I assume you mean the $3 trillion plus in 'emergency loans' the Fed loaned to lending institutions between 2007 and July 2010?  Or at least that is one of the items you are citing as a problem.

 

These were lending programs specifically targeted to keep the flow of credit moving through the credit crisis.  Most of the loans were to major financial institutions such as BOA, JP Morgan, Citigroup and Wells Fargo, as well as foreign banks such as Deutche Bank, Barclays, etc.  Regardless of how they were secured, most of these loans have been paid back and none are overdue.  At least that it what was reported in whatever story I read today on the subject.  These lending programs were absolutely vital to many, many small businesses during the financial crisis

 

Then, I believe, there was another $1 trillion in mortgage securities the Fed bought from F&F.  I am not sure how I feel about that.  It all comes down to how vital you feel the housing market is (or should be) to our economy.

 

The FED, Loans: If possible could you put a link to the article that shows the $3 Trillion from the emergency loan program has been paid back (I have read they have closed most of the programs, but that is not the same as having everything paid back). I would be very interested in that article, since the article I found said $2.3 Trillion is still not been paid back and is on the FED books. If different information is available that shows something very different, then that would chance this discussion.

 

Need for these loans: As far as these loans go, I have continued to state through this thread that it would not have be wise to let the financial system collapse and that many legal actions the FEDs have taken needed to happen. What I have issue with is that we are now 3 years later and from what I have found, the FEDs (taxpayer) are still holding trillions in 'assets' from these institutions (including many overseas banks) that are not worth the $1 for $1 exchange we made for them.

 

Unethical/Illegal conduct: It has become very clear through this mess that many of these 'to big to fail' companies have done some very unethical and illegal things. I have posted mainstream articles showing this is/has been happening and many times with FED support or a blind eye. This is not a way to create a sustainable, long lasting economy in the US. I want to see these practices stopped, and those involved prosecuted, they serve no one but the few elite. The middle class has gotten smaller and poorer through this economic crisis, and the top elite have gotten richer. A lot of this has happened through the transfer of weath that continues today.

 

Housing: I believe housing has a vital roll in creating a stable and strong economy in the US. What I don't agree with is having the FEDs artifically pump the market to try and maintain prices points that are not supported by incomes. Housing is still over inflated, related to income, in most the US. This is not a sustainable practice. I also believe the efforts from the FEDs are also stoking the continuation of suburban sprawl by not allowing those McMansion and other suburban product to adjust to their true cost.

 

Lending for small business: I work daily with the small business community and most of them will tell you their access to cash has really not improved and that most of the FED programs for small businesses was window dressing. The big boys have gained more ground against small businesses through this mess.

Here's some decent coverage - http://www.bostonherald.com/business/general/view.bg?articleid=1300127&srvc=

 

The figures provide details on more than $2 trillion the Fed lent through emergency programs from December 2007 to July this year to ease a credit crisis. The lending programs had never been used before and are now defunct. Most of the loans have been repaid, and none are overdue, Fed officials say.

 

So they say, at least.  You can also note in the article how it talks about the new Financial Regulations putting an end to the secrecy of the "discount window".  Not sure I agree with that.... those loans were kept secret for a very good reason IMHO.

 

On your last point, I would have to presume that the small businesses would be far worse off if not for these programs, even if they did lose some ground to the "big boys".... which has been happening everyday in America for a looooong time, financial crisis or not.

Here's some decent coverage - http://www.bostonherald.com/business/general/view.bg?articleid=1300127&srvc=

 

The figures provide details on more than $2 trillion the Fed lent through emergency programs from December 2007 to July this year to ease a credit crisis. The lending programs had never been used before and are now defunct. Most of the loans have been repaid, and none are overdue, Fed officials say.

 

So they say, at least.  You can also note in the article how it talks about the new Financial Regulations putting an end to the secrecy of the "discount window".  Not sure I agree with that.... those loans were kept secret for a very good reason IMHO.

 

On your last point, I would have to presume that the small businesses would be far worse off if not for these programs, even if they did lose some ground to the "big boys".... which has been happening everyday in America for a looooong time, financial crisis or not.

 

Thanks for the extra information.

 

I think the small business issues is broken down into to parts. The ones that provide product or support for big business may have faired ok (with the financial approach being taken), but those that are competing with big business clearly have lost more ground faster than normal through this mess. They have been hit with a lack to capital and the deep recession. Big business has most been hit by the deep recession, but found capital through these special government/emergency programs.

