Friday, February 11, 2011
General Economic News Feb. 7 - 11
News
FRIDAY
Postal Service warns of default as losses mount
The U.S. Postal Service warned Wednesday that it may default on some of its financial obligations later this year after reporting yet another quarterly loss.
Feds Propose New Non-Bank Regulations
U.S. Regulators edged closer on Tuesday to defining which companies, other than banks require more government scrutiny under the Dodd-Frank financial reform law.
Rise in Rates Is Headwind for Housing
U.S. 30-year mortgage rates have jumped above 5% for the first time since last spring, in a rapid rise that could present a challenge to the still-troubled housing market.
Treasury plan would end Fannie, Freddie
The Obama administration on Friday laid out initial recommendations for reforming the U.S. housing market, including by dramatically scaling back the government’s future role and eliminating Fannie Mae and Freddie Mac, the federally supported companies that nearly collapsed under the weight of soured subprime mortgages in 2008 and required a $150 billion taxpayer bailout.
New York Stock Exchange poised to become German-owned
A potential merger would make a German company majority owners of the New York Stock Exchange, the symbolic headquarters of American capitalism.
Consumer Sentiment in U.S. Increases to Eight-Month High
Confidence among U.S. consumers increased in February to the highest level in eight months, a sign falling unemployment and rising stock prices may be comforting households.
Buffett Tells FCIC It's Powerless to Stop `Too Big to Fail'
Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., told the Financial Crisis Inquiry Commission that taxpayers will always be on the hook for collapses at the biggest U.S. companies.
Grim reaping
A lack of rain in China threatens to send wheat prices even higher.
Spread the wealth
The impressive growth figures of resource-rich African countries are not all good news.
THURSDAY
How Fannie and Freddie let the banks off easy
Imagine depositing your paycheck at the local bank each week only to have the bank lose your money, but never face any consequences.
GOP critic calls Joe Biden's $53 billion high-speed rail plan 'insanity'
Vice President Joe Biden Tuesday proposed that the US government infuse $53 billion into a national high-speed rail network. The announcement was met immediately by deep skepticism from two House Republicans that could be crucial to the plan's success, raising questions about whether it can clear Capitol Hill.
Foreclosures are falling - but it's a fake out
Foreclosure filings plunged in January, but don't shake those pom-poms yet. It's strictly a fake out.
House rejects Republican effort on UN funds
Vote marks 3rd straight embarrassment for new House GOP leadership.
Avoiding foreclosures: More states give help to homeowners
A $7.6 billion federal effort to help unemployed homeowners avoid foreclosure will soon be running in all 18 states sharing the funds.
Ethanol pumping up food prices
Get ready for higher food prices, which appear to be just around the corner for U.S. consumers and potentially a crippling burden for the world's poor.
With Fannie & Freddie on the Chopping Block, Lobbyists and Tea Party at Odds
Congressional Republicans face a collision of interests between free-market purists and Big Business.
Deutsche Boerse Deal With NYSE Signals New Wave of Mergers
The biggest day ever for mergers of securities exchanges triggered rallies in shares of operators from New York to Sydney and Sao Paulo as derivatives overtake stock trading as the drivers of growth.
Home sales grow, aided by stabler prices
Home sales volume rose sharply in the final three months of 2010, aided by more stable prices on a year-over-year basis, a real estate industry group said Thursday.
WEDNESDAY
Fannie and Freddie phase-out plan due
The Obama administration will issue a proposal later this week recommending the gradual elimination of government-sponsored mortgage backers Fannie Mae and Freddie Mac, a White House official said Wednesday.
Obama's Big, Bold Bet on High-Speed Rail
Six weeks ago, I warned that President Obama's much maligned high-speed-rail program was becoming a " high-stakes gamble." Well, the President just went all in.
30% of mortgages are underwater
Sometime, somehow, the foreclosure crisis will ease. But probably not anytime soon.
Food inflation isn't in every grocery aisle
It's getting more expensive to eat around the world. But there are bright spots -- a few food staples have remained relatively steady in price even as inflation sweeps the globe.
Home heating assistance seen at record high
8.9 million households are expected to qualify for financial help this winter.
Geithner Says U.S. Economy Getting `Stronger,' More Confident
Treasury Secretary Timothy F. Geithner said today that the U.S. economy is “getting stronger” and companies are starting to hire again.
House Panel Plans Scrutiny of `Excessive Burdens' in Swaps Rules
The House Agriculture Committee will work to ensure Dodd-Frank Act rules for derivatives trading “do not impose undue or excessive burdens” on financial markets, according to a draft of the panel’s oversight plan.
