Democrats & Liberals Archives

Recession Still Not Here, Sorry Republicans.

If they’re waiting on a recession that will doom Obama they’ll need to wait a little bit longer, I think. BLS reports today jobs grew by just 80,000 in October but continues an upward trend that has seen the private sector add 2.76 million jobs in the last 20 straight months.

Remember that month we had zero job growth and how that became a talking point for the right wing media and for ad campaigns? That number was revised upward two months in a row to 104,000 jobs. For some reason there isn't a rush to retract that critical tone or to apologize for the almost giddy reporting on Obama's apparent abysmal failure. Oh well, maybe next time?

Overall unemployment ticked down slightly to 9% and the long term unemployed declined and is generally trending downward. Unemployment is still in a deep hole but we're digging our way out over time.

This slow growth is unfortunate but not that unexpected. It's unrealistic to think we'll re-create jobs at the pace we lost them this time around. When is the last time you saw the economy create 800,000 jobs in a month's time?

The markets and GDP growth have followed the same trend as jobs. GDP growth has slightly exceeded the pre-recession level and the markets are less than 20% off the peak. They're growing ever so slowly, moving sideways many months, but moving up more than they are moving down.

All this is of course very bad news for the GOP clown car primary we're all witnessing. This crop of candidates have to be praying for a depression to hit because as of today they're not convincing anyone they're qualified to do better than Obama.

At a slightly increased pace of job creation Obama will be able to remind voters in the head to head debates that he's seen the markets, GDP, and job growth come into positive growth on his watch. Compare that to the way things were when he started and you'll see how he might frame his case for wanting four more years. Unemployment will be bad for quite some time but the trend is as important as the number itself.

But in the end the facts may not matter. The conservatives these days live in a cloud of contempt for the president. You don't have to listen to right wing talk radio for long before you hear somebody refer to Obama as the worst president ever or blame him for the sluggish economy as if the problems he's handled better than anyone expected are somehow all his fault.

Liberals can't let the right get away with that. We are roughly one year out from the election and we need to be taking this message to the people who listen to us in our families, our circle of friends, our churches or other places in the community.

Are we going to turn our backs on a man who's seen us through the worst economic period of our lifetime in order to put back in power the same group of people who presided over this mess to begin with? There's no clear answer to that question but there should be.

Posted by Adam Ducker at November 4, 2011 10:56 AM
Comments
Comment #331478

When you are in a hole, the first thing to do is stop digging.

Everybody wants a recovery. The policies of the last few years have slowed the recovery. In the early 1980s, unemployment went higher and it had been high for a long time before that, but it came faster. At this point in the recovery in 1983, we added more than a million jobs in one month. These days, we can hardly manage 80,000.

What the massive spending did (besides create massive new debt) was to front end load the recovery. It worked like the cash for clunkers. It may have kept unemployment from going to the levels of the 1980s, but it didn’t keep it below the 8% the Obama folks promised and it seems also to have prevented needed adjustments.

So now we are stuck in the doldrums, perhaps w/o the escape velocity needed to get us back into the robust growth we enjoyed in the 1980s, or even in 2003.

Posted by: C&J at November 4, 2011 1:06 PM
Comment #331479

One of the dumbest notes on the financial pix in the country is the spin on numbers. The numbers get twisted, adjusted, revised, and in the end they don’t mean a darn thing.

The one number that does make a difference is who is working and who isn’t.

The federal government needs to step back and quit trying to create jobs. That is an impossible task. All they do is spend money. They create nothing but mistrust, debt, and additional power for people who should be out looking for a real job.

The best thing that could be done by government is to give pep rallies and tell the job producers to “go for it, I support you, but I am not going to put additional burdens on you with more regulations and more taxes”.

If they did that the economy would burst forth with growth. Government is the body that stymies and does not stimulate.

Maranatha

Posted by: tom humes at November 4, 2011 1:58 PM
Comment #331481

tom humes,
“The federal government needs to step back and quit trying to create jobs. That is an impossible task.”

No. It isn’t. You are wrong. Completely, totally, flat-out wrong. The Great Depression came to an end once and for all when the United States government engaged in deficit spending and put money into defense. Other countries at the time did the same, with the same results. Of course, World War II followed, which tends to be the result of placing so much money into defense.

So! Government spending on jobs in the defense sector works exactly the same as government spending on infrastructure, or other areas of the economy. Actually, it works better in sectors other than defense, because defense spending does not contribute anything nearly as useful and positive as, say, a bridge.

