and the concept of the Greek nation state. (It’s also a repudiation of the EU, since it sets up a system where it’s impossible to purchase non-local products)

The Guardian presents this positively, but I see it as a step toward Greece, a barely function nation to begin with, moving in the direction of Somalia.

I’m increasingly coming to believe that the Euro currency experiment, and in particular German domination of this process will lead to another war in Europe (hopefully cold, and not hot) in the next decade, as my brother (Bear who swims) has predicted, .

Good NFP News Again

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The non-farm payroll numbers came out today, and they are good, 227,000 more jobs in February, though unemployment did not fall, it’s still 8.3%, because about a quarter million people started looking for a work again.

Additionally, the numbers for December and January numbers were revised up.

Clearly good news, and as it’s now 3+ months, I think that we can rule out the numbers being an outlier.

Of course, if the continued war against the rest of Europe by the Germans takes out Spain or Italy, all bets are off.

It’s Jobless Thursday

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And it was not particularly good news.

Initial claims rose by by 8,000 to 362,000, 10,000 more than forecast, with the less volatile 4-week moving average rising by 250, continuing claims rising by 10K to 3.42 million, and extended claims rose 26.8K to 3.4 million.

Not great news, but still better than it was 6 months ago.

We should be getting the official NFP numbers tomorrow, but the ADP numbers were pretty good.

Of course, “pretty good” still means that we are looking at a decade before we return to trend.

Dallas Fed President calls for Big Bank Breakup

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I’m stunned that someone at this high a level in the financial establishment would suggest breaking up the mega-banks. I don’t know what is leading to this, but he’s off Tim Geithner’s Christmas list:

The five biggest banks in the United States are too powerful and should be broken up, Dallas Fed President Richard Fisher said on Wednesday.

The financial crisis has left the five biggest banks even more powerful than before, he said at an event in Mexico City.

The five biggest U.S. banks are: JPMorgan , Goldman Sachs , Morgan Stanley , Bank of America , and Citigroup .

“After the crisis, the five largest banks had a higher concentration of deposits than they did before the crisis,” he said. “I am of the belief personally that the power of the five largest banks is too concentrated.”

The U.S. Dodd-Frank reform and consumer protection act includes mechanisms for regulators to break up large financial companies, but imposes high hurdles for such action.

“The purpose of Dodd-Frank was to reduce the concentration of power and we have a term called ‘too big to fail’… perversely, these banks are now even bigger, they are too ‘bigger’ to fail than before.”

Last month a group of consumer advocates, academics and economists said they wanted to end “too-big-to-fail” banks, starting with Bank of America.

Fisher continued his U.S. assessment by focussing on consumer demand, which he said is driving a pick-up in the economy although risks remain.

A welcome, if unexpected, development.

My guess, and I could be talking out of my ass, is that this is an artifact of the fact that he’s one of the most extreme inflation hawks at the Fed. 

Basically, I think that he thinks that Bernanke is keeping rates at the zero bound in order to allow the too big to fail banks to dig themselves out of their holes, and he is concerned that this will set the stage for inflation.

If I am right in my analysis, his statement is actually less shocking than it appears at first glance.

H/t Chris in Paris.

Dungeons and Draghi*

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Someone has finally set up the Greek/Euro financial crisis as a choose your own adventure game:

Reading the media and blogs, it seems to me that left and right are united in the view that the Greek default is being handled appallingly, that the current attempts at a solution are childishly obviously wrong and that everything is the fault of someone, probably the Germans. My own view – that it is not at all clear what the direction of policy is, and that although I don’t agree with the troika plan, it’s recognizable as a good-faith plan made by conscientious international civil servants working under unimaginably difficult political constraints in an economic context that was irreparably broken before they got there – is, as always, unpopular.