Weekly jobless claims rise 26,000 to 436,000

Continuing claims increase 53,000 to 4.27 million

 

"Despite the increase, jobless claims have totaled less than 450,000 for four straight weeks, the first time that’s happened this year. Most economists believe weekly claims have to move down toward 400,000 or below to indicate a faster pace of hiring, or at least slower layoffs."

http://www.marketwatch.com/story/weekly-us-jobless-claims-climb-26000-to-436000-2010-12-02

UN heightens double dip recession fears

 

"UNITED NATIONS (AFP) – The United Nations warned Wednesday that world growth in the next two years will not be enough to recover jobs lost in the financial crisis and that key countries could be heading for a double-dip recession."

 

"The United States, Japan and major European economies are all at risk of a new recession, said a UN report which predicted the world economy will expand by 3.6 percent this year before falling to 3.1 percent in 2011 and 3.5 percent in 2012."

 

"The recovery of the world economy has started to lose momentum since the middle of 2010, and all indicators point at weaker global economic growth," said the report."

http://news.yahoo.com/s/afp/20101201/bs_afp/financeeconomyworldun

Maybe the UN report I posted above is onto something? This numbers was not even close to the 'experts' projections.

 

Unemployment Rises to 9.8% as U.S. Adds Just 39,000 Jobs

 

"Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington. The jobless rate rose to 9.8 percent, the highest since April, while hours worked and earnings stagnated."

http://www.bloomberg.com/news/2010-12-03/u-s-added-39-000-jobs-in-november-unemployment-rose-to-9-8-.html

 

I posted several times (last summer) that it appeared a wheel fell off the recovery wagon sometime back in the early summer. In my business we notice a significant pull back by businesses, and developers in about June/early July and it really has not comeback. Before then businesses and developers where dusting off plans and were working hard to get thing moving again, then it got very quiet. I think this chart shows this event for the job market as well. Since June we have basically run a zero job growth rate. Add in the reality that we need to generate between 150,000 to 200,000 new jobs per month, just to handle the new incoming workforce and you start getting an ugly picture.

 

http://www.marketwatch.com/story/unemployment-hits-98-as-payrolls-add-just-39000-2010-12-03

Here is a quick look at the U-6 number. This number more closely reflects how unemployment data was reported before, 1994. While not an exact apple to oranges comparision, the unemployment rate during the great depression ran from about 16% to 25% at its peak. Just trying to show a little comparision, not stating we are in a depression. We are getting close to having 1 in 5 Americans either unemployed or underemployed. I just struggle with the concept that the economic is making a noticable rebound with this kind of data.

 

The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed

 

"According to the government's broadest measure of unemployment, some 17.5 percent are either without a job entirely or underemployed. The so-called U-6 number is at the highest rate since becoming an official labor statistic in 1994."

http://www.cnbc.com/id/34040009/The_Real_Jobless_Rate_17_5_Of_Workers_Are_Unemployed

one in eight americans is on food stamps.  rebound? freakin food eaters.

Maybe now people will realize they need to life off what they make, not extended credit.

The concept of "underemployed" is skewed given the times, IMHO.  Compare how many people have college, even HS, degrees now to that same figure around the Great Depression and of course there will be many out there who consider themselves underemployed.  Not everyone can be a CEO.... but every mook with a 4 yr degree feels entitled to that type of opportunity.

The concept of "underemployed" is skewed given the times, IMHO.  Compare how many people have college, even HS, degrees now to that same figure around the Great Depression and of course there will be many out there who consider themselves underemployed.  Not everyone can be a CEO.... but every mook with a 4 yr degree feels entitled to that type of opportunity.

 

At the same time not everyone wants to be CEO.

Maybe now people will realize they need to life off what they make, not extended credit.

 

I think this lesson is starting to sink in, at least on some.

^Is this really the lesson we should glean from the crisis?  Let's recall:

 

-Bubble in housing sector due to availability of cheap credit, which was financed through supposedly AAA securities sold to institutional investors. (Toss in some crazy reinsurance risk managment to that powder keg, the credit default swaps).

-Complexity of the underlying mortgages (things like new, higher rates after 5 years) and inability to refi causes defaults, which then causes the MBS's to become unable to be accurately valued, which causes the credit default swap payments to come due). Bear Stearns goes broke, forced sale/bailout to JP Morgan/Chase

-Re-insurers go broke (AIG, etc.) causing Lehman Bros. to go bankrupt.  All other investment banks at risk of going broke.

-Credit market seizes up.  GM, Chrysler, State of California, other who rely on short term loans from major banks to provide day-to-day working capital because their income comes in at fixed points during the year can't pay their bills.

-Producers cut back because of lack of funding, unemployment insues, expected sales fall further (fewer buyers due to unemployment), more layoffs, then massive unemployment.