C&J,
There’s no point in comparing the current economic situation with the recession of 1983, or other post WWII recessions. This one has been different. It is a credit crunch, an asset deflation. That’s completely different from the other recessions. Interest rates and inflation remain extraordinarily low because real estate tanked, the commercial banks, insurance giants, and investment banks tanked, thereby destroying enormous amounts of wealth.

The Bush and Obama administrations front loaded the recovery. They played it safe, and essentially re-inflated the commercial banks, insurance giants, and investment banks. It cost a lot. Now the financial sector is doing fine. Unfortunately, taxpayers paid for the bailout. It’s a classic example of lemon socialism. People have had enough of bailing out the richest of the rich and the oligopolies.

November 5th is bank transfer day. Take your money out of the big banks, and put it into credit unions & community banks where it will do some good on a local level.

Posted by: phx8 at November 4, 2011 3:05 PM
Comment #331482
The Great Depression came to an end once and for all when the United States government engaged in deficit spending and put money into defense.

No. It isn’t. You are wrong. Completely, totally, flat-out wrong.

Posted by: Rhinehold at November 4, 2011 3:08 PM
Comment #331485

Rhinehold,
Yes, I recall how you opposed saving the economy from depression with the bailouts and stimulus bills. When the House GOP opposed one of those bills, the stock market lost one trillion dollars in one day. Ever notice how no one turns to libertarians during recessions? When it matters, there are no libertarians in foxholes.

Posted by: phx8 at November 4, 2011 3:30 PM
Comment #331486

You’re right phx8, we should keep spending more each year… Both the Democrats and Republicans want to spend more money, they need that increased spending to control more aspects of our lives, they just disagree on which parts.

Totalitarianism is the answer, plainly, as it has been working so well these past 30 years.

Posted by: Rhinehold at November 4, 2011 3:38 PM
Comment #331487
Yes, I recall how you opposed saving the economy from depression with the bailouts and stimulus bills.

BTW, had the Democratically controlled congress relaxed the mark-to-market rules for mortages when asked to by people who knew what was going on, there would have been no need for a stimulus or bailout. Of course they would have most likely lost the general election for president, which was more important to them. They made sure to relax those rules in March of 2009, six months after most of the damage was done.

As for the ending the Great Depression, I would recommend reading a bit more on the real story there, not the made up fantasy that ended up proving Keynesian economics wrong in the end.

This may help a little for a start:

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx

Posted by: Rhinehold at November 4, 2011 3:43 PM
Comment #331488

C&J:

“At this point in the recovery in 1983, we added more than a million jobs in one month. These days, we can hardly manage 80,000.”

Yes, 1.114 million jobs in one month in fact. That’s incredible. Of course the only problem is it came after a month we lost 308,000 jobs. I wonder what Fox would say if we lost 308,000 jobs next month? The average creation for 1983 was about 293,000 a month though. We’ve averaged 125,000 this year even with bleeding in the government sector. Creating 293 is great but the million job month was not typical of that recovery or any recovery.

“So now we are stuck in the doldrums, perhaps w/o the escape velocity needed to get us back into the robust growth we enjoyed in the 1980s, or even in 2003.”

So does that mean you’re arguing without the steps taken by Obama that we’d be actually growing faster now?

Posted by: Adam Ducker at November 4, 2011 4:05 PM
Comment #331489

Adam

I think that SOME of the steps taken by Obama (and Bush) were good. But Obama pushed way too far. So, yes, if Obama had acted in a wiser way, we would be enjoying a more robust recovery.

Obama supported asset prices to a great extent than he should have and promised way more than he could deliver. We (C&J) “lost” a lot of money on our house. We never will get that “back” from any government policy. It is lost. It as a bubble that created that value. Obama cannot give it back and should not try. In doing so, he made it much more difficult for people to buy and sell houses. He did the same with other assets, while allowing big bonuses to bankers etc, while claiming to be outraged by the same.

We need some adults in the White House. Bush grew the government too much. Obama saw what Bush did and raised it to the sky. The answer is not more of that.

Government cannot create jobs. It can move them around (taxing some to create jobs for others) and it can create conditions for others to create wealth. Obama did some of the first and none of the second. That is how he failed.

Posted by: C&J at November 4, 2011 4:28 PM
Comment #331491

I would like to see jobs created, people back to work, and no recession, but the problem is Obama’s policies. Unless he changes his policies, there will never be an improvement in the economy. A creation of 80,000 jobs means nothing, and a drop of .1% unemployment means nothing; the actual unemployment is still close to 17%. In my area, there are still companies closing their doors. If you listen to the CEO’s and entrepreneurs that actually create jobs, and not the Ivy League economists who Obama surrounds himself with, you will understand why companies are not being created or expanded. Take away government agencies ability to over regulate companies, shut down the liberal rhetoric about raising taxes, and repeal obamacare, and you will see real growth. Not the juggling of numbers as we see today.

