In Parts I & II we looked back on days past, via Steinbeck and the Great Depression, and wondered if that is a vision of our economic future? Economic issues aren’t the only thing we should be concerned about in the future…, and those issues seem particularly relevant on Independence Day. Thomas Pynchon took a look back at the 60’s and 70’s and gave us his vision of what the Ronald Reagan Road of the 1980’s looked like, behind the media veil, in his book, “Vineland“. I wonder what Pynchon is saying today…, with a new cabinet level government law enforcement agency called Homeland Security…, and Border Patrol agents manning checkpoints, stopping all law abiding citizens and boarding buses? Are they really looking for “terrorists” and illegal aliens? Or are they just testing us…, again…, to see what magnitude of fascist oppression we will stand still for?

After reading Krugman today I'm ready to go hide under a rock. I figured it was bad, but sheesh. There's bad and then there is bad.

Painful acceleration in job losses this month. Economist's expected losses of 365,000, instead they got 467,000.

Here's the killer quote, however:

Consumers are saving 6.9 percent of their disposable income, and spending remains sluggish.

Consumers are still retrenching. 6.9% for American consumers? That's a huge number. An implicit argument in the Times article comes from this quote:

“We have to wait to see where things go,” said Mark Zandi, chief economist at Moody’s Economy.com. “If we didn’t have the stimulus, the economy would’ve contracted twice as fast in the second quarter and the job losses we’re suffering now would be very similar to the ones we were suffering at the beginning of the year.”

I read this to mean the bounce from the stimulus is, to a certain degree, over. Is it? I can't say. We'll have to wait an see what the July numbers are like.

Still, are you still retrenching? Are you saving more than you spend? How are your neighbors doing? Still unemployed? Or recently laid-off? I know far too many people here in Austin who are unemployed. Another indicator is the sheer amount of homeless people I see on the streets, begging at stop lights and the like. This isn't over.

Grant McCool | NEW YORK | June 27

Reuters - Ruth Madoff forfeits asset claims, left with $2.5 million
Sat Jun 27, 2009 8:13am EDT

By Grant McCool

NEW YORK (Reuters) - Ruth Madoff, the wife of epic swindler Bernard Madoff who reaped billions and a lavish family lifestyle, will be left with $2.5 million and have to look for a new home as she forfeits claim to some $80 million in assets.

Documents filed in Manhattan federal court on Friday night showed that Ruth Madoff, 68, who has said nothing in public about her jailed husband's crimes in the six months since his arrest, had come to an agreement with U.S. prosecutors.

“We very much want to work with others to make sure that we have … as pro-American a tax system for corporations as we possibly can …” Lawrence Summers

The Administration is struggling to fund its spending spree in ways that would nominally be consistent with the President’s campaign promises. The Obama budget proposed to inflict two substantial tax increases on U.S. corporations with global operations. One would make it more expensive to bring cash from those operations into the U.S. The other would make it expensive (on average 30% more expensive) to pay Americans, rather than citizens of any other country, to perform headquarters administrative jobs such as accounting, IT, or HR. These proposals were supposedly aimed at fulfilling the promise to “end tax breaks for shipping jobs overseas”. While they hurt companies with global operations, it is hard to see how they would do anything other than reduce U.S. jobs.

Stephen Labaton | Washington | June 23

NYT - During the debate over financial regulation, the Federal Reserve chairman, Ben S. Bernanke, has been surprisingly quiet. But behind the scenes, he has been a forceful proponent of giving the Fed more power, both defending his management of the economic crisis and arguing that more authority would help the agency act more decisively to reduce the chances of a recurrence, according to interviews with lawmakers and officials from the Fed, the Treasury and the White House.

Despite criticism by some lawmakers that the Fed failed to anticipate the problems that led to the crisis, Mr. Bernanke has told associates that such critics fail to recognize the extraordinary actions taken by the central bank over the last year.

Mr. Bernanke believes the Fed’s actions have played a major role in averting a possible second Great Depression, according to government officials who know his thinking. Those steps, the Fed chairman has told these people, demonstrate that the agency is up to the larger task assigned to it by the Obama administration.

Phillip inman | New York | June 21

The Observer - Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Shobhana Chandra | June 19

Bloomberg - More than one-quarter of American states now have unemployment rates higher than 10 percent, and all but two saw a further job-market deterioration in May.

Tennessee and Indiana joined the rank of states, now 13, that have jobless rates exceeding 10 percent, and eight states - - including California, Florida and Georgia -- reached their highest level of joblessness in May since records began in 1976, the Labor Department reported today in Washington.