 

I'm not sure where "living above your means" comes into this.  I suppose the original mortgagees were, but of course they were provided that money by bankers who expected to make a profit, and supposedly conducted an analysis of the borrowers assets before they provided a loan.  Or are the large institutional players, the pension funds (both American and European) and charities and non-profits who were the end buyers of the MBS's that allowed for the money to flow to the mortgagees in the first place "living above their means"?  Or was it the banks that tried to make profits selling MBS's, buying MBS's insuring those MBS's and reinsuring their MBS's all at the same time?

 

Either way, now that Ireland is going broke, and Spain is likely to be next, it's going to be pretty ridiculous when people who claim government that was in massive deficit or "living above its means" is now paying for it, since both Ireland and Spain were running surpluses before the fiscal crisis.

Another look at what is happening on the other side of the ocean.

 

China's credit bubble on borrowed time as inflation bites

The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist.

 

"Officially, inflation was 4.4pc in October, and may reach 5pc in November, but it is to hard find anybody in China who believes it is that low. Vegetables have risen 20pc in a month."

 

"The economy is entering the ugly quadrant of cycle – stagflation – where credit-pumping leaks into speculation and price spirals, even as growth slows. Citigroup’s Minggao Shen said it now takes a rise of ¥1.84 in the M2 money supply to generate just one yuan of GDP growth, up from ¥1.30 earlier this decade."

 

"Prices are 22 times disposable income in Beijing, and 18 times in Shenzen, compared to eight in Tokyo. The US bubble peaked at 6.4 and has since dropped 4.7. The price-to-rent ratio in China’s eastern cities has risen by over 200pc since 2004."

 

"Albert Edwards from Societe General said the OECD’s leading indicators are signalling a "downturn" for Asia’s big five (Japan, Korea, China, India, and Indonesia). The China indicator composed by Beijing’s National Bureau of Statistics has fallen almost as far as it did at the onset of the 2008 crash."

 

"I remain convinced we are witnessing a bubble of epic proportions which will burst – catching investors as unawares as the bursting of the Asian bubbles of the mid-1990s. Ignore these indicators at your peril," he said."

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8182605/Chinas-credit-bubble-on-borrowed-time-as-inflation-bites.html

^Ha.  I got shouted down about a year ago on this site for even mentioning the possiblity of a Chinese "bubble."

 

In domestic news...

 

Gov't: Taxpayers make $12B on Citigroup bailout

 

WASHINGTON – After all is said and done, taxpayers will make a $12 billion profit on the government's $45 billion bailout of Citigroup.

 

The Treasury Department said late Monday that it had struck a deal to sell its remaining holdings in Citigroup common stock, about 2.4 billion shares. With the proceeds of the sale, priced at $4.35 a share, the government will have realized $57 billion on its bailout package for the big bank.

 

http://news.yahoo.com/s/ap/20101207/ap_on_bi_ge/us_citigroup_stock_sale

Economists ready to hike GDP view after tax deal

 

"WASHINGTON (MarketWatch) — Wall Street economists were tapping into their spreadsheets Tuesday, ready to ratchet up their economic growth forecasts for next year in light of the tax deal struck by President Barack Obama and congressional Republicans, particularly the surprise one-year reduction in payroll taxes."

 

"The proposal — which Congress still needs to pass in the face of clearly upset Democratic members — would extend all Bush-era income-tax cuts as well as federal unemployment insurance and lower the payroll tax by $120 billion with a 2-percentage-point reduction."

 

"The plan would also extend the 15% capital-gains rate and proposes a 35% estate-tax rate with a $5 million exemption. Emergency unemployment-insurance benefits would be extended through the end of 2011."

http://www.marketwatch.com/story/economists-ready-to-ratchet-up-gdp-forecasts-2010-12-07?dist=afterbell

Talking about debt per capita: In 2009, Iceland had debt of 850% of GDP:

 

http://www.vanityfair.com/politics/features/2009/04/iceland200904?printable=true&currentPage=all

 

Now, they are coming out of recession:

http://www.nytimes.com/2010/12/08/business/global/08icecon.html?_r=1

 

The benefits of having your own currency.  From the article:

 

"Like Ireland and Greece, Iceland has taken a large dose of austerity measures to rebuild its economy. Unlike Ireland and Greece, however, Iceland allowed private banks to fail, and its currency, the krona, has declined by about 46 percent against the dollar since the start of 2008.

 

“Excluding the financial system, the real economy is doing well,” Arsaell Valfells, a professor of business and finance at the University of Iceland, said in telephone interview. Retail spending was still shrinking, he said, but the export sector, consisting mainly of fish, aluminum and tourism, was improving.

 

“We’ve basically gone back to 2003 in terms of the level of standard of living,” he said. The worst has been felt by younger people who borrowed at the height of the bubble and are now having to reduce their debt, he said. “But they’ll come through this,” he added.

