By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR
Collapse in note yields suggests economic distress will keep Fed on hold well into 2010 or beyond.

IT'S THE CRASH YOU DIDN'T HEAR. Not in the price of any security market, but in short-term U.S. Treasury yields.

Treasury bills once again were trading at negative interest rates Thursday, a mind-boggling state of affairs that hasn't existed since the panic late last year. That followed the collapse of Lehman Brothers and the assorted knock-on effects, notably the run on money-market funds after the Reserve Fund "broke the buck."

More significantly, the yield on the two-year Treasury note -- the most actively traded security on the planet -- fell to 0.669% Thursday, within a hair of the low of 0.657% set in the dark days of last December, according to data on Barrons.com's Market Data Center.

Ron Scherer | Fort Collins, CO | Nov 20

CSM - From Seattle to Huntsville, Ala., five cities are poised to prosper in the New Economy because of exports, innovation, clean technology, and healthcare.

In Houston, the Texas Medical Center is expanding so quickly that it will soon become the seventh largest downtown in the US. By itself. The hospital complex brims with restaurants, shops, and hotels, and employs 100,000 people – the population of Billings, Mont.

In Seattle, the erector-set cranes along the waterfront and big forklifts at the airport are loading exports into containers with the constancy of a piston: plywood to Beijing, halibut and crab to Tokyo, Granny Smith apples to Moscow. Last year, Washington was the only state to ship more goods to China than it receives.

In Fort Collins, Colo., town fathers are aggressively transforming the heart of the city into a zone that generates as much electricity as it consumes – making it a showcase for the city’s quest to become the Silicon Valley of clean energy.

As the United States emerges from the worst recession in 80 years, a new economy is taking root that will help create the next tier of powerhouse cities in America. Just as the Industrial Revolution of the late 1800s and the Information Age of the past 40 years helped shift the urban and regional balance of power in the US, forces are now at work that will shape who prospers in the economy of tomorrow.

No one yet knows the exact contours of the New Economy. It is more Monet than Rembrandt. But experts say that certain characteristics are already visible on the canvas that will give cities advantages in attracting new jobs and industries.

Sandra Gonzales | Berkeley, CA | November 20

San Jose Mercury News - In a striking scene of civil disobedience, dozens of students barricaded themselves inside a UC Berkeley building for more than 11 hours Friday to protest a 32 percent increase in student fees.

The dramatic display ended Friday evening with dozens of arrests, climaxing a week of civil unrest mirrored at other campuses around the state, including Davis and Santa Cruz, where hundreds marched for the third day Friday to decry one of the biggest fee hikes in UC history.

I was trying to think of ways that we could possibly take down as many financial problems as we can while simultaneously bringing the power back to the people. That is, going through our own channels rather than the official process that has proven itself to be ineffective.
I was mulling bank bailouts, "too big to fail" and the notion of money as power when it hit me. What if we just took all of our money out of big banks and put it into local community banks and credit unions? This would greatly strengthen the community, rewarding banks that actually stick to banking, keep money local and even help bolster small business loans, while forcing the large banks to break down. Sure, things would be hairy at first and it wouldn't be pretty, but wouldn't it be a better situation in the long run?

Michael Smallberg | Nov 20

POGO - The House Financial Services Committee voted 43-26 yesterday afternoon in favor of an amendment introduced by Reps. Ron Paul (R-TX) and Alan Grayson (D-FL) that would remove restrictions preventing the GAO from auditing the Federal Reserve. The amendment was modeled after Rep. Paul’s long-standing bill to audit the Fed, which was co-sponsored by over 300 Members in the House and supported by POGO and many other groups.

The vote on the final passage of the financial regulatory package to which the Paul-Grayson amendment is attached has been delayed until after Thanksgiving. Nonetheless, yesterday’s vote signals a defeat for Rep. Mel Watt (D-NC), who had introduced an alternative amendment that would have limited the scope of the GAO’s audits.

Kudos to FDL: FDL Statement on the Committee Passage of H.R. 1207, the Paul-Grayson Bill to Audit the Fed

By Emily Kaiser and Nancy Waitz - Analysis

WASHINGTON (Reuters) - The U.S. government is having a tough time guesstimating how many small businesses failed in this recession, casting doubt on the reliability of vital data on employment and economic growth.