Posted by: Frank at November 4, 2011 5:13 PM
Comment #331493

“If they’re waiting on a recession that will doom Obama they’ll need to wait a little bit longer, I think.”

Worst recovery since the Great Depression…no need to wait for the doom, obama is a single termer.

Posted by: Royal Flush at November 4, 2011 5:50 PM
Comment #331496

“I always thought I was pretty good with math. But I guess I am wrong. I thought we needed to create about 150,000 jobs every month just so the unemployment rate would stay the same. We created 80,000 last month but unemployment dropped. The U6 number dropped too. One or both should have gone up! What’s going on? Did I miss something? Is it at all possible the administration is lying? (Go ahead and laugh!) Does some independent agency corroborate these numbers?”

Posted by: Frank at November 4, 2011 6:14 PM
Comment #331497

“This is the worst jobs recovery since the Great Depression.”
Herman Cain, September 15th, 2011

“Worst recovery since the Great Depression…”
Royal Flush

When PolitiFact asked the Cain campaign how it came to this conclusion, the campaign referred PolitiFact to the Bureau of Labor Statistics. The statement can be assessed in one of two ways: job creation, or change in the unemployment rate.

“Since the end of the recession in June 2009, the U.S. gained 639,000 jobs. But in two of the 12 recoveries we reviewed, the U.S. actually lost jobs.

From November 2001 to January 2004 under President George W. Bush, the economy lost 481,000 jobs. And from July 1980 to September 1982 under Presidents Jimmy Carter and Ronald Reagan, the U.S. lost 661,000 jobs, according to BLS figures.

Now for the unemployment rate. Unemployment has decreased by a modest 0.4 percentage points since the end of the most recent recession. But we found three recoveries where unemployment actually rose in the same amount of time.

From November 2001 to January 2004, unemployment crept up by 0.2 percentage points. Between March 1991 and May 1993, under President George H.W. Bush, it rose by 0.3 percentage points. And between July 1980 and September 1982, it jumped by 2.5 percentage points.

This means that as of August, there are either two or three recoveries since the Great Depression that were weaker than the current one, depending on which measure you use. This is very similar to June’s results.”
http://www.politifact.com/georgia/statements/2011/sep/26/herman-cain/cain-jobs-recovery-worst-great-depression/

The statement by Cain and by Royal Flush is false.

Frank,
You write: “Take away government agencies ability to over regulate companies, shut down the liberal rhetoric about raising taxes, and repeal obamacare, and you will see real growth.”

That sounds just like the conservative gameplan under the Bush administration. It didn’t work out very well then. Why would it work better now?

During the early part of the Clinton administration, the Democrats raised taxes. Conservatives warned of economic disaster; instead, the economy boomed. At the end of the Clinton administration, we were projecting a budget surplus of $10 trillion over the next ten years, and were running annual budget surpluses.

Then came the Bush tax cuts… unfunded wars in Afghanistan… and private health care costs doubled, driving up the cost of government health care programs.

The repeal of the Glass Steagall Act and an amendment preventing government oversight & regulation of commodoties resulted in the total implosion of the financial sector.

So, once again, why would we want to go with those policies?

Posted by: phx8 at November 4, 2011 6:21 PM
Comment #331498

And how is MF Global failure going to affect the financial pix in this country.

Jon Corzine took the company to the sewer and did a bath.

Democrat fincial politics are just too much of a nut to crack. Of course they crack on their own very well.

Do we talk recession or depression or give a pass to a liberal democrat who didn’t know what the heck he was doing and had cronies to help him be a non-achiever.

He even washed his kids savings when he took the signing bonus option and paid almost $10 a share and at the filing of the bankruptcy papers it was worth only $1.20 a share. That is how liberal democrats operate in the financial circles.

The problem it affects everybody not just liberal democrats. The economy in general is hurt. But what do they care. They still have millions of dollars to go do it again. If at first you don’t succeed try, try again. With their theories how is it they still have millions to screw the economy with.

A fool and his money are soon parted.

Maranatha

Posted by: tom humes at November 4, 2011 6:22 PM
Comment #331499
The repeal of the Glass Steagall Act and an amendment preventing government oversight & regulation of commodoties resulted in the total implosion of the financial sector.