 

Iceland’s experience, he said, offered a lesson for the euro zone as it grappled with its own crisis: “This is the proper process. If you go through a bubble economy and you need to correct it, the answer is not to convert private debt into public debt. Rather it is to restructure the debt to the level of the assets.”

Such a trust worth group. Its has been amazing to watch all the illegal activity these stalwart banks have been doing. There is pages of documented illegal activity that would have brought down most companies. But, these guys just keeping going and almost no one has even received jail time. What makes these types of issues even worse is having the FEDs, the Government and the taxpayer continue to support these organizations financially. The corruption in the system is just amazing.

 

Bank of America Muni Bid Rigging Payments May Be `Tip of the Iceberg'

 

"Bank of America Corp.’s agreement to pay $137 million in restitution for taking part in a nationwide bid-rigging conspiracy for municipal-investment contracts may soon be followed by more settlements to repay the scheme’s victims, the Justice Department’s Antitrust Division head said."

 

“Stay tuned to this channel -- I think you will see a lot more activity in the coming weeks and months,” Christine Varney, the antitrust chief, told reporters yesterday. “We are committed to getting restitution, full restitution, to all the municipalities that were victims of this scheme.”

 

"The government has identified more than a dozen firms, including JPMorgan Chase & Co., UBS AG, and Societe Generale as unindicted co-conspirators in a criminal case brought by the Justice Department against a Los Angeles investment broker."

 

"Prosecutors have said that favored bankers got inside information from brokers who handled bidding for the contracts so they could carve up the market. In some cases, bankers admitted paying kickbacks to brokers."

http://www.bloomberg.com/news/2010-12-08/bank-of-america-deal-in-muni-case-may-be-tip-of-the-iceberg-.html

Looks like the values being lost are increasing year over year, not decreasing. With that said, I have not been a big fan of Zillow or their data over the last several years. I think what does come out of this type of information is that the housing bust is not over yet.

 

U.S. homes to lose $1.7 trillion in value this year: Zillow

About $9 trillion has been lost since June 2006, report estimates

 

"CHICAGO (MarketWatch) — Homes in the U.S. will have lost $1.7 trillion in value in 2010 by the time the year is through, according to estimates released Thursday by Zillow.com, an online real-estate marketplace.

 

That’s 63% more than the $1 trillion in value that homes lost last year, the report said."

http://www.marketwatch.com/story/us-homes-to-lose-17-trillion-in-value-in-2010-2010-12-09?dist=afterbell

WASHINGTON – After all is said and done, taxpayers will make a $12 billion profit on the government's $45 billion bailout of Citigroup.

 

I question this figure.

 

Sure, it will be reported as a $12B book profit.  But I don't think it takes all of the bailout activities into account.

 

From what I understand...

 

The FED has been lending Citi billions of dollars at favorable rates (virtually zero percent), which Citi then uses to purchase T-Bills at 2.5-4.0%.  Citi makes a quick profit on this manuever, which effectivly strengthens their balance sheets.  This also alows them to write off mortgage loses.  They write off the loses at a rate that closely matches the profit they make on the purchase of the T-Bills.

 

So effectively, the American taxpayers have been reimbursing Citi for it's loses on it's lending fiasco. 

 

The government also bailed out many of Citi's trading partners, a great number of whom would have likely gone under without such action.  As a result, Citi was spared from paying out billions of dollars in losses on mbs and other forms of trading insurance and deals.

 

Does that $12 "profit" on the gov'ts bailout of Citi take into account these and other measures?  I don't think so.

 

IMO (and a whole lot of others' opinions as well), Citibank has been a zombie bank for the past 4 years. Dead by traditional measures of 'alive', but still up and moving around.

WASHINGTON – After all is said and done, taxpayers will make a $12 billion profit on the government's $45 billion bailout of Citigroup.

 

I question this figure.

 

Sure, it will be reported as a $12B book profit.  But I don't think it takes all of the bailout activities into account.

 

From what I understand...

 

The FED has been lending Citi billions of dollars at favorable rates (virtually zero percent), which Citi then uses to purchase T-Bills at 2.5-4.0%.  Citi makes a quick profit on this manuever, which effectivly strengthens their balance sheets.  This also alows them to write off mortgage loses.  They write off the loses at a rate that closely matches the profit they make on the purchase of the T-Bills.

 

So effectively, the American taxpayers have been reimbursing Citi for it's loses on it's lending fiasco. 

 

The government also bailed out many of Citi's trading partners, a great number of whom would have likely gone under without such action.  As a result, Citi was spared from paying out billions of dollars in losses on mbs and other forms of trading insurance and deals.