The figures make it likely President Barack Obama, whose home state of Illinois also passed 10 percent for the first time since 1983, was correct this week in forecasting the national unemployment rate will reach that level this year. With no region escaping the rout, consumers across the country will probably curtail their spending, preventing any boom out of the deepest recession in half a century, analysts said.

Kevin G. Hall | Washington | June 18

McClatchy -

Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon and could rival the default rates for subprime mortgages and slow efforts to find bottom in a prolonged national housing slump.

The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. In an option ARM, a borrower can opt to pay less than his or her monthly balance due, and the difference is tacked onto the outstanding loan balance.

Many experts had expected an explosion of defaults in the springtime on these roughly 564,000 outstanding mortgages. However, interest rates dropped to historic lows, and that delayed the detonation of what many housing analysts still see as a ticking time bomb.

"They're probably going to default at a rate that makes subprime look like a walk in the park," warned Rick Sharga, senior vice president for RealtyTrac, a foreclosure research firm in Irvine, Calif.

Option ARMs have triggers that reset to a new interest rate based on either a set timeframe or when debt exceeds some cap above the loan's value. The spring drop in interest rates allowed many borrowers to escape a day of reckoning because the lower rates prevented a triggering of that cap.

That just postponed the problem, however, because most option ARMs have five-year automatic trigger dates. These loans were most prevalent in states such as California, Florida and Nevada, where home prices have sunk so far that many homeowners are underwater: They owe more than their homes are worth.

June 17

Raw Story - President Barack Obama will announce Wednesday the White House’s proposal for reforming the U.S. financial system. The plan will call for the closure of the U.S. Office of Thrift Supervision (OTS), the creation of a new consumer credit protection agency and greater powers for the Federal Reserve to supervise major financial firms.

Reuters characterized the plan as cutting the number of U.S. bank regulators.

The administration would merge the OTS with the Office of the Comptroller of the Currency, an administration official said Tuesday. The proposal also calls for creating the Consumer Federal Protection Agency (CFPA) to police credit, savings and other payment markets, the official added.

It will be guided by five principles, the official said on condition of anonymity, including “transparency, simplicity, fairness, accountability, and access.”

yay banksters regulating banksters!, sample comments after the jump

June 16

The Guardian -
No recovery until next year in world's biggest economy, while ECB says European banks face $283bn more in write-downs

The massive stimulus thrown at the US economy will produce a solid recovery by the middle of 2010, the International Monetary Fund said today but it warned that the worst of the crisis may still lie ahead.

In its annual consultation with the world's number-one economy, the Washington-based group said policymakers were correct to keep the stimulus flowing for now, but would need to turn their attention to the threat of yawning deficits once the crisis had passed.

Censorship working at full gear. Some rumors here: AsiaNews.it

More about these financial nukes: Market Ticker.

Because the two Japanese have not been arrested, the bonds are real. The problem of the USA is that the bonds shouldn't exist. Bloomberg of course claims that they are counterfeit.

Joyce Smith | June 13

The Kansas City Star -

Calorie counters, beware.

Restaurants across the land, feeding a trend begun several years ago with the introduction of Hardee’s Thickburger, are offering ever-larger burgers, sandwiches and rich dishes.

In this economy, restaurateurs say, they want to give more value for the money. And stressed consumers seem to have a taste for such comfort food. For some diners, words like low fat, diet, organic or healthy are just not on the menu.

“I hate to say it, but if you are down on your luck, you tend to eat more, you lean toward food,” said Kevin Lyman, president of the Kansas City Originals, an organization of area independent restaurants.

The latest burst of big food is not going down well with nutrition experts. To counter the trend, they’re backing federal legislation introduced this week that would require restaurants to list calories on the menu or on menu boards.

Papa Bob’s Bar-B-Que of Bonner Springs calls its entry into the giant sandwich explosion of 2009 the Ultimate Destroyer.(pictured, engorged here)

Take a half-pound of pulled pork and a half-pound of hickory-smoked sliced pork on a 12-inch hoagie bun. Top that with sauce, two slices of bread and then a half-pound of hickory-smoked turkey breast.

Follow that with a half-pound of ham, sauce and two more slices of bread, then three half-pound hickory smoked hamburgers with more sauce and more bread, brisket, sausage, sauce and bun.

In case you’ve lost track, that’s 4½ pounds of meat.

Joseph Stiglitz | The Guardian Comment Is Free

The US has a huge corporate safety net, allowing the banks to gamble with impunity, but offers little to struggling individuals

With all the talk of "green shoots" of economic recovery, America's banks are pushing back on efforts to regulate them. While politicians talk about their commitment to regulatory reform to prevent a recurrence of the crisis, this is one area where the devil really is in the details – and the banks will muster what muscle they have left to ensure that they have ample room to continue as they have in the past.