Again, where do you get this stuff?

http://www.factcheck.org/2008/10/who-caused-the-economic-crisis/

A MoveOn.org Political Action ad plays the partisan blame game with the economic crisis, charging that John McCain’s friend and former economic adviser Phil Gramm “stripped safeguards that would have protected us.” The claim is bogus. Gramm’s legislation had broad bipartisan support and was signed into law by President Clinton. Moreover, the bill had nothing to do with causing the crisis, and economists – not to mention President Clinton – praise it for having softened the crisis.

Timothy Geithner has also stated that Glass Steagall played no part in the downfall.

And had it been the problem, why is it that so many years later it is still not back in place?

Glass Steagall was a red herring placed out in the poltiical world during an election where the left thought they could pin the issues on McCain through his economic advisor. That the left still clings to the fantasy is telling…

Had mark-to-market rules been relaxed, the banks would not have had billions of dollars erased from their books overnight on assets that had real value that they were not allowed to list, keeping them from loaning funds and causing the spillover into the rest of the economy. The Democrats wanted to win an election, and they did. Congrats! It just cost everyone else in the country…

Posted by: Rhinehold at November 4, 2011 6:33 PM
Comment #331500

A fool and his money are invited everywhere as well.

Posted by: Royal Flush at November 4, 2011 6:35 PM
Comment #331501

Frank,
You’re right about 150,000 non-farm payroll number being the generally accepted figure for job creation matching population growth. In the latest numbers, there was a revision for the past two months that added 102,000 jobs.

I’d suggest not paying too much attention to the unemployment rate or U6. The public likes following the unemployment rate because it seems like an easy one to understand, but that number can be deceptive for a couple reasons, especially over the shorter term. Same goes for U6. If you want to find a number to make unemployment look as bad as possible and score political points, U6 is great for that, but if you really want to understand the economy and where we are going, follow non-farm payroll.

Unemployment is a lagging indicator. You can have an economic recovery without creating jobs. You cannot have jobs with first having an economic recovery.

Posted by: phx8 at November 4, 2011 6:37 PM
Comment #331502

Frank: “I always thought I was pretty good with math. But I guess I am wrong. I thought we needed to create about 150,000 jobs every month just so the unemployment rate would stay the same.”

Whoever you’re quoting (sounds like Limbaugh) doesn’t understand how the numbers are collected or they’re intentionally misleading. First of all 150,000 is pretty high. The realistic number is under 100,000 these days because population is growing slower than it used to. Second, unemployment rates U1 through U6 are not based solely on how many jobs are created in a month but rather the size of the workforce and the number of unemployed persons.

Royal Flush: “Worst recovery since the Great Depression…no need to wait for the doom, obama is a single termer.”

That’s that cloud of contempt talking. It keeps the facts phx8 pointed to from making sense.

Posted by: Adam Ducker at November 4, 2011 6:47 PM
Comment #331503

Rhinehold,
“The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that officially ensured the deregulation of financial products known as over-the-counter derivatives. It was signed into law on December 21, 2000 by President Bill Clinton. It clarified the law so that most over-the-counter (OTC) derivatives transactions between “sophisticated parties” would not be regulated as “futures” under the Commodity Exchange Act of 1936 (CEA) or as “securities” under the federal securities laws. Instead, the major dealers of those products (banks and securities firms) would continue to have their dealings in OTC derivatives supervised by their federal regulators under general “safety and soundness” standards. The Commodity Futures Trading Commission’s (CFTC) desire to have “Functional regulation” of the market was also rejected. Instead, the CFTC would continue to do “entity-based supervision of OTC derivatives dealers.” [1]These derivatives, especially the credit default swap, would be at the heart of the financial crisis of 2008 and the subsequent Great Recession.”

The CFMA was a one-page amendment inserted by Gramm into the ten thousand page budget bill of 2000. The budget was signed by Clinton and did enjoy broad support. It is doubtful the legislators knew about Gramm’s amendment.

Glass Steagall kept firewalls between the three major legs of the financial sector: commercial banking, investment banking, and insurance. In a nutshell, commercial banking engaged in safe, low risk practices; investment banking engaged in venture capital formation and riskier practices; and insurance engaged in just that, insurance, including conservative investments such as guaranteed annuities.

Repealing the Act allowed supposedly conservative institutions to become involved with riskier investments. With the firewalls down, the unregulated commodoties- deregulated by Gramm’s CFMA amendment- were bought and sold without oversight. It generated enormous fees, but created risks that no one understood at the time, especially surrounding mortgage derivatives. This enormous, shadowy market in derivatives- orders of magnitude larger than the original mortgage market- imploded, resulting in a loss of trillions.