 

Does that $12 "profit" on the gov'ts bailout of Citi take into account these and other measures?  I don't think so.

 

IMO (and a whole lot of others' opinions as well), Citibank has been a zombie bank for the past 4 years. Dead by traditional measures of 'alive', but still up and moving around.

 

Bingo and not just T-Bills. The FED discount window has been very kind to the big banks. They keep lending to these banks for about 0% and then these banks turn around and invest in commodities (and other investments), which in turn runs up the cost of commodities (oil, food, etc) to main street. They then make a nice profit, turn back in the money they were lended from the FED discount window, leave with their billions made and start the process over. This allows Main Street to take another one for the Hampton Team.

Another interesting article on Japan and their issues and how the US maybe following in their not so wise footsteps.

 

U.S. Must "Man Up and Take the Pain" or We'll Become Japan, Katsenelson Says

 

"Just as Japan's policymakers were unable to stave off deflation after their credit bubble burst in 1989, despite their best efforts, conventional wisdom holds that all of Ben Bernanke's "reflation" policies will ultimately be overwhelmed by deleveraging and debt destruction."

 

"Of course, there are important differences between Japan and the U.S.

 

Most importantly, Japan is dealing with a "horrible demographic profile," Katsenelson says, citing its aging population, low birth rates and limited immigration."

 

"With its savings rate falling, Japan's aging citizenry is reaching a tipping point where it will no longer be able to purchase Japanese Government Bonds (JGBs) at anywhere the same level as in the past 20 years, when over 90% of JGBs were purchased internally."

 

"As a result, Japan will soon have to tap the global markets to fund its borrowing. Katsenelson predicts JGBs will get a cold reception from international buyers because of Japan's demographics and the fact its debt is already almost 200% of GDP, or roughly double America's."

http://finance.yahoo.com/tech-ticker/u.s.-must-%22man-up-and-take-the-pain%22-or-we'll-become-japan-katsenelson-says-535701.html?tickers=EWJ,TBT,TLT,UUP,UDN,%5EN225,TIP&sec=topStories&pos=9&asset=&ccode=

 

Some positive news, maybe. Note that gas prices rose 4% which made up a lot of this retail sales growth. This is one thing that has turned into a joke for stats. They like including food and gas prices in retail sales numbers (for the bump) but they exclude them from the main CPI data to show inflation is not a problem. This in turns allows the FEDs to continue QE's by saying inflation is well under control, yet in reality main street is seeing a noticable increase in cost for basic items, food, heat, gas.

 

U.S. retail sales in November rise 0.8%

Consumer purchases increase for fifth straight month

 

"Retail sales rose 0.8% last month, with growth pegged at 1.2% excluding the volatile automotive sector, the Commerce Department reported. Sales for October and September were also revised higher to suggest an even stronger trend."

 

"What’s holding the economy back, analysts say, are high household debt levels, a weak housing sector and a nearly 10% unemployment rate. More rapid growth is unlikely until businesses expand payrolls, wages rise and households’ net wealth increases."

 

"The biggest increase in sales last month for U.S. retailers occurred at gas stations as fuel prices rose and Americans began to drive more during the holiday season. Gas sales jumped 4% in November, marking the biggest increase in one year."

http://www.marketwatch.com/story/us-retail-sales-climb-08-in-november-2010-12-14

 

I am not sure the underlining issues of household debt, weak housing sector, unemployment and the need for a noticable growth in wages will be changing much in the near future. This economy is stuck in a huge mud pit and traction is hard to come by. I think in 2011 the best we can hope for is VERY slow growth or a break even from 2010.

Go housing team, go, go, go. Oops, nevermind. I guess rock bottom interest rates are not the magic cure, at least for housing.

 

Housing Shaky as Lenders Tighten

 

"Economists are worried that the housing sector may be heading into another downdraft as mortgage lenders continue to tighten already restrictive lending standards."

 

"Such a scenario seemed less likely earlier this year, when home-buyer tax credits fueled a surge in sales. But sales have plunged in the second half of the year after those credits expired. New and existing home sales were down by more than 25% in October from a year ago."

 

'Meanwhile, applications for mortgages have hovered near their lowest levels in more than a decade since May, even though mortgage rates have tumbled to their lowest levels in 60 years, with average 30-year, fixed-rate loans bottoming at 4.21% in October."

 

"Banks have become more restrictive in part because Fannie and Freddie are stepping up demands for banks to buy back defaulted loans when they can prove that the mortgage didn't meet underwriting guidelines, an expensive proposition for banks."