The old system worked well for the bankers (if not for their shareholders), so why should they embrace change? Indeed, the efforts to rescue them devoted so little thought to the kind of post-crisis financial system we want that we will end up with a banking system that is less competitive, with the large banks that were too big too fail even larger.

It has long been recognised that those America's banks that are too big to fail are also too big to be managed. That is one reason that the performance of several of them has been so dismal. Because government provides deposit insurance, it plays a large role in restructuring (unlike other sectors). Normally, when a bank fails, the government engineers a financial restructuring; if it has to put in money, it, of course, gains a stake in the future. Officials know that if they wait too long, zombie or near zombie banks – with little or no net worth, but treated as if they were viable institutions – are likely to "gamble on resurrection". If they take big bets and win, they walk away with the proceeds; if they fail, the government picks up the tab.

Well hooray! Ten US banks have been given permission to repay their TARP loans from the federal government - $68 billion worth. This governmental Seal of Approval may mean these banks are healthy and safe and ready to do business, but what it certainly means is that the executives running these banks want to escape any government control over how much they pay themselves.

What’s in it for us the taxpayers? Not much. The government still needs to borrow trillions and trillions of dollars, which means interest rates aren’t going down. No fundamental reforms have been imposed on the banking industry – just some tweaking around credit card rules – so you still will have a very hard time getting credit. You’ll also earn about 0% interest on your bank deposits, but pay 30% or more for credit depending on your financial condition. This is certainly not going to get the consumer spending or the economy moving, so what is it going to take to enact real change to our financial system?

Our own Zuma has come across a potent set of proposals for real reform from the author William Greider. You’ll want to check out both Zuma’s report on the Diaries page, as well as Greider’s article on Alternet (printed originally in The Nation). The gist of these reforms is radical in today’s political climate – it is nothing less than a legal cap on interest rates. No bank or finance company would be able to charge you more than this cap – to do otherwise would be considered usury. What would our economy look like if we had laws against usury?

David Leonhardt | Washington, DC | June 9

NYT - There are two basic truths about the enormous deficits that the federal government will run in the coming years.

The first is that President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying. The second is that Mr. Obama does not have a realistic plan for eliminating the deficit, despite what his advisers have suggested.

Mr. Anti-Net Neutrality, the Monopolist himself, Ed Whitacre is going to be the new CEO of GM.

What an amazingly stupid, counter-productive idea.

GM needs a real innovator like Steve Jobs, not a establishment creation like Whitacre.

Update: One prediction here. Whitacre is a one trick-pony. If he knows how to do anything it is this: accreting earnings via mergers and acquisitions, which is not earnings growth per se. Mark my words: within 12 months GM will attempt a merger with another car company. My money is on Chrysler. Time will tell and I will be happy to admit the error of my ways if not. But I doubt I will have to.

Three demographic groups contend in the political system and on the cultural landscape. The generation that came of age during World War Two, now in its late years, controlled the presidency and much of public life, from John F. Kennedy’s election in 1960 until George Bush, Sr’s defeat in 1992 – a thirty-two year run. The baby boomers, thus far, have enjoyed a much shorter period – only sixteen years, from Bill Clinton’s election in 1992 until Barack Obama’s last year.

Despite their numbers and a cultural hegemony that would have put off Antonio Gramsci, the baby boomers are beginning to be pushed aside. They are not as geriatric as the WW2 generation – after all, they eat low-carb foods and work out occasionally – but they command much less respect. Obama (b. 1961, after the baby boom according to most demographers) outclassed a handful of boomers in the primaries and in the election overwhelmed the seventy-two-year-old John McCain, who was neither WW2 nor baby boomer but who might better fall in the latter category owing to his service in Southeast Asia.

The Economy Is Still at the Brink

Sandy B Lewis and William D. Cohan | June 6

NYT -Mr. Obama thinks that the way to revive the economy is to restore confidence in it...

We have both spent large chunks of our lives working on Wall Street, absorbing its ethic and mores. We’re concerned that nothing has really been fixed. We’re doubly concerned that people appear to feel the worst of the storm is over — and in this, they are aided and abetted by a hugely popular and charismatic president and by the fact that the Dow has increased by 35 percent or so since Mr. Obama started to lay out his economic plans in March. But wishing for improvement and managing by the Dow’s swings are a fool’s game. more at the link

NYT - IPanic-
Image after the jump. Larger image at link.

