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A century and a half ago it was at the centre of the Californian gold rush, with hopeful prospectors pitching their tents along the banks of the American River.
Today, tents are once again springing up in the city of Sacramento. But this time it is for people with no hope and no prospects.
With America's economy in freefall and its housing market in crisis, California's state capital has become home to a tented city for the dispossessed.
The revised and upgraded unemployment figures released on Friday were nothing short of staggering: almost two million jobs lost in the past three months as the official unemployment rate rose to a quarter-century high of 8.1%. Nearly three million Americans are now officially unemployed for six months or more, while another 8.6 million are "working part time because they cannot find full-time employment." Just the previous day, the government released figures showing, not surprisingly, that food stamp recipients had also soared by another 700,000 in February -- 651,000 jobs had been lost that same month -- to a record total of 31.8 million.
While the nation’s economy flounders, business is booming for The GEO Group Inc., a private prison firm that is paid millions by the U.S. government to detain undocumented immigrants and other federal inmates. In the last year and a half, GEO announced plans to add a total of at least 3,925 new beds to immigration lockups in five locations. The Immigration and Customs Enforcement (ICE) agency and the U.S. Marshals Service, which hire the company, will fill the beds with inmates awaiting court and deportation proceedings.
What can $5 billion buy in Washington?
Quite a lot.
Over the 1998-2008 period, the financial sector spent more than $5 billion on U.S. federal campaign contributions and lobbying expenditures.
This extraordinary investment paid off fabulously. Congress and executive agencies rolled back long-standing regulatory restraints, refused to impose new regulations on rapidly evolving and mushrooming areas of finance, and shunned calls to enforce rules still in place.
Does anybody in the federal government know or could know “who, what, where and when” of the massive, complex, vertical, horizontal, global collapse of Wall Street and its planetary tentacles in over 100 countries abroad? Step forward if you exist! Uncle Sam needs you!
Is the multi-million dollar bailout of this financial mess and house of cards, this phantom wealth mummy hitting air beyond the federal governments’ salvage capability?
It is relatively easy to announce hundreds of billions of dollars of corporate rescue programs here and hundreds of billions of dollars of guarantees of corporate recklessness there and trillions of dollars of assorted stimulus, loan availabilities and foreclosure prevention initiatives in all directions. Now comes the rubber hitting the road.
A top UBS official told a Senate hearing on tax havens that the Swiss bank, which has been subpoenaed to turn over information on as many as 52,000 U.S. account holders, would not turn over the identities of possible U.S. tax cheats.
"UBS cannot disclose information to the IRS that would put its employees at serious risk of criminal prosecution under Swiss law," said Mark Branson, UBS' chief financial officer of wealth management.
"Because Swiss law prohibits UBS from producing responsive information located in Switzerland ... we believe that UBS has now complied with the summons to the fullest extent possible without subjecting its employees to criminal prosecution in Switzerland." Branson said.
Treasury Refuses to Identify Banks Taking $2.2 Trillion Taxpayer Bailout Bucks
Fed Refuses to Release Bank Data, Insists on Secrecy
By Mark Pittman and Craig Torres | Bloomberg
Here's how a typical TALF deal would work: A hedge fund uses $1 million of its own money and gets a $9 million loan from the Fed, payable after three years, to buy a $10 million asset-backed security, which finances consumer loans. Hoping that the market for these assets recovers, the hedge fund would hold the asset for three years.
If the security rises in value to $11 million, the investor would keep the profit, essentially doubling the initial investment. The government, meanwhile, would consider the deal a success because consumer lending was spurred.
If the value fell below $9 million, the hedge fund would lose its down payment but nothing more. The Treasury, using bailout funds approved by Congress, would cover the next set of losses, with the Fed ultimately on the hook for anything more.
There's a $700 trillion elephant in the room and it's time we found out how much it really weighs on the economy.
Derivative contracts total about three-quarters of a quadrillion dollars in "notional" amounts, according to the Bank for International Settlements. These contracts are tallied in notional values because no one really can say how much they are worth.
But valuing them correctly is exactly what we should be doing because these comprise the viral disease that has infected the financial markets and the economies of the world.
World Bank Group leaders said the United States and China should balance out their economic dysfunctions, which are paradoxically dissimilar.
Referring to the Group of 20 industrialized nations, World Bank Group President Robert Zoellick and its Chief Economist Justin Yifu Lin, in a report published in The Washington Post Friday, said "without a strong G-2, the G-20 will disappoint."
The United States, Lin and Zoellick said, "must rebalance saving and consumption. It cannot afford a return to the days of maxing out credit cards to finance unfettered consumption. It must regain control over expanding budget deficits, which are driven largely by entitlement spending," the article said.
On Wednesday, the Obama administration released guidelines on its plan to stem the collapse of the housing market with its "Making Home Affordable" initiative, or Homeowner Affordability and Stability Plan (HASP). The plan claims to offer "assistance to as many as 7 to 9 million homeowners."