 

"Originators are scared to death. We are being intensely cautious because we understand that the franchise could be on the line," says Mr. Walters. He says tightening could continue "for at least a year, maybe longer."

http://online.wsj.com/article/SB10001424052748703727804576011872478182318.html

Why exactly is it a bad thing that lenders "continue to tighten already restrictive lending standards?"  Unreasonably loose lending standards were a large part of what caused the credit crisis.  And, for that matter, "restrictive" by whose definition?  I certainly haven't seen much movement back towards a norm (let alone a rule) of 20% down payments.

 

Screw reinflating the housing bubble.  Pop it.  Flatten it.  Kill it.  Bury it.  Bring housing prices down to the level where recent college graduates and mid-career blue collar workers can actually afford decent houses in decent neighborhoods.  Yes, that will hurt the housing sector and the retail banking sector.  Banks have more ways to make money than merely home mortgage loans, however, and the amount of money that otherwise get sunk into onerous mortgage payments will be free to spend in the more liquid economy again.

Why exactly is it a bad thing that lenders "continue to tighten already restrictive lending standards?"  Unreasonably loose lending standards were a large part of what caused the credit crisis.  And, for that matter, "restrictive" by whose definition?  I certainly haven't seen much movement back towards a norm (let alone a rule) of 20% down payments.

 

Screw reinflating the housing bubble.  Pop it.  Flatten it.  Kill it.  Bury it.  Bring housing prices down to the level where recent college graduates and mid-career blue collar workers can actually afford decent houses in decent neighborhoods.  Yes, that will hurt the housing sector and the retail banking sector.  Banks have more ways to make money than merely home mortgage loans, however, and the amount of money that otherwise get sunk into onerous mortgage payments will be free to spend in the more liquid economy again.

 

Agreed. Down payments, and housing that equals incomes is where the US housing market needs to go and I believe will ultimately end up. All the financial 'tricks' in the world will not stop this, delay yes, stop no. Trillions are being spent to delay it and trillions are being lost despite their best efforts.

Coming to a country near you? England, Ireland, Greece, Spain, and now Italy.

 

Italian Students Vent Anger

 

ROME—Italian students demonstrated around the country Tuesday to protest a bill to overhaul universities and slash funding for education—and express broader frustration at the government's handling of a troubled economy.

 

In Milan, students forced their way into Italy's stock exchange, strewing the building with leaflets that read "give us our money back" and unfurling banners that denounced the governing coalition as "shady businessmen, racists and thieves."

 

"The protests are a manifestation of discontent with the economic crisis, and the government's way of handling it," said Fulvio Esposito, rector of the University of Camerino. "The reforms may be the pretext but there's unhappiness at the bottom."

http://online.wsj.com/article/SB10001424052748704694004576019460324925904.html?mod=MKTW

Downtowns Get a Fresh Lease

Suburbs Lose Office Workers to Business Districts, Reversing a Post-War TrendArticle Video Interactive Graphics By ANTON TROIANOVSKI

As the market for office space shows signs of recovery, the suburbs are getting left behind.  

 

 

A succession of mayors have revitalized downtown Houston, above, persuading companies like BG Group to relocate there from the suburbs.

For decades, the suburbs benefited from companies seeking lower rent, less crime and a shorter commute for many workers. But now, office buildings in many city downtowns have stopped losing tenants or are filling up again even as the office space in the surrounding suburbs continues to empty, a challenge to the post-war trend in the American workplace and a sign of the economic recovery's uneven geography.

 

Even some forlorn cities are showing signs of revival. In Detroit, Health insurer Blue Cross Blue Shield of Michigan next spring will start moving thousands of suburban employees into the downtown.

 

http://online.wsj.com/article/SB10001424052748704058704576015660618563654.html?mod=WSJ_RealEstate_MIDDLETopNews

And, for that matter, "restrictive" by whose definition?  I certainly haven't seen much movement back towards a norm (let alone a rule) of 20% down payments.

 

Slow down a second...Piggyback lending is dead.  The leverage rates for new conventional mortgages have indeed returned to more normal levels (not sure if 20%, but probably close).  New FHA lending is still highly leveraged, by design, but requires insurance premiums to compensate for the risk and is less leveraged now than loans originated during the boom.  The big difference is that there's a lot more FHA lending now than in recent years for a number of reasons (and relaxing standards is not one of them). 

 

All to say, initial equity requirements have most certainly tightened across the board and, within loan types, have indeed essentially returned to pre-boom levels.

^^I wish somebody would shove that article in the faces of the Eaton Board of Directors, highlighting the section that discusses how young people want to be in the central city and not the 'burbs.  Of course too late now as the bulldozers are on the move.

Downtowns Get a Fresh Lease

Suburbs Lose Office Workers to Business Districts, Reversing a Post-War TrendArticle Video Interactive Graphics By ANTON TROIANOVSKI

As the market for office space shows signs of recovery, the suburbs are getting left behind.