Posted by: phx8 at November 4, 2011 6:48 PM
Comment #331504

Adam,
100,000? Source? I’ve heard various numbers, but 150,000 seems like the one used most often.

The quote from my previous comment came from Wikipedia. There is a LOT of information on these topics one the web if anyone would care to learn more.

Posted by: phx8 at November 4, 2011 6:50 PM
Comment #331508
The CFMA was a one-page amendment inserted by Gramm into the ten thousand page budget bill of 2000. The budget was signed by Clinton and did enjoy broad support. It is doubtful the legislators knew about Gramm’s amendment.

I’m not sure where you are getting your information but the Financial Services Modernization Act of 1999, which is the law that repealed Glass-Steagall, was signed as a separate law on November 12, 1999.

The House passed its version of the Financial Services Act of 1999 on 1 July 1999 by a bipartisan vote of 343-86 (Republicans 205–16; Democrats 138–69; Independent 0–1), two months after the Senate had already passed its version of the bill on May 6 by a much-narrower 54–44 vote along basically-partisan lines (53 Republicans and one Democrat in favor; 44 Democrats opposed).
The truth is, however, the Gramm-Leach-Bliley Act had little if anything to do with the current crisis. In fact, economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been.


Observers as diverse as former Clinton Treasury official and current Berkeley economist Brad DeLong and George Mason University’s Tyler Cowen, a libertarian, have praised Gramm-Leach-Bliley has having softened the crisis. The deregulation allowed Bank of America and J.P. Morgan Chase to acquire Merrill Lynch and Bear Stearns. And Goldman Sachs and Morgan Stanley have now converted themselves into unified banks to better ride out the storm. That idea is also endorsed by former President Clinton himself, who, in an interview with Maria Bartiromo published in the Sept. 24 issue of Business Week, said he had no regrets about signing the repeal of Glass-Steagall:

Bill Clinton (Sept. 24): Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn’t signed that bill. …You know, Phil Gramm and I disagreed on a lot of things, but he can’t possibly be wrong about everything. On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I’d be glad to look at the evidence. But I can’t blame [the Republicans]. This wasn’t something they forced me into.

What resulted in the loss of ‘trillions’ was not that the market imploded, but that once it did, those mortgages that were backed with REAL ASSETS had to be listed as having no value, when they most decidely did have value. The banks were just not allowed to claim any. Had they been allowed to do that (as they can now, thanks to action by the congress that was 6 months too late) then the issues would have been limited to the financial industry and as we know, those banks that took advantage of the law were able to weather part of their portfolio taking a hit as their other ventures were still solid.

To me it sounds like you are buying into the rhetoric of people like Moveon.org who as helped push the fantasy, as detailed in the link I provided:

The MoveOn.org Political Action ad blames a banking deregulation bill sponsored by former Sen. Phil Gramm, a friend and one-time adviser to McCain’s campaign. It claims the bill “stripped safeguards that would have protected us.” That claim is bunk. When we contacted MoveOn.org spokesman Trevor Fitzgibbons to ask just what “safeguards” the ad was talking about, he came up with not one single example. The only support offered for the ad’s claim is one line in one newspaper article that reported the bill “is now being blamed” for the crisis, without saying who is doing the blaming or on what grounds. The bill in question is the Gramm-Leach-Bliley Act, which was passed in 1999 and repealed portions of the Glass-Steagall Act, a piece of legislation from the era of the Great Depression that imposed a number of regulations on financial institutions. It’s true that Gramm authored the act, but what became law was a widely accepted bipartisan compromise. The measure passed the House 362 - 57, with 155 Democrats voting for the bill. The Senate passed the bill by a vote of 90 – 8. Among the Democrats voting for the bill: Obama’s running mate, Joe Biden. The bill was signed into law by President Clinton, a Democrat. If this bill really had “stripped the safeguards that would have protected us,” then both parties share the blame, not just “John McCain’s friend.” The truth is, however, the Gramm-Leach-Bliley Act had little if anything to do with the current crisis. In fact, economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been.
Posted by: Rhinehold at November 4, 2011 8:20 PM
Comment #331510

Rhinehold,
I’m talking about two separate pieces of legislation, the repeal of Glass Steagall (Gramm-Leach-Bliley), and the Commodoty Futures Modernization Act. Here is an article on the act.
http://motherjones.com/politics/2008/05/foreclosure-phil

I will not be around tomorrow…

Posted by: phx8 at November 4, 2011 9:20 PM
Comment #331513

“What resulted in the loss of ‘trillions’ was not that the market imploded, but that once it did, those mortgages that were backed with REAL ASSETS had to be listed as having no value, when they most decidely did have value.”