Part of the program, costing $75 billion, pertains to private lenders, providing funds to them if they agree to renegotiate home loans. A separate $200 billion component will make funds available to Fannie Mae and Freddie Mac, the two federally-backed mortgage lending giants, so that they can modify a share of the home loans they control.
The U.S. Financial System Is Effectively Insolvent
Nouriel Roubini | Forbes | Submitted by Peter Trottam
For those who argue that the rate of growth of economic activity is turning positive--that economies are contracting but at a slower rate than in the fourth quarter of 2008--the latest data don't confirm this relative optimism. In 2008's fourth quarter, gross domestic product fell by about 6% in the U.S., 6% in the euro zone, 8% in Germany, 12% in Japan, 16% in Singapore and 20% in South Korea. So things are even more awful in Europe and Asia than in the U.S.
Fresh off a U.S. victory over Swiss bank UBS AG, which admitted in a recent plea deal with the Justice Department that it aided tax evasion by wealthy American clients, Congress and the White House are trying to press a wider crackdown on the lucrative tax haven business.
UBS last month agreed to pay $780 million in fines as part of a deferred prosecution agreement with federal prosecutors. The bank is outing clients attached to about 250 accounts that the Justice Department alleges were set up as shell entities in tax avoidance schemes. The bank admitted to violating regulations set under a treaty that requires banks to submit information about their U.S. clients' tax obligations.
Last year, the Government Accountability Office reported that cost overruns on the Pentagon's 95 largest weapons acquisitions system totaled about $300 billion, even though the government cut quantities and reduced performance expectations. "A train wreck is coming," McCain said at a hearing yesterday on the bill.
A bill to end cost overruns in major weapons systems would create a powerful new Pentagon position -- director of independent cost assessments -- to review cost analyses and estimates, separately from the military branch requesting the program.
"AIG is a huge, complex, global insurance company, attached to a very complicated investment bank hedge fund that built -- that was allowed to build up without any adult supervision, with inadequate capital against the risks they were taking, putting your government in a terribly difficult position," Geithner said. "And your government made the judgment back in the fall that there was no way that you could allow default to happen without catastrophic damage to the American people....On Monday, AIG announced a loss of $61.7 billion for the fourth quarter of 2008, the biggest quarterly corporate loss in U.S. history. The federal government simultaneously announced that it would once again restructure the terms of the AIG bailout, which began in September and had grown to a $152 billion total package."
Bair Says Insurance Fund Could Be Insolvent This Year (Update1)
By Alison Vekshin | Bloomberg
Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.
“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.
Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.
So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.
Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.
By Dave Lindorff
The futility and stupidity of the Fed’s and the Obama administration’s policy of pumping ever more money into failing banks and insurance companies in a vain effort to get them lending again was demonstrated—if anyone was paying attention—by the collapse in auto sales this past month, with all the leading companies, Ford, GM and Toyota, reporting sales down by about 40%.
This fall off in car buying was despite record discounting by the auto industry, and offers of 0% financing.
Clearly, obtaining financing is not the reason people are not buying cars.
People are not buying cars because they are worried about having a job to enable them to pay back the loan.
The budget battle being waged in cities and towns across Massachusetts reached the front lines last week, when a soldier serving his third tour of duty in Iraq received his pink slip.
NewsCenter 5’s Kelley Tuthill reported that Leo Pike, who was deployed to Iraq again in September with the Navy Reserves, opened his mail Thursday and learned that he will be losing his job as a New Bedford firefighter.
“He loves being a firefighter,” said Pike’s fiancée Renee Garbitt. “He loves his job and he says that he’s one of those people that’s happy to go to work every day.”
Garbitt, who is raising their 2-year-old son, Leo, on her own while Pike is deployed over seas, said that the layoffs were enacted with little consideration for the disadvantages the family would face as a result of Pike’s military service.
“He’s going to have to come home to no job and, now, competing with 76 others who have had quite a head start on him,” Garbitt said.
Obama seeks major change in federal contracting
By Phillip Elliott | Yahoo!News
President Barack Obama approved an order Wednesday to overhaul the way the U.S. government awards contracts for work to be done by the private sector, reversing a Bush administration policy.
Obama joined Republican Sen. John McCain, his presidential campaign rival, and other congressional figures to announce an executive memorandum that commits his administration to a new set of marching orders for awarding contracts. Obama said "the days of giving government contractors a blank check are over" and said changes could save up to $40 billion a year.
One area in particular that is targeted is no-bid contracts, which the administration is seeking to change so that there will be more competition for government-paid work.
"Even if these were the best of times, budget reform would be overdue in Washington," Obama said.
By Corporate Crime Reporter [reporting what Chairman Conyers should be reporting himself but is apparently afraid to]
President Obama’s White House made crystal clear this week: a Canadian-style, Medicare-for-all, single payer health insurance system is off the table.