 

 

A succession of mayors have revitalized downtown Houston, above, persuading companies like BG Group to relocate there from the suburbs.

For decades, the suburbs benefited from companies seeking lower rent, less crime and a shorter commute for many workers. But now, office buildings in many city downtowns have stopped losing tenants or are filling up again even as the office space in the surrounding suburbs continues to empty, a challenge to the post-war trend in the American workplace and a sign of the economic recovery's uneven geography.

 

Even some forlorn cities are showing signs of revival. In Detroit, Health insurer Blue Cross Blue Shield of Michigan next spring will start moving thousands of suburban employees into the downtown.

 

http://online.wsj.com/article/SB10001424052748704058704576015660618563654.html?mod=WSJ_RealEstate_MIDDLETopNews

 

Lets hope this is one trend that doesn't lose momentum.

That WSJ article states that the office space market is showing signs of recovery. While it may be true that demand is increasing incrementally, the overall office space and commercial real estate market is set for a meltdown due to the overabundance of vacant suburban and urban office space both, in addition to retail space.

That WSJ article states that the office space market is showing signs of recovery. While it may be true that demand is increasing incrementally, the overall office space and commercial real estate market is set for a meltdown due to the overabundance of vacant suburban and urban office space both, in addition to retail space.

 

True. I just hope that a larger percentage of the office market that is left fills up the urban core more so than the suburban office market.

Where Home Prices Are Falling Dangerously

In a number of major American cities, housing prices have taken a sharp turn for the worse.

 

"No. 1: Cleveland

The nation's most worrisome housing market saw prices drop a scary 3% in September alone, according to the S&P/Case-Shiller data. Like much of the rest of Ohio, Cleveland hasn't found replacements for the manufacturing jobs lost over the past decade starting from the 2001 recession. The unemployment rate in Cuyahoga County, which includes Cleveland, was 9.2% in April. These days it's at 9.7%.

 

No. 2: Minneapolis

Home prices have retreated here for three straight months, most recently declining by 2.1% in the month of September alone. The unemployment rate in the Minneapolis area is a pretty decent 6.7%, but it has increased from just 6.1% in May.

 

No. 3: Portland

In Portland housing prices fell by 1.9% in September, and home prices are down 3.6% in the last year.

 

No. 4: Dallas

The town's football team isn't the only thing sinking this fall. Home prices fell 1.6% in September after sliding 1.2% in August.

 

No. 5: Phoenix

The residential real estate market in Phoenix has cause for concern, trending downward by 1.5% in September and 1.3% in August.

 

No. 6: Chicago

After a nice run of five straight months of housing prices gains, things were looking up in Chicago. Then came a 1.5% decline in September.

 

No. 7: Boston

Home prices have inched up 0.4% over the last year, but Boston may not be able to stay in the positive column after declines of 1.3% in September and 0.3% in August.

 

No. 8: Atlanta

Home prices in Atlanta tumbled 1% in September and 1% in August. The residential real estate market is down 3.1% in the last year."

http://realestate.yahoo.com/promo/where-home-prices-are-falling-dangerously.html

....and on the flip side, as a reminder how bad the media, economists and pretty much everyone is at making sense of any of this prospectively, I recommend scanning this gem from the 2007 media archives for a quick giggle:

 

http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070614_838245.htm

 

But even with the first-quarter decrease in delinquencies, the MBA expects to see a "modest increase" in late payments over the next two quarters, with an increase in foreclosures on a lag. The association expects the housing market to recover in late 2007.

Yahoo is really jumping the gun- there's a lot of statistical noise in month to month numbers.  Cleveland's year over year numbers are still down by 1.9%, but that's actually mid-pack, not worst in the nation. 

^It's almost like they sensationalize and decontextualize data to generate hits.

Yahoo is really jumping the gun- there's a lot of statistical noise in month to month numbers.  Cleveland's year over year numbers are still down by 1.9%, but that's actually mid-pack, not worst in the nation. 

 

Something tells me winter will not be kind to most markets. Those that have even greater downward momentum may find winter even less kind to their housing market.

What elephant under the rug? Coming to a state near you, very soon.

 

State Budgets: The Day of Reckoning

 

"It has gotten much less attention because each state has a slightly different story. But in the two years, since the "great recession" wrecked their economies and shriveled their income, the states have collectively spent nearly a half a trillion dollars more than they collected in taxes. There is also a trillion dollar hole iln their public pension funds."

 

"The states have been getting by on billions of dollars in federal stimulus funds, but the day of reckoning is at hand. The debt crisis is already making Wall Street nervous, and some believe that it could derail the recovery, cost a million public employees their jobs and require another big bailout package that no one in Washington wants to talk about."