Rhinehold,

By bundling an enormous amount of junk, sub-prime loans and blending them into complex mortgage backed securities, the investment banks essentially poisoned entire portfolios of mortgage backed securities. Upon the implosion of the housing inflation bubble, the collateral supporting the securities was clearly impaired in addition to the defaults on the sub-primes. Certainly, not all the loans in those securities were non-performing and not all of the collateral supporting those loans was reduced to zero. However, who could evaluate the actual value of a given security under such circumstances? The banks were victims of their own cleverness. It was they who destroyed the market for the securities.

Mark to market accounting wasn’t the culprit. Nobody was going to trust valuations of the securities at that time even if it was under the relaxed mark to model rules adopted in early 2009. Fortunately, for the banks the Fed stepped in late 2008 and created a market for the securities by buying the securities from the banks at face value (QE1). Where did it get almost a trillion dollars to do so? It printed it. That increased bank reserves and helped with their solvency crisis.

Posted by: Rich at November 4, 2011 10:06 PM
Comment #331516
I’m talking about two separate pieces of legislation

I can see that, I just don’t understand why. Are you admitting that the repeal of Glass-Steagall had nothing to do with the economic issues then since you seem to jump from accusing the problem on it to something else …

Mark to market accounting wasn’t the culprit.

It didn’t matter how ‘poisonous’ the loans were, if 100% of them defaulted they were still backed by real estate assets. If the housing market lost 20% of it’s value (a round number which is close to right I believe) then those ‘poisonous assets’, if 100% of them defaulted (not likely), were still at least 80% of value. But because of the mark to market rules, they had to be listed on the accounting ledgers as 0%. This prevented many banks to be unable to lend money because of government regulations about loans to asset ratios.

QE1 would not have been needed had the accounting rules been relaxed instead of rushing it through congress while scaring everyone into thinking a new dust bowl was coming…

http://www.williamisaac.com/published-works/mark-to-market-revisited-a-picture-is-worth-a-thousand-words/

Posted by: Rhinehold at November 5, 2011 1:43 AM
Comment #331517
Because banks are able to loan about $8 for every dollar of capital they hold, the $500 billion market to market write-offs destroyed $4 trillion of bank lending capacity, wreaking havoc on the financial system and the economy and contributing to millions of people losing their jobs and homes and starving small businesses of credit. We have yet to recover.
My testimony that day included a slide (below) showing the impact of mark to market accounting on just one $3.65 billion portfolio of mortgage backed securities held by one of our nation’s largest banks. The chart showed that the bank expected a maximum of $100 million of losses on the portfolio but had enough extra collateral to cover those losses so no net losses were expected. Yet, mark to market accounting required the bank to write off over $900 million of the portfolio. The bank recently updated the chart showing the performance of this same portfolio as of March 31, 2011 (updated chart below). The portfolio declined to $2.1 billion due to prepayments and normal amortizations. The bank now expects total net losses of $28 million. The mark to market charge on the portfolio has been reduced from over $900 million at the end of 2008 to just $44 million, even though nothing has really changed except market perceptions of value! These two charts tell you everything you need to know about mark to market accounting. It was very bad accounting during the Great Depression when President Roosevelt ordered it eliminated in favor of historical cost accounting, and it was very bad accounting during the crisis of 2008-2009 when it helped bring our nation’s financial system and economy to the brink of collapse.
Posted by: Rhinehold at November 5, 2011 1:46 AM
Comment #331522

Adam Ducker, “Whoever you’re quoting (sounds like Limbaugh) doesn’t understand how the numbers are collected or they’re intentionally misleading.”

Thank you Adam, but that quote was my own.

Phx8, “I’d suggest not paying too much attention to the unemployment rate or U6. The public likes following the unemployment rate because it seems like an easy one to understand, but that number can be deceptive for a couple reasons, especially over the shorter term. Same goes for U6. If you want to find a number to make unemployment look as bad as possible and score political points, U6 is great for that, but if you really want to understand the economy and where we are going, follow non-farm payroll.

Unemployment is a lagging indicator. You can have an economic recovery without creating jobs. You cannot have jobs with first having an economic recovery.
Posted by: phx8 at November 4, 2011 6:37 PM”

Believe me phx8, as the next 12 months go by, we will see the MSM juggling the unemployment figures to show a drop, in order to benefit Obama. I predict the next numbers to be in the 8’s and within a year we will be to 7.9% and it will be a lie. And these bogus unemployment numbers will become the LEADING indicator to economic recovery. Government agencies are predicting no improvement in the unemployment numbers for the next year.