I don’t have a solution myself – the more I end up discussing this with people, the more I am reminded of the London Business School proverb taught on some of the gnarlier case studies, which is “Not All Business Problems Have Solutions”. So, CT hivemind, what do you think the best outcome is? Below the fold, I note some talking points, aimed at preventing our commentariat from falling into some of the pitfalls and mistakes which appear to be dominating debate at present. Because the whole issue is a twisty turny maze which at times seems to consist of nothing but false moves, I am presenting it in the form of a “Choose Your Own Adventure” book. I would note at this stage that I could probably have presented it in a funky HTML way rather than making you scroll up and down, but I have convinced myself that this is a feature rather than a bug – the medium matches the message here, because international debt negotiations are cumbersome, inconvenient and irritating too. Also, it is probably easier than it needs to be for readers to end up at the wrong paragraph and get a confusing jumbled narrative which bears little resemblance to the decisions they thought they’d made. Again, this is a crucial part of giving you the authentic international financial diplomacy experience.

…………

It’s an inspired idea.

*Not my bon mot. One of the commenters on  the above post came up with it.

Greeks Vote to Approve Their Own Suicide While the Rest of the EU Applaudes

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Their parliament has approved the new austerity plan, which will allow them to borrow money and give it to German, French, and British banks.

If I were running Greece, I would start a program of aggressive instruction in German for the populace.

If the Germans want to make Greece uninhabitable, perhaps they should accommodate the refugees.

In the meantime, Athens burns:

After violent protests left dozens of buildings aflame in Athens, the Greek Parliament voted early on Monday to approve a package of harsh austerity measures demanded by the country’s foreign lenders in exchange for new loans to keep Greece from defaulting on its debt.

Though it came after days of intense debate and the resignation of several ministers in protest, in the end the vote on the austerity measures was not close: 199 in favor and 74 opposed, with 27 abstentions or blank ballots. The Parliament also gave the government the authority to sign a new loan agreement with the foreign lenders and approve a broader arrangement to reduce the amount Greece must repay to its bondholders.

The new austerity measures include, among others, a 22 percent cut in the benchmark minimum wage and 150,000 government layoffs by 2015 — a bitter prospect in a country ravaged by five years of recession and with unemployment at 21 percent and rising.

But the chaos on the streets of Athens, where more than 80,000 people turned out to protest on Sunday, and in other cities across Greece reflected a growing dread — certainly among Greeks, but also among economists and perhaps even European officials — that the sharp belt-tightening and the bailout money it brings will still not be enough to keep the country from going over a precipice.

It’s actually going to make things worse, because it will cause the economy to contract, and the last thing you want to do in order to get out of debt is to cut your salary.

Now They Tell Us

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One of the architects of the European austerity program is now saying that austerity is making things worse:

A leading architect of the austerity programme in Greece – one of the harshest ever seen in Europe – has admitted that its emphasis on fiscal consolidation has failed to work, and said economic recovery will only come if the crisis-hit country changes tack and focuses on structural reforms.

Poul Thomsen, a senior International Monetary Fund official who oversees the organisation’s mission in Greece, also insists that, contrary to popular belief, Athens has achieved a lot since the eruption of the debt crisis in December 2009.

“We will have to slow down a little as far as fiscal adjustment is concerned and move faster – much faster – with the reforms needed to modernise the economy,” he told the Greek daily Kathimerini, adding that the policy shift would be “reflected” in the conditions foreign lenders attached to a new rescue programme for Athens.

Hoocoodanode?

Taking a pay cut makes it harder to pay off your debts.

Marketplace Gets It Wrong

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I was listening to marketplace, and they noted the good news that incomes rose in December rose at the fastest rate in months, and that people saved more too.

They said that this is good, but what it really means is that consumer spending fell in December:

U.S. consumer spending was flat in December as households put the largest rise in income in nine months into their savings, potentially signaling slower consumption early in 2012.

It was the weakest reading on spending since June, the Commerce Department said on Monday, and it followed two tepid gains in October and November.

Still, economists were cautiously optimistic that rising wages as labor markets improve will keep demand supported.

“I do believe there is some underlying trend that gives us some reason to feel a little bit better about what lies ahead regarding spending, and the main reason is the labor market,” said Anthony Karydakis, chief economist at Commerzbank in New York.

U.S. economic growth quickened in the fourth quarter and hiring picked up, but activity is expected to soften early this year. Federal Reserve Chairman Ben Bernanke said last week that the central bank was considering a further easing of monetary policy to support growth.

Reuters gets it. This is not good news.

This is deleveraging in  a depressed economy.