Deeper Look at Unemployment
The Economic Policy Institute does a deep-dive on the long-term unemployment picture (hat tip: Naked Capitalism).
There are some significant pearls of economic consideration in this analysis, especially as it applies to long-term employment.
Here is one that I think is particular enlightening regarding the unemployment deficit we need to recover from:
“Furthermore, while the labor market has shed 6.7 million jobs since the start of the recession, it is important to keep in mind that in those 19 months, the population has continued to grow. Just to keep up with population growth, the economy must add approximately 127,000 jobs every month, which means almost 2 and a half million jobs, should have been added over this period. In other words, the economy is now 9.1 million jobs below what is needed to maintain pre-recession employment levels.”
Now, I think we get into some reality of what is actually happening in the jobs’ market as employers attempt to cope with the recession with these next two points.
Analyzing change in aggregate weekly hours:
“Total hours worked in the economy is a more comprehensive measure of labor market weakness than employment because it captures both job loss and reductions in hours for workers who keep their jobs. Table 3 shows an index of aggregate weekly hours of production and nonsupervisory workers on private nonfarm payrolls at the start of each recession over the last forty years along with its value 19 months later. Again, aggregate hours during the current recession are falling at a faster rate than in previous recessions; over the course of this recession, aggregate hours have fallen 8.8%, whereas in the first 19 months of the recession of 1981/1982, aggregate hours fell by 6.2%”
And reviewing the underemployment rate:
“Underemployment is a more comprehensive measure of labor market slack that includes not just the unemployed, but also “involuntarily” part-time workers (workers who want full-time work but can’t get the hours) and marginally-attached workers (jobless workers who want a job but are not actively seeking work and are therefore not counted as officially unemployed). Underemployment data as currently measured are only available since the mid-1990s, so it is not possible to compare the current recession to the recession of 1981 on this measure. Table 4 shows underemployment over the current recession. In particular, the number of involuntarily part-time workers has increased by approximately 90%, from 4.6 million to 8.8 million. Over this time, the underemployment rate has increased from 8.7% to 16.3%, so that now nearly 26 million people—one out of every six US workers—are either unemployed or underemployed.”
I certainly don’t want to still all the thunder of this excellent analysis. Take a look and review the charts. I am not submitting that it is perfect (few economic analysis are), but it is certainly worth putting in your data banks.
Taking Another Look at Bailout “Income” Sheet
Matt Taibbi at TrueSlant.com takes a slightly different view of the success of Bank Bailouts.
Citing reports from the New York Times and the Financial Times, “telling us the bailout is working because the government has made some money on TARP,” Taibbi thinks the math is selective at best.
Take a look a Matt’s argument for yourself:
“This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.”
Is Federal Reserve Chairman Bernanke Campaigning for Re-election (Reappointment)?
- Image via Wikipedia
I would have to agree with a few of these sources–Chairman Bernanke is off and running on his reappointment campaign.
Washington Post: Televised townhall meeting in Kansas? That was the unusual format for PBS’ Jim Lehrer special with Chairman Ben Bernanke:
Using atypically folksy language, Bernanke explained why he thinks the central bank responded appropriately to the financial crisis.
“I was not going to be the Federal Reserve chairman who presided over the second Great Depression,” he said, defending the bailout of American International Group and other large financial firms. “I had to hold my nose and stop those firms from failing. I am as disgusted about it as you are.”
Mish’s Global Economic Trends: In classic Mish style–he pulls few punches. Calls 60 Minutes interview “creampuff” and wraps in Former New York Attorney General, Eliot Spitzer’s Fed “Ponzi Scheme” comment:
The Fed’s media blitz started in March as noted by a Cream Puff Interview With Bernanke On 60 Minutes.
Bernanke stepped up his advertising campaign this weekend in a town hall meeting on public TV. The show will air this week in three installments on PBS’ “The NewsHour with Jim Lehrer.”
The Business Insider: Bernanke grabs three high profile “news hour” spots with his PBS special with Jim Lehrer. The Insider calls it a 3-Night Infomercial:
Last night Bernanke recorded a special with PBS’ Jim Lehrer, which will be shown tonight, tomorrow, and Wednesday during the news hour. As Barry Ritholtz observes, this is his re-election campaign, and he’s taking it straight out of the Obama playbook (well, sort of. Obama bought his infomercial, but it probably wouldn’t be appropriate for Bernanke to do that).
More Coverage of the Bernanke Reappointment Campaign:
- Bloomberg: Roubini, Schwartz Square Off Over Bernanke Reappointment
- BusinessWeek: Ben Bernanke Gets Real in Kansas City
- Bloomberg: Bernanke Disarms US Lawmakers with Garage Meetings
- The Big Picture: Bernanke Meets His Public
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Maybe the FDIC Did Have the Best Loan Modification Plan?