The formula the U.S. Labor Department designed to help it deliver timely, thorough monthly employment reports broke down in the heat of the financial crisis, miscounting the number of jobs by an estimated 824,000 in the year through March.

The most likely culprit is the so-called "birth-death" model, which the Labor Department uses to estimate how many companies were created or destroyed.

Scott Lanman | Washington | November 19

Bloomberg - A U.S. House committee advanced a proposal to remove a three-decade ban on congressional audits of Federal Reserve interest-rate decisions, a measure backed by a lawmaker who has called for the abolition of the central bank.

The House Financial Services Committee today, in a 43-26 vote and a second voice vote, attached the amendment for a broad audit of the Fed to legislation creating a council of regulators to monitor systemic risk. The proposal was offered by Representative Ron Paul, a Republican from Texas, and based on a bill with more than 300 co-sponsors.

Sean O'Grady | Nov 20

The Independent - When the masters of the universe came crashing down to earth last year, the reverberations were felt far beyond Wall Street and the City. Sean O'Grady surveys the best of the books that explode the myth that greed is good

One of the few welcome consequences of the global recession has been a modest upsurge in economic literacy, or at least interest. That's not to be exaggerated; most people still don't know their asset-backed securities from the elbows, but at least we're making some attempt to redress that deficit of understanding.

No previous economic crisis has brought forth such a crop of words – over 3,000 new books, a few more reprints, trillions of column inches of newspaper, magazine and web pieces, official reports, not to mention a Facebook page devoted to "Recession Survivors" and those Twittering and blogging their way to an understanding of seismic changes. OK, it isn't much to throw into the balance when you have mass unemployment, the derangement of national finances and the destruction of the world's banking system on the other side, but at least we are creeping towards some acknowledgement of what went wrong, and why. That's something.

So, what to read? A bit like the bewildering complexity of "exotic derivatives" that helped to get us into this mess (and which the bankers themselves never understood), the choice seems endless. It really boils down to which of the three prevalent treatments of the crisis you prefer: the anecdotal, the analytical or the apoplectic.

MarketWatch First Take

Nov. 13, 2009, 2:03 p.m. EST
The downside of a weak dollar
Commentary: Inadvertently driving a bigger trade defici

By MarketWatch

SAN FRANCISCO (MarketWatch) -- The latest international trade numbers border on blasphemy.

For the generations of college kids who learned the ABCs of global economics from Paul Samuelson, a weak dollar is supposed to tip the balance of trade in favor of the nation's exporters. So why is the trade deficit exploding?

The dollar has lost 16% of its value against six other major currencies since March. In one quarterly report after another, companies doing business abroad showed they padded their profits every time they converted sales in local currencies back into U.S. dollars -- effectively enjoying the equivalent of a price hike without actually hiking prices.

Brad Knickerbocker | Washington | November 18

CSM - Though the congressional debate and legislative sausage-making are far from over, the Senate took a major step Wednesday in putting forth a $849 billion healthcare reform bill.

The bill, launched by Senate majority leader Harry Reid – and vigorously opposed by Republicans – aims to provide health insurance for 94 percent of all Americans, including 31 million people now uninsured.

Mary Williams Walsh | Washington | November 16

NYT -
The Federal Reserve Bank of New York gave up much of its power in high-pressure negotiations with the American International Group’s trading partners last year, according to a government report made public on Monday.

Just two days before the New York Fed paid A.I.G.’s partners 100 cents on the dollar to tear up their contracts with the insurance giant, one bank volunteered to take a modest haircut — but it never got the chance.

UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.

Tony Pugh | Washington | Nov 17

McClatchy - The number of U.S. households that are struggling to feed their members jumped by 4 million to 17 million last year, as recession-fueled job losses and increased poverty and unemployment fueled a surge in hunger, a government survey reported Monday.

These "food-insecure" households represent about 49 million people and make up 14.6 percent, or more than one in seven, of all U.S. households. That's the highest rate since the U.S. Department of Agriculture began monitoring the issue in 1995.

Additionally, more than one-third of these struggling families — some 6.7 million households, or 17.2 million people last year — had "very low food security," in which food intake was reduced and eating patterns were disrupted for some family members because of a lack of food.

In phone interviews, more than two-thirds of people with very low food security said they went hungry from time to time, and 27 percent of these adults said they didn't eat at all some days.

These families make up 5.7 percent of U.S. households, again the highest rate since 1995, up from 4.1 percent and 4.7 million households in 2007.

The announcement of financial overhaul legislation in the U.S. Senate this week smacked of irony as its author, Senator Chris Dodd—the recipient of a sweetheart rate on his own home mortgage—announced a sweeping 1,136 page piece of legislation to “protect consumers.” It appears at this point that the protection consumers and Middle America really need is from this nation’s politicians, who have too long lined their pockets with campaign contributions from big business and who have allowed financial institutions to fleece Middle America.

It wasn’t but a couple of years ago that big business and congress all but eliminated the ability of consumers to effectively discharge their debts in bankruptcy proceedings. At the same time, banks and financial institutions were making loans to borrowers who clearly could not qualify. Banks, financial institutions and credit card companies continued extending generous limits on credit cards and lines of credit to consumers. Now be fair, much of the mortgage activity came from Democrats in congress who believed that everyone had an inalienable right to own a home, evidently whether they could afford it or not. And naturally, Republicans, who long ago sold their soul to big business, positioned their bank and financial institution contributors for all of the mortgage business.

Lita Beck | Nov 15

Raw Story - A crime as old as the West is taking off again like a stampede as cattle rustlers armed with wire cutters and cattle trailers crisscross country roads.

"We've got some awful good cowboys, you know," said Marvin Willis, Texas Special Ranger. "They can load the cattle in a hurry."

For the second year in a row, cattle rustling may reach record levels. There were 6,404 cattle thefts in Texas in 2008 and only 2,400 thefts in 2007, according to the Texas & Southwestern Cattle Raisers Association.

A modern-day posse of more than two dozen Texas Rangers -- including Willis -- is charged with tracking down cattle thieves.

But it's nothing like the old Westerns, Willis said. Willis called the modern-day outlaws "common thugs."

"If it wasn't cattle, it would be something else they'd be stealing," he said.

Ranchers such as Sammy Ward said they fear the increase in cattle thefts is tied to the economic recession.

"But I think the worse the economy gets, you're going to see more," he said.

The victims are often small ranchers, and the loss cuts deep.

Chris McGreal | Los Angeles | Nov 13

The Guardian - UN special rapporteur says wealthy US ignoring deepening homeless crisis while pumping billions into bank rescues

• Investigator meets homeless victims of American dream

UN special rapporteur Raquel Rolnik says the burden falls most heavily on the very poor, leaving the extent of the housing crisis invisible to many in the US. Photograph: Mario Tama/Getty Images A United Nations special investigator who was blocked from visiting the US by the Bush administration has accused the American government of pouring billions of dollars into rescuing banks and big business while treating as "invisible" a deepening homeless crisis.

Raquel Rolnik, the UN special rapporteur for the right to adequate housing, who has just completed a seven-city tour of America, said it was shameful that a country as wealthy as the US was not spending more money on lifting its citizens out of homelessness and substandard, overcrowded housing.

"The housing crisis is invisible for many in the US," she said. "I learned through this visit that real affordable housing and poverty is something that hasn't been dealt with as an issue. Even if we talk about the financial crisis and government stepping in in order to promote economic recovery, there is no such help for the homeless."

She added: "I think those who are suffering the most in this whole situation are the very poor, the low-income population. The burden is disproportionately on them and it's of course disproportionately on African-Americans

Tony Pugh | Washington | Nov 11

McClatchy - As job losses continue to slow the nation's economic recovery, labor experts and economists are urging Congress and the Obama administration to boost funding for a little-known program that 17 states are using to avert layoffs and keep workers in their jobs.

Mass layoffs of 50 or more employees claimed 278,000 jobs in the third quarter alone, according to new government data. All the laid-off workers were idled for at least a month and only one-third of their employers expected any of them to be recalled.

In the face of continuing business slowdowns, however, thousands of employers are forgoing layoffs and taking advantage of state "work-sharing" programs in which they cut the hours of full-time workers, who then recoup a portion of their lost wages — usually 50 to 60 percent — from unemployment insurance benefits.

The rules vary by state, but work sharing typically helps reimburse employees for wage reductions ranging from 10 to 60 percent.