Edmund L. Andrews | Washington DC | June 3

NYT - The Federal Deposit Insurance Corporation indefinitely postponed a central element of the Obama administration’s bank rescue plan on Wednesday, acknowledging that it could not persuade enough banks to sell off their bad assets.

In a move that confirmed the suspicions of many analysts, the agency called off plans to start a $1 billion pilot program this month that was intended to help banks clean up their balance sheets and eventually sell off hundreds of billions of dollars worth of troubled mortgages and other loans.

Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.

Why are we not surprised?

Washington DC | June 4

Reuters - Medical bills are behind more than 60 percent of U.S. personal bankruptcies, U.S. researchers reported on Thursday in a report they said demonstrates that healthcare reform is on the wrong track.

More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts, the team at Harvard Law School, Harvard Medical School and Ohio University reported in the American Journal of Medicine.

"Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy," Harvard's Dr. David Himmelstein, an advocate for a single-payer health insurance program for the United States, said in a statement. "For middle-class Americans, health insurance offers little protection," he added.

Patients with multiple sclerosis paid a mean of $34,167 out of pocket in 2007, diabetics paid $26,971, and those with injuries paid $25,096, the researchers found.

E. Scott Reckard & Jim Puzzanghera | Costa Mesa & Washington | June 5

LA Times - Mozilo, Countrywide's co-founder, and two former associates are accused of failing to tell shareholders how far lending standards declined at the company as the housing boom went bust.

Reporting from Costa Mesa and Washington -- Federal regulators filed a civil fraud lawsuit today against Countrywide Financial Corp. co-founder Angelo Mozilo and two former associates.

The Securities and Exchange Commission scheduled a news conference this afternoon in Washington to discuss the allegations against Mozilo, who founded Countrywide in 1969 and was its chief executive until Bank of America purchased it last year as its financial condition deteriorated.

The agency has been investigating whether Mozilo and others failed to inform shareholders just how lax lending standards became at the Calabasas mortgage goliath as the housing boom neared its end. The SEC also was scrutinizing Mozilo's sale of hundreds of millions of dollars in stock in 2006 and 2007 as defaults mounted on the high-risk loans that Countrywide increasingly had specialized in.

Tracy Wilkinson | Mexico City | June 2

LA Times - Mexico's reeling economy received another jolt of bad news Monday with reports of the largest monthly decline yet in the amount of money Mexicans working abroad send home.

Remittances for the month of April totaled about $1.7 billion, 18.6% less than the $2.1 billion recorded in April 2008, Mexico's central bank said.

After oil, remittances are Mexico's largest source of income, and their decline is certain to further erode the country's economic growth. Experts cite several reasons for the drop in money sent home by the estimated 12 million Mexicans living in the U.S., including recession in the U.S. and widening unemployment among migrant workers. In addition, tighter security at the nations' shared border has deterred some Mexicans from heading north in search of increasingly scarce jobs.

Last year was the first time remittances declined overall for a 12-month period, after steady growth ever since authorities began keeping records 13 years ago.

Tim Higgins | New York | June 1

Detroit Free Press - General Motors Corp., which for much of its 100-year life was the world's largest automaker and the pinnacle of corporate America, has filed for bankruptcy reorganization in an attempt to rebuild itself as a smaller and leaner automaker.

The Detroit automaker, which has been staying afloat with more than $19 billion in U.S. government loans, has seen its U.S. sales drop nearly 50% so far this year, hit hard by the worst economy since the Great Depression.

The U.S. government has promised to shepherd GM through Chapter 11 in a plan that will see the company sell off its good assets to a new GM, while the less desirable assets are expected to remain in bankruptcy to be liquidated. The U.S. Treasury plans to provide an additional $30 billion to finance GM during its bankruptcy.

Kevin G. Hall | Washington | May 29

McClatchy Newspapers -

A record 12 percent of all U.S. mortgages were at least one payment behind or in the foreclosure process during the first three months of this year, a report said Thursday.

In a reminder that the nation's economic problems aren't going away anytime soon, the report also found that the foreclosure rate on prime fixed-rate loans to financially healthy borrowers has doubled in the past 12 months. For the first time since the explosion in subprime lending to borrowers with weaker credit began early in this decade, in fact, the largest percentage of new foreclosures in January, February and March were on prime fixed-rate loans.

In its National Delinquency Survey, the Mortgage Bankers Association, an industry trade group, reported that one in four new foreclosure proceedings in the first quarter were on prime mortgages, up from one in five during the last three months of 2008.

The trend reflects a one-two punch of growing job losses among higher-income Americans and falling home prices, and it suggests that the recession is compounding the national housing crisis.