 

"Whitney made her reputation by warning that the big banks were in big trouble long before the 2008 collapse. Now, she's warning about a financial meltdown in state and local governments."

 

"It has tentacles as wide as anything I've seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy," she told Kroft."

 

"California, which faces a $19 billion budget deficit next year, has a credit rating approaching junk status. It now spends more money on public employee pensions than it does on the state university system, which had to increase its tuition by 32 percent."

 

"Arizona is so desperate it sold off the state capitol, Supreme Court building and legislative chambers to a group of investors and now leases the buildings from their new owner."

http://www.cbsnews.com/stories/2010/12/19/60minutes/main7166220.shtml?tag=currentVideoInfo;segmentTitle

^Is there any voter in Ohio who doesn't know about the looming $8B state budget shortfall.  It's hardly under the rug.

^I'll pay that $88 myself if you are sweating it that bad, Strap ;)

 

I always viewed the first Stimulus package as more a bailout of the States than anything else.  State's do indeed need to stop deferring their financial problems.  Ohio is thankfully not near the bottom of the barrel on this issue, but things don't look great either.

 

One thing that definitely needs to stop is the double-dipping which is so rampant.... meaning employees who qualified for PERS, took it, and then simply changed titles or positions within the government so they are paid both a regular salary and a pension. 

 

Workers comp, disability and other entitlement programs need to be thoroughly audited for fraud.... but nobody wants to talk about that because there certainly is a cost involved and you have to be confident that any such audit will net a return on investment.

 

Costs of maintaining infrastructure also should be shifted more towards those who cause the most wear and tear, and not so much shared by the State as a whole.

Perhaps Santa needs to put some reading glasses in your stocking this weekend- that second "8" is a "B" for billion :)

d'oh!

I believe this is one issue the FEDs can't resolve. Pensions will fall and states will default. All the FED can do is try and prolong the event, cover enough to control the damage and keep the potential anger in check.

Home Prices in U.S. Decrease More Than Forecast

 

"The S&P/Case-Shiller index of property values fell 0.8 percent from October 2009, the biggest year-over-year decline since December 2009, the group said today in New York. The decrease exceeded the 0.2 percent drop projected by the median forecast of economists surveyed by Bloomberg News."

 

(Funny economist at it again. - WOW, we are now talking about misses in general for several years. I think their projections have become irrelevant.)

 

"A wave of foreclosures waiting to reach the market means home prices will remain under pressure in 2011, representing a risk to household finances."

http://www.bloomberg.com/news/2010-12-28/u-s-property-values-decline-more-than-forecast-in-s-p-case-shiller-index.html?cmpid=wsdemand

While this will still leave out a noticable chunk of the unemployed (those that don't collect unemployment benefits), it will show a better picture of what is happening on Main Street.

 

Jobless report to include those unemployed more than two years

 

"Until now, the unemployment reports did not include those who had been unemployed for more than two years. Now the jobs bureau will be keeping track of all of the long-term unemployed, and it could reveal the true depth of the economic downtown."

http://marketplace.publicradio.org/display/web/2010/12/29/am-jobless-report-to-include-those-unemployed-more-than-two-years/

Where Home Prices Are Falling Dangerously

In a number of major American cities, housing prices have taken a sharp turn for the worse.

"No. 1: Cleveland

The nation's most worrisome housing market saw prices drop a scary 3% in September alone, according to the S&P/Case-Shiller data. Like much of the rest of Ohio, Cleveland hasn't found replacements for the manufacturing jobs lost over the past decade starting from the 2001 recession. The unemployment rate in Cuyahoga County, which includes Cleveland, was 9.2% in April. These days it's at 9.7%.

 

Home prices are down across the board, and to larger degrees elsewhere. And where are they getting their unemployment numbers?  Cleveland is a lot better than what they are reflecting here and is one of the best bounce-back recession markets off the strength of renewed manufacturing demand.

 

http://www.bls.gov/eag/eag.oh_cleveland_msa.htm

 

Plus, why pick on us?  There are way worse MSAs in terms of unemployment figures.  Go eff yourself Yahoo.

^Those unemployment numbers are just plain wrong for Cleveland...lower than Ohio's rate of unemployment and the nation as a whole.

This is the glass damn near empty thread, guys.  Take your positive outlooks and facts back to one of the development threads. 

Very interesting how this will all shake out.  Seems to reason that the states who are in the best shape financially, will be in the best position to barter for new development.  From reading about Illinois, why would you want to own a business or have any interaction there with the govt at all?  You want to be someplace stable, where taxes are predictable and government actions are not all emergency measures.