Obama doesn't even want to discuss it.
Take the case of Congressman John Conyers (D-Michigan).
Conyers is the leading advocate for single payer health insurance in Congress.
Last week, Conyers attended a Congressional Black Caucus meeting with President Obama at the White House.
During the meeting, Congressman Conyers, sponsor of the single payer bill in the House (HR 676), asked President Obama for an invite to the President’s Marchy 5 health care summit at the White House.
[Note for TomDispatch readers: Not to be missed -- the Nation Institute, which so nobly supports TomDispatch.com, Nation Books, and Alternet are co-hosting a panel discussion, "Meltdown: The Economic Collapse and a People's Plan for Recovery," with an all-star cast that includes Katrina vanden Heuvel, Joseph Stiglitz, Barbara Ehrenreich, Jeff Madrick, Bill Fletcher, Jr., and Christopher Hayes. Some of them should be consulting for the Obama administration in place of Tim Geithner, Larry Summers et al. instead of offering us their thoughts for free at 8 pm this Friday at 2 West 64th Street in New York City. Doors open at 7:15, first come, first served.]
Back in December, I wrote about the layoffs -- what a polite word for a terrible act -- then coursing through book publishing, my own business of more than 30 years. "When you get the word," I commented, "the call, the notice that you're a goner, or when your little world shudders, that's something else again. Even if the call's not for you, but for a friend, an acquaintance, someone close enough so you can feel the ripples, that can do the trick."
Supporters of Single Payer Health Care will rally this Thursday at noon in Lafayette Square. Can you be there? Pass it on, and bring friends!
Want to restore jobs and stimulate the economy? A new study (pdf) released by the California Nurses Association says that establishing a national single-payer healthcare system would do both — in addition to providing health insurance for 47 million uninsured individuals.
According to the study, expanding Medicare to include the uninsured, and those on Medicaid or employer-sponsored health plans, and expanding coverage for those with limited Medicare, would have the following immediate impacts:
On Thursday, the U.S. House of Representatives postponed helping homeowners and the economy by delaying action on a crucial bill (H.R. 1106). Please take the time to tell them the only way to get the economy back on track is to stop foreclosures.
For each day that Congress delays this vote:
* Another 6,600 families lose their homes.
* More families living near foreclosed properties see their home values drop.
* More senior citizens lose their life savings.
* More families can't send their children to college because they have lost their home equity.
* Towns and cities lose tax revenue and struggle with the extra costs of dealing with vacant properties.
* Economic recovery remains that much more out of reach.
TELL YOUR REPRESENTATIVE TO STAND UP FOR ORDINARY AMERICANS AND VOTE FOR H.R. 1106. DON'T WEAKEN IT. SUPPORT ENACTMENT NOW.
Why is Geithner dithering? Because he is asking the wrong question. The question he is posing is: how can the government save Citigroup? The right question is: how can the government rebuild the banking system?
President Obama deserves immense credit for being willing to spend serious money to prevent recession from becoming depression. He has resisted pressures from fiscal conservatives to put budget balance first, or to make social insurance bear the brunt of spending cuts down the road. And he has used his gifts as a teacher to enlist the broad support of the American people for a far-reaching strategy of public investment.
These days, the way executives make money instead is in the form of bonuses for years where they bring in a lot of return (and often times for years they don't), but the threat of being fired for too much risk taking is minimal. The more risk you take, the more money everyone makes. And it's not the partner's money you're playing with anymore. You're playing with house money. No one is minding the store anymore....These executives did not actually fail. They succeeded wildly. It's just that they had a different goal - to take home as much money as they possibly could for themselves. Mission accomplished!
“The Last Picture Show”: President Barack Obama’s Fiscal Year 2009 Budget
by Richard C. Cook
Greenbacks and programs like the Alaska Permanent Fund are part of what I call Dividend Economics. It’s why I’ve proposed the “Cook Plan,” which would be a system of vouchers for the necessities of life in the amount of $1,000 a month for any adult citizen who applied. A smaller amount would be provided as an allowance for children.
The vouchers would be taxed like any other income and would supplement other entitlements such as unemployment compensation, Social Security, etc. But taxes would be low for those who would use the vouchers as a main source of income. Under the plan, the vouchers would then be accepted as deposits at a new network of community savings banks that would lend at one percent interest to consumers, students, small businesses, local manufacturing establishments, and family farms.
Systemic Failure: Capitalism "Lays An Egg"
by Stephen Lendman
After the 1929 October 24, 28 and 29 market crash, the weekly entertainment industry magazine Variety (on October 30) published its most famous ever headline: "Wall Street Lays an Egg." In October 2008, history repeated, and since the October 2007 peak, equity prices plunged over 50% after the Dow and S & P (in February) posted their second worst ever monthly percentage declines - topped only in 1933 during the depths of the Great Depression. So far, the current market drop matches its 1929 - 1932 pace, and like then, shows no signs of abating.