For example, an employer that needs to cut 20 percent of its full-time work force could do so through layoffs. If those laid-off workers earned an average of $500 a week, they probably could expect roughly $250 a week in unemployment benefits.

However, if instead of layoffs those workers' hours were cut by 20 percent through the work-sharing program, they'd each earn $400 a week. They'd also be eligible for the program's jobless benefits, which would make up about half of that $100 wage cut, or $50. With this approach, the worker's earnings would be roughly $450 a week, a 10 percent cut instead of a 50 percent cut.

good program, we started this a few weeks ago AND you get to keep your insurance!

Deborah Solomon & Jonathan Weisman | Washington | November 13

WSJ - The Obama administration, under pressure to show it is serious about tackling the budget deficit, is seizing on an unusual target to showcase fiscal responsibility: the $700 billion financial rescue.

The administration wants to keep some of the unspent funds available for emergencies, but is considering setting aside a chunk for debt reduction, according to people familiar with the matter. It is also expected to lower the projected long-term cost of the program -- the amount it expects to lose -- to as little as $200 billion from $341 billion estimated in August.

The idea is still a matter of debate within the administration and it is unclear how much impact it would have on the nation's mounting deficit levels. Still, the potential move illustrates how the Obama administration is trying to find any way it can to bring down the deficit, which is turning into a political as well as an economic liability.

I couldn't help but crib the title to this post from Barry. The American peso. I love it. Dollar is not looking good. Not looking good at all.

I started this out as a comment to Sean Paul's recent opinion that we should reinstate the Glass-Steagall Act, which kept lending banks separate from investment banks. Doing so would deny investment banks access to cheap credit and FDIC insurance, which would mean they wouldn't be able to over-leverage themselves like they did over the last few years.

It sounds good to me... but frankly I'm not smart enough to know if its a good idea... and I do have one nagging concern... We need to make certain we keep our banking system not only stable, but profitable. Because if we don't, we might cripple part of our economy.

More after the jump.

I'm going to print this out later this afternoon and see what it is all about. I've already read enough to know this doesn't come close to preventing what Numerian discusses here. Here's a summary of Dodd's proposed financial reforms.

Highlights followed by my commentary:

Consumer Financial Protection Agency: Creates an independent watchdog to ensure American
consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other
financial products, while prohibiting hidden fees, abusive terms, and deceptive practices.

Okay, this is a no brainer. But while we're at it, can't we have some usury laws in this country? I mean, a grandma who has paid her bills on time her entire life that gets her rate jacked up to 29%? We can do better.

Ends Too Big to Fail: Prevents excessively large or complex financial companies from bringing down
the economy by: creating a safe way to shut them down if they fail; imposing tough new capital and
leverage requirements and requiring they write their own “funeral plans”; requiring industry to provide
their own capital injections; updating the Fed’s lender of last resort authority to allow system-wide
support but not prop up individual institutions; and establishing rigorous standards and supervision to
protect the economy and American consumers, investors and businesses.

This does nothing, absolutely nothing to end 'too big to fail.' It's a band-aid, feel good measure that only adds another layer of useless bureaucracy without any real enforcement.

As I have said countless times, over and over and over: if it is too big to fail, it is too big to exist. Period. Can we have some anti-trust enforcement? What's the safe way to shut them down when we will face a systemic collapse, similar to the one we faced last year? How? Requiring industry to provide their own capital injections? Look, if industry could have injected their own capital they wouldn't have come a-begging to the government, you know?

Here's a good alternative to Dodd's bill, that would give the Treasury Secretary power to break up a banks or institutions or "any entity that has grown so large that its failure would have a catastrophic effect on the stability of either the financial system or the United States economy without substantial Government assistance." I approve. The bill seems to be gaining steam as well in Congress.

Protects Against Systemic Risks: Creates an independent agency with a board of regulators to identify
and address systemic risks posed by large, complex companies, products, and activities before they
threaten the stability of the financial system. The agency could require companies that threaten the
economy to divest some of their holdings.

What ever happened to the SEC? Why do we need several new layers of bureaucracy? Why not just beef up the SEC's enforcement division? Am I missing something here?

Single Federal Bank Regulator: Eliminates the convoluted system of multiple federal bank regulators to
increase accountability and end unnecessary overlap, conflicting regulation, and “charter shopping;”
keeps in place the healthy dual banking system that governs community banks.