TUESDAY
Small Business Confidence Hits 3-Year High in January
Confidence among small U.S. business owners rose to a three year high in January, but concerns about sales saw owners remain cautious about hiring and spending plans, a survey showed on Tuesday.
Homeowners face 'new normal' in housing bust
Life has changed in ways big and small in this central California county, which is still trapped in the wreckage of a housing boom that went bust five years ago.
Business leaders list the red tape they want cut
Asked last year by a key Republican lawmaker to weigh in on the regulatory barriers businesses face, more than 100 companies and industry groups have returned a litany of complaints about federal red tape.
Cash Buyers Lift Housing
Bargain Hunting Boosts Prices in Depressed Cities; Broader Asset Rebound Spreads
Let's make a deal! Mergers are back.
Merger activity is off to a frenzied start in 2011. Thomson Reuters said this morning that the value of takeovers worldwide was $351.6 billion in the first few weeks of the year, up 78% from the beginning of 2010.
Starving Charters
A new study shows the funding bias against non-traditional schools.
Foreclosures Raise U.S. Economic Stress
The nation's economic stress inched up in December because higher foreclosures outweighed lower unemployment, according to The Associated Press' monthly analysis.
FDIC seeks delay in bonuses for top bank execs
Federal regulators have proposed making top executives at large financial firms wait at least three years to be paid half of their annual bonuses, a move designed to cut down on risky financial transactions.
Obama’s anti-loophole call gets clean-energy exception
One week after he called on lawmakers to close tax-code loopholes that benefit specific industries, President Obama proposed one of his own — a tax break aimed at spurring the development of energy-efficient commercial buildings.
Study: Card Issuers Face $25 Billion Revenue Hit
New card regulations could cost U.S. card issuers up to $25 billion a year in lost revenue, according to a study from Boston Consulting Group that is one of the first to add up the total cost of various regulatory changes.
MONDAY
Obama to address business lobby
After months of trying to pin down a time that works for both parties, President Obama will march out of the White House on Monday morning and make his way across H Street to the headquarters of the U.S. Chamber of Commerce.
Egypt feels the cost of protest
A report released Friday estimates that Egypt is losing $310 million daily from the protests. On Cairo streets, concerns range from tomato prices to the future of tourism and jobs.
Super Bowl ad message: Recession's over, start spending!
The recession is officially over -- or at least, that's the message from Super Bowl advertisers this year.
Mortgage modifications part of Countrywide settlement
Mortgage modifications, restitution, and relocation aid part of $6.5 million settlement to help Countrywide's foreclosed homeowners.
Economic Reports for the Week
Scheduled for this week are consumer credit data for December (Monday); weekly jobless claims and wholesale trade inventories for December (Thursday); trade deficit for December and the Thomson Reuters/University of Michigan consumer sentiment index (Friday).
America's wealthy turn less charitable
For charities hoping to land a big gift from one of America's wealthiest individuals, 2010 was a very bad year.
Big Banks Could Get Pinched With Deposit Insurance Costs
Mega-banks will have to pay more for U.S. deposit insurance under a new regulation set for final approval on Monday as the government advances a boatload of financial oversight changes.
Economist Comments
FRIDAY
Republican says government shutdown possible, as House GOP work to bridge divisions
A top Republican on the House Appropriations Committee says that the fight to cut spending could lead to a government shut down.
Meaningful patent reform a must
The strength of our economy relies on our ability to protect new inventions and build on innovation. Whether it’s a mousetrap in your home, an iPad in your hand or a pacemaker in your heart, intellectual property plays a critical role in our daily lives and the global economy.
In a State of Sticker Shock, Stores Try to Sell Public on a Radical Idea
Michigan May Abolish Price-Tag Rule; 'It's a Real Pain in the You-Know-What'
THURSDAY
The Range Fuels Fiasco
A case study in the folly of politically directed investment.
Homes more affordable, but don't expect a rebound
Despite a flurry of positive data on the housing sector, it's still too early to bank on a comeback.
Cutting Spending to Revive Federalism
Republicans can start a national debate about the proper role of the federal government.
WEDNESDAY
BACON: Leeches of the world, unite!
Failure to stop bloodsucking now will endanger constituents later.
Cost of Driving: How Much Taxpayers Are Actually Paying
Not only are gas prices rising, but every year consumers pay big for medical and insurance costs, they lose hours -- and sometimes days -- stuck in traffic, and on average pay more than $100 in fuel taxes.
TUESDAY
RAHN: Destructive economic myths
Supposed ‘truths’ are toppling America’s financial success
Obama’s Keynesian failures must never be repeated
Mr Obama’s Keynesian experiment amounted to little more than an exercise in the redistribution of wealth from our grandchildren, to today’s special interest groups. Those responsible owe them some answers.