Considering all the heat FDIC Chair Sheila Bair got during her campaign for loan mods and the program she implemented at IndyMac Bank, I found this article interesting. I guess the “proof is in the pudding” now.
Housing Wire: IndyMac Modification Outperform Industry Redefault Standards
As of May 31, 2009 the redefault rate among modified IndyMac Federal Bank (IndyMac) loans was 15.6%. The bulk of these modifications took place in Q408 — as early as September 2008, according to FDIC spokesperson David Barr — indicating many of these loans are at least six months past modification.
The FDIC rate is well below the industry standard six-month redefault rate, which ranges from 30% to more than 40%.
I wonder what an updated report from OCC Comptroller John Dugan would look like now?
Federal Reserve Board Wants Mortgage Broker Fee Restrictions
Interesting…
Federal Reserve Board is doing consumer marketing studies now. In reaction to consumer testing the Fed is resubmitting a proposal to change Regulation Z, more commonly known as the Truth in Lending Act (TILA).
Please, read more and then come back and register you opinions in the comment section below.
Housing Wire: Fed Proposes Fee Restrictions on Mortgage Brokers
The Fed’s proposal would prohibit payments to a mortgage broker or loan officer that are based on the interest rate or other terms, and would prohibit a mortgage broker or loan officer from “steering” consumers into transactions that are “not in their interest” in order to increase the compensation paid to brokers and officers.
Rain City Guide: Federal Reserve Proposes Changes to Reg Z
If you’ve been following Ben Bernanke’s testimony on the Hill this week, you may have noticed him hinting about significant proposed changes to Reg Z and changes in how mortgage originators are compensated, leaving many of us in the industry wondering “what now”. Don’t get me wrong, Reg Z could use some tweeking…it’s just that the mortgage industry is in a state of constant change (evolution?) with a deluge of new forms and/or regulations including MDIA, HVCC and the new Good Faith Estimate which goes into effect on January 1, 2010.
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Kicking in Doors on Loan Modification and Loan Rescue Scams
Most of the mortgage news this morning is leading with State Attorneys Generals, Federal prosecutors, and the FTC coordinating to shutdown loan businesses preying on desperate homeowners.
Inman News: Officials in California shutdown Anaheim-based Loan Mod Boiler Room Operation.
The company employed a sales force of 31 at the time it was shut down, McNamara found, and less than half as many employees engaged in negotiating loan modifications with lenders or processing related documents.
Employees in sales were typically paid a $450 commission when a client paid the full $2,500 fee up front, regardless of the outcome of the case. By contrast, eight staff negotiators earned $500 a week plus $75 for every loan modification they were able to negotiate.
MortgageInsider: Orange County District Attorney raids three homes looking for alleged foreclosure rescue scam.
Attorney General Jerry Brown last week said he has filed suit against the men for allegedly charging homeowners $4,000 in upfront fees and then failing to get them cheaper payments on their home loans.
Brown also charged the companies sometimes promised to arrange a short sale — when a lender aggrees to accept less than debt owed on a property — but instead attempted to use customers’ personal information for their own benefit.
Washington Post: FTC announces “Operation Loan Lies”
The Federal Trade Commission recently announced that it is leading “Operation Loan Lies,” an effort by 25 federal and state agencies to shut down firms that are deceptively marketing foreclosure rescue and mortgage-modification services. These companies often do little or nothing to help homeowners renegotiate their mortgages or stop foreclosures, officials from the FTC and other agencies say.
Zillow Mortgage Marketplace Adds “True Cost” to Loan Quotes
As Mary Miller, Zillow’s Director of Product Management, states in her blog post–mortgage shoppers are very focused on mortgage rates and closing fees. However, we all know those can be deceptive and depending on your plan for the home you are purchasing or refinancing, very misleading.
Mary explains the value of this concept very nicely:
When comparing mortgage quotes, most borrowers focus on two factors: interest rate and upfront fees. But it’s difficult to determine whether it makes more sense to choose a loan with a lower rate and higher fees, or a loan with higher fees and a lower rate. The best combination depends on how long borrowers will have the loan.
Great new feature for the consumer.
However, I think it would be even more powerful if the mortgage broker or lender got the goal in the anonymous loan request. Most mortgage brokers are well trained at structuring mortgage loans that meet homeowners and new home buyer needs. It would be ashamed to put them in a competitive guessing game on their quotes.
Another nice move by Zillow in the mortgage loan marketplace.
The Day After…Trying to Understand Obama’s Healthcare Plan
I watched it, but I have to say I don’t get it.
President Obama’s press conferences are increasingly sounding like the ShamWow infomercials. He might have a legitimate claim to be on PitchMen. I must admit, I am kinda waiting for what else I get for $19.95.
So let’s tool through the morning coverage and see if anyone has figured it out…
BBC: I think the BBC captures the healthcare reform landscape in the closing paragraphs:
The speaker of the House of Representatives, Democrat Nancy Pelosi, said on Wednesday that her party had the votes needed to pass the reform there.
“It will take some time,” she said. “But we are going to do it right.”
House Republican Leader John Boehner called on Mr Obama to scrap the bill and start again “in a bipartisan way”.
“If they try to fix our healthcare system like they’ve tried to rescue our economy, I think we’re in really, really big trouble,” he said.
Some opinion polls show that barely half of Americans now approve of the way Mr Obama is handling healthcare reform.
So, if I read that right the Democrats say we have the numbers, it’s happening! The Republicans are complaining it is more legislation built from the top down. And, nearly half (and I suspect growing) of the American people are confirming that they don’t like what is happening.
Washington Post: The Washington Post hints at my Pitch Man analogy. I am not comfortable with government leaders that are adept at being “bending public opinion, and Congress, to his will.” Sounds too much like manipulation.
Since taking office, President Obama has preached the urgency of implementing the big items on his long list of policy priorities. And he has been largely successful at bending public opinion, and Congress, to his will — on the stimulus package, financial bailouts and his budget, with unprecedented new investments in education and renewable energy.
The Big Money: Some are already calling foul on President Obama’s numbers–Millionaire tax for healthcare? More like $350,000 and dropping. Does this sound familiar? Remember the debate over what “rich” was and where the line for “tax breaks” would be drawn? Very similar, very similar.
Americans would not shoulder the costs at the end of the day, the president said that, in turn, a surcharge on the highest-income Americans would be acceptable. According to the Wall Street Journal, the health care bill costs are estimated at about $1 trillion over a decade, and, as it stands now, the bill calls for a surtax on families earning $350,000 and up—a figure House leaders have already signaled may be too high.
Mish’s Global Economic Trend Analysis: Mish asks some real questions in an open letter to President Obama.
- Will the plan cover a transplant procedure with a $50,000 cost for someone who is 80 years old with a life expectancy of two years? One year? Who decides? Or is everything free for everyone regardless of the odds of success?
- Will the plan cover fertility treatments? Abortion?
- Will the plan address issues that arose in the Terri Schiavo case?
- To what extent must doctors provide generics instead of prescription drugs?
Mandelman Matters: Of course, my favorite–Mandelman covers it his way.
It’s no secret that millions of American families live with the constant threat of having to take care of a family car as it ages and requires more intensive repairs. In some cases we’re just talking about tires, breaks and tune-ups… but for less fortunate Americans, we’re talking about transmissions, exhaust systems, and even entire engines. In many cases, these families are not only suffering from the financial burden associated with these repairs, but they are ending up being forced to take cabs and even ride busses.
Some polling data:
- Zogby Poll discussion,
- Zogby survey results (PDF 1, PDF 2),
- Kaiser Family Foundation tracking poll
Bernanke Under Fire. Will He Take the Fed Down Too?
There is a lot of debate as Bernanke heads for another round of testimony on Capital Hill:
- Was the Federal Reserve competent in managing the economy pre-mortgage meltdown and during the ongoing economic crisis?
- Should the Fed be reined in by Congress and lose its political independence?
- Should Bernanke be retained or replaced when his term expires in January 2010?
What do you think? Is the Federal Reserve necessary? Must it retain its political independence?
Ron Paul is leading the charge to abolish the institution and gave this speech.
Here is more:
I’m not sure I have an opinion yet. I am swiftly moving through an Alexander Hamilton
Subprime Borrowers Aren’t to Blame for Mortgage Meltdown?
New favorite writer of mine, Martin Mandelman of Mandelman Matters, writes an interesting piece exonerating subprime borrowers from culpability in the mortgage meltdown:
“What did surprise me was what our politicians and the media started blaming the meltdown on: sub-prime borrowers. Anyone that read me back then knows it well… and if I said it once I said it a thousand times: it’s NOT the sub-prime borrowers. At best people were confusing a fuse… with the bomb.”
Now, while I too am not blaming the “subprime borrowers,” obviously, I think Andelman may play too gently on the role of subprime loans (aka “affordable housing”) in melting us down in grand fashion.
We should continue to remember (remind Congress) there is nothing dishonorable about renting.
Having said that, I am 100% in agreement–a little hard to argue with most empirical evidence–that loans that lacked reasonable down payments and even negative equity sent us into mortgage crazy land.
As Andelman quotes the good professor of economics, Stan Leibowitz:
“The evidence from a huge national database containing millions of individual loans strongly suggests that the single most important factor is whether the homeowner has negative equity in a house — that is, the balance of the mortgage is greater than the value of the house. This means that most government policies being discussed to remedy woes in the housing market are misdirected.”
After all, how many quarter to half-million dollar loans can a business get with 0% down? Right! A little risk management goes a long way.