I can't really speak this one, as commercial banking or banking writ large is not my bailiwick. Asset markets, yes. The Fed System? Nope. Numerian?

Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and
corporate affairs with a non-binding vote on executive compensation and director nominations.

Shareholders already have this right. That's why they are called shareholders, you know? A non-binding vote? That's just weak.

Closes Loopholes in Regulation: Eliminates loopholes that allow risky and abusive practices to go on
unnoticed and unregulated - including loopholes for over-the-counter derivatives, asset-backed securities,
hedge funds, mortgage brokers and payday lenders.

Okay, this is a good idea. But I don't see anything here that will lead to the regulation of CDS' or hedge-funds or absolutely criminal equity extraction schemes by 'private' equity firms.

Protects Investors: Provides tough new rules for transparency and accountability from investment
advisors, financial brokers and credit rating agencies to protect investors and businesses.

Question: does this bill gut Sarbanes-Oxley? (If you haven't read this story, do so now. It will make you weep.) If the bill does gut it, well, what's the point of all the rest of the reforms? Talk about pointless.

Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively
pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at
the expense of American families and businesses.

This last one is just boilerplate. My question is: why haven't these laws hitherto been enforced? And for those who might quibble with me that I'm not offering solutions, only criticisms, my reply is read this. I've already offered solutions.

Nov 8

NYT - Frank Rich:

On Tuesday, Congressional Democrats, with the White House’s consent, voted to gut the Sarbanes-Oxley Act, the post Enron-WorldCom law passed in 2002 to prevent corporate accounting tricks and fraud. Arthur Levitt, the former Securities and Exchange Commission chairman, told me on Friday it was “surreal” that Democrats were now achieving the long-held Republican goal of smashing “the golden chalice” of reform. If investors cannot have transparency, Levitt said, “the whole system is worthless.”

Floyd Norris:

The Sarbanes-Oxley law also took steps to reinforce the independence of the Financial Accounting Standards Board, which writes accounting rules in the United States. By giving the board a secure source of financing, legislators said they were protecting it from the threats of the companies that had previously made donations to keep the board functioning.

But this Congress has made clear that independence for the accounting rule writers can go too far — particularly if the rules force banks to reveal the horrid mistakes they previously made.

This year, a subcommittee of the House Financial Services Committee held a hearing at which legislators sought no facts but instead threatened dire action if the chairman of the financial accounting board did not promptly make it easier for banks to ignore market values of the toxic securities they owned. The board caved in, which may be one reason why banks are reporting fewer losses these days.

But the board’s retreat was not enough to satisfy the banks. The American Bankers Association is now pushing Congress to give a new systemic risk regulator — either the Federal Reserve or some panel of regulators — the power to override accounting standards. The view of the bankers is that the financial crisis did not stem from the fact that the banks made lots of bad loans and invested in dubious securities; it was caused by accounting rules that required disclosure when the losses began to mount.

** Committee Allows a Break on Certain Auditing Rules

Beijing | November 6

Al Jazeera - China has described as protectionist new US anti-dumping duties on steel pipes and demanded Washington's recognition that it is a market economy.

The reaction came a day after the US imposed preliminary anti-dumping duties ranging up to 99 per cent on $2.63bn in Chinese-made pipes used in the oil and gas industry.

Where are my green shoots?

The U.S. unemployment rate climbed to 10.2% in October, topping the 10% mark for the first time in 26 years, the Labor Department reported Friday.

Nonfarm payrolls dropped by a seasonally adjusted 190,000 in October, bringing to total number of jobs lost in the recession to 7.3 million. It was the 22nd straight decline in payrolls. Large losses were seen in manufacturing, construction and retail. Health care and temporary-help agencies added jobs.

10.2% is not, I repeat, is not a good number.

Earlier this week, President Obama signed into law the $680 billion FY 2010 Defense Authorization Bill, the largest such budget since the end of World War II. If you missed that aspect of the story, you weren’t alone. Many news stories chose instead to focus on the hate crime provisions tacked onto the bill.

I’ve often quarreled with the inclusion of superfluous legislative riders, and the hate crime provision is more superfluous than most. (Indeed, as my Cato colleague David Rittgers has pointed out, it might be worse than superfluous.)