The economic collapse of America can be traced right to the door step of Barney Frank and Chris Dodd. I know the left goes nuts when Fannie and Freddie are blamed, but even Mayor Bloomberg, a liberal of liberals, finally admitted the collapse can be laid at the feet of Freddie and Fannie and Clintons AG who threatened to shut down any banks that did not make subprime loans:

“I hear your complaints,” Bloomberg said. “Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.

“But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and congress certainly isn’t going to blame themselves. At the same time, Congress is trying to pressure banks to loosen their lending standards to make more loans. This is exactly the same speech they criticized them for.”

http://www.capitalnewyork.com/article/culture/2011/11/3971362/bloomberg-plain-and-simple-congress-caused-mortgage-crisis-not-banks

Here are comments by McCain in 2008:

“McCain has labeled Freddie Mac and Fannie Mae as prime culprits in creating the financial storm that has roiled Wall Street and Washington.

“At the center of the problem were the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac,” he said last week in Green Bay, Wisconsin.

“Using money and influence, they prevented reforms that would have curbed their power and limited their ability to damage our economy,” he said. “And now, as ever, the American taxpayers are left to pay the price for Washington’s failure.”

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQIOOr9klOnE&refer=home

McCain is a RINO and part of the Republican establishment, and yet he understood the problem. But the real problem is that Congress (Democrats) have not learned a single lesson:

“Oct. 20 (Bloomberg) — The U.S. Senate adopted a measure that would raise the maximum size of a home loan backed by mortgage companies Fannie Mae, Freddie Mac and the Federal Housing Administration to $729,750.

Senator Robert Menendez, a New Jersey Democrat, offered the increase as an amendment to a spending bill today. The measure was approved less than a month after the limit on so-called conforming loans was automatically reduced to $625,500.

“If we want to get the economy moving, the housing market has to be part of it,” Menendez said tonight on the Senate floor.

The Senate adopted the amendment 60-31. The amendment required 60 votes for approval and was offered during the chamber’s consideration of a package of spending measures. If the Senate passes the underlying bill, the House would then have to vote for it to become law.”

http://www.businessweek.com/news/2011-10-21/senate-adopts-measure-to-increase-fannie-freddie-loan-limits.html

Hopefully, we have enough conservatives in the House to restore some sanity..

Posted by: Frank at November 5, 2011 11:14 AM
Comment #331523

Hopefully, we have enough conservatives in the House to restore some sanity..
Damn good thing we had all those conservatives to reaffirm in god we trust as our official motto republicans are a bunch of clowns.

Posted by: Jeff at November 5, 2011 12:19 PM
Comment #331524

Phx8: We Need 90,000 Jobs Per Month to Keep Pace With the Growth of the Population:

In an article on the June employment report the NYT told readers that the economy needs 150,000 jobs per month to keep pace with the growth in the population. Actually, the Congressional Budget Office projects that the underlying rate of labor force growth is now just 0.7 percent annually. This comes to roughly 1,050,000 a year or just under 90,000 a month.
Posted by: Adam Ducker at November 5, 2011 12:22 PM
Comment #331525

Frank: “Thank you Adam, but that quote was my own.”

Sorry for the misunderstanding. The quotes around your text threw me off a bit.

Frank: “Believe me phx8, as the next 12 months go by, we will see the MSM juggling the unemployment figures to show a drop, in order to benefit Obama. I predict the next numbers to be in the 8’s and within a year we will be to 7.9% and it will be a lie. “

How will the media juggle the numbers that BLS puts out? It’s already absurd enough when people claim BLS is fudging the numbers for whatever reason. Now you suggest that the media will spin figures themselves? Maybe you can expand on this idea because I’d like to talk more about it.

Every time I write about the BLS report I get people talking about revisions and lies by the government. What would be the point of lying about unemployment? Does anyone out there look at the number and say “Well shoot, I haven’t had a job in 3 years and my family is wasting away. But unemployment dropped from 9.1% to 9.0% so things must be pretty good?”

Posted by: Adam Ducker at November 5, 2011 12:33 PM
Comment #331526

These eye popping charts showing the percentage below peak levels tell you a lot about our current recovery. By the time Obama even took office this recession made anything Reagan faced look like a joke. That we’re even creating jobs at a pace of 125,000 per month given what we see about the depth of the recession seems to weaken the argument that we’d be doing much better with a different leader in the White House. Maybe that’s just me…

Posted by: Adam Ducker at November 5, 2011 12:50 PM
Comment #331529

jeff, “Damn good thing we had all those conservatives to reaffirm in god we trust as our official motto republicans are a bunch of clowns.”

The vote was taken outside of regular business hours. And since Obama had no idea what our national motto was, it’s probably good that it was passed and with a majority of Democrats too.


“WASHINGTON — Citing a crisis of national identity and mass confusion among Americans about their nation’s motto, the House on Tuesday voted on a resolution “reaffirming ‘In God We Trust’ as the official motto of the United States.”

The resolution, smaller than a law but bigger than a wish, is designed to clear up any confusion over the motto’s official status and to encourage schools and other public institutions to display it, said Representative J. Randy Forbes, Republican of Virginia and the measure’s sponsor.

“What’s happened over the last several years is that we have had a number of confusing situations in which some who don’t like the motto have tried to convince people not to put it up,” Mr. Forbes said in an interview.

“Some public officials have stated incorrectly that there are different national mottoes,” he added. “We heard the president make that mistake.” (Last year, President Obama cited “E pluribus unum” as the nation’s motto in a speech in Indonesia.)

“This is something I have paid a lot of attention to over the years,” Mr. Forbes said, pointing to discussions of the motto, which officially became that of the nation in 1956, throughout the last century in Congress. “If you look at the debates, they clarified that the motto had spiritual and psychological value.”

Mr. Forbes, along with the Congressional Prayer Caucus, beat back efforts to prevent “In God We Trust” from being engraved in the Capitol Visitor Center.

The resolution, which went through an expedited process requiring acquiescence of two-thirds of the House, passed 396 to 9, with all but one of the no votes coming from Democrats; two members voted “present.” The Senate had passed a similar measure in 2006 when Republicans controlled that chamber.”

http://www.nytimes.com/2011/11/02/us/house-of-representatives-affirms-in-god-we-trust-motto.html

Adam Ducker, I did not say the BLS would fudge the numbers, I said the MSM would. Tell me, if the MSM lied about the labor numbers, how many Americans would know it was a lie? How many people check the BLS numbers, and how many just depend on the MSM?

The left can spin the numbers all they want; but it won’t help the economy at all.

Posted by: Frank at November 5, 2011 7:08 PM
Comment #331538

Frank,

Read this rebuttal to Bloomberg: http://rortybomb.wordpress.com/2011/11/01/bloombergs-awful-comment-what-can-we-say-for-certain-regarding-the-gses/

You might pay particular attention to the fact that the majority of Republicans on The Financial Crisis Inquiry Commission (FCIC) rejected the argument on its face and actually were incredulous that the fourth member, Peter Wallison, was making the argument. Check out the emails where the Republicans were concerned that Wallison and the AEI consultant, Pinto, were on the take for even suggesting the argument.

Posted by: Rich at November 5, 2011 10:21 PM
Comment #331541

Rhinehold,
The non-farm payroll numbers and other numbers associated with unemployment are some of the most closely watched statistics in the world. Enormous amounts of money in the financial markets change hands based upon those statistics, and any knowledge about inaccuracies in those numbers would command an enormous financial premium, because it affects the price of debt instruments, the biggest financial markets in the world. A conspiracy to cook the unemployment numbers in order to make the administration look good is highly unlikely.

Posted by: phx8 at November 5, 2011 10:58 PM
Comment #331543

Frank: “Tell me, if the MSM lied about the labor numbers, how many Americans would know it was a lie?”

Why would they try to lie, first of all? Second, it’s not like the “MSM” is one unified body and would all just spin in lockstep. The major media outlets would never get away with such a thing and it’s fantasy to pretend otherwise.

Posted by: Adam Ducker at November 6, 2011 12:14 AM
Comment #331597

AD, you live in the fantasy land if you don’t believe there has always been a concerted effort by the mSM to control the politics in America. It don’t take much research to figure that one out.

Rich, typical leftist move; attack the messenger and not the message. The left loved the liberal policies of Bloomberg, until he said smoething they didn’t want to hear, and now he’s nuts. Great…

Posted by: Frank at November 6, 2011 11:00 PM
Comment #331598

Frank:

I disagree about the media controlling politics but leveraging control is light years away from the act of flat out lying about one of the most watched and talked about economic figures from the government. They absolutely would never get away with lying about it.

Posted by: Adam Ducker at November 7, 2011 12:00 AM
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