FEULNER: Dodd-Frank: A costly way to help
Government’s intervention is more bad than good.
Destructive Economic Myths
Wildly inaccurate statements from news commentators, financial analysts, politicians and even administration officials have most people believing that if Congress does not increase the debt limit in March, the U.S. government will default on its debt obligations, thus ending the government's ability to borrow. Nonsense.
Yes, They're Overpaid
Taxpayers should recognize that bureaucratic inefficiencies like excessive pay are part and parcel of large government. Reform of the pay system is important and necessary, but ultimately the best means of reducing excessive federal paychecks is to reduce the size of the federal government.
Fannie, Freddie Debate: What to Expect
Congress is about to begin addressing the long-overdue issue of housing-finance reform this week, but don't get too excited: It's probably going to take several years before anything meaningful gets done about the two giant gorillas in the housing-finance debate - Fannie Mae and Freddie Mac.
MONDAY
Made in the USA
US manufacturing still tops China’s by nearly 46 percent.
NUGENT: Social Security: Anti-social and insecure
Sinking it now is best for America in the long run
Giving Hamp the Hook
Treasury's mortgage foreclosure relief program is a bust.
Egypt Needs Free Enterprise More Than Democracy
As Egyptians struggle to throw off the yoke of dictatorship the world watches and wonders, what comes next?
It’s time to end welfare for farmers
All of the Capitol Hill chest-thumping about spending cuts masks a fundamental paradox: how will Republicans make serious cuts in the entitlements their constituents love — and their local economies depend upon? Specifically, will Congressional Republicans (many of whom come from rural states and districts) make substantial cuts to farm subsidies?
Blogs
FRIDAY
Housing Seizures Rise
Any discussion about house prices ends up dwelling on the "shadow inventory"--the backlogs of houses that really need to be sold, but nonetheless aren't on the market. There are the owners who want or need to move, the banks who are too overwhelmed to foreclose on everyone who's behind, and the bank-owned houses that haven't been put on the market yet because what's the point when there are four other foreclosures for sale on the same block? As prices tick up, those houses will be put on the market--which will, of course, depress prices again.
Psst
Thinking about the micro of macro like this may help us understand the jobless recoveries of recent recessions. Could it be that it is not the recovery that is so different but the boom and bust that preceded it?
Lists: Ranking Economic Data
Here is a first cut at ranking economic data. These lists are not exhaustive (I'm sure I left a few off), and the rankings are not static.
State Department Circumvents Congress on $100 Million UN Upgrade
George Russell at Fox News recently reported on the State Department’s decision to let the United Nations keep $100 million in overpaid U.S. contributions to use for “security enhancements” rather than return it to the U.S. taxpayer
Hidden costs of light rail
Are there additional energy costs of running a light rail that don't get measured?
Even in Canada, rise in home prices is slowing
Canada home prices are rising about 5 percent a year, while home prices are falling in the US.
THURSDAY
Should the NYSE Be Allowed to Merge?
Call it the World Stock Exchange. And be afraid.
Enduring Problems of Foreign Aid
As Americans begin to question the wisdom of interfering politically (via aid) in Egypt, recent unrest in Pakistan highlights other troublesome dynamics that emerge with the dispersal of U.S. foreign aid.
Government workers don't need unions
Pushback against public-sector unions would simply make the always-unfair fight over the fiscal commons slightly less unfair, and make fiscally prudent policy slightly less unlikely.
Secretary Sebelius Will Not Find the Right Formula to Fix CLASS
According to Health and Human Services (HHS) Secretary Kathy Sebelius, the design of the Community Living Assistance Services and Supports (CLASS) program has basic flaws, but the bureaucracy will fix those flaws with hard work and deep thinking. Sebelius spoke on the CLASS program on Monday at a Kaiser Family Foundation briefing, and she outlined the Obama Administration’s updated technocratic thinking on this new government-run, long-term care entitlement created under Obamacare.
Fast Train to Nowhere
Who’s policing ‘Amtrak Joe’ Biden’s rail boondoggles?
WEDNESDAY
The Wallison Dissent
If the housing and mortgage crisis drags on past 2013 or so, I would view that as a strong indication that Wallison and Pinto have uncovered something very important. In any case, his dissent is a significant document. I am not saying that it is the final word on the subject. But no one should dismiss his views without first reading his paper.
Small businesses hunker down for economic winter
Small business optimism is slightly up, but owners are still waiting to see more significant signs of growth.
TUESDAY
President Delivers Same Zero-Sum Message on Jobs to U.S. Chamber
In his speech at the U.S. Chamber of Commerce yesterday, President Obama tried to make nice with U.S. business. While the speech contained some positive elements about promoting trade and a lower corporate tax rate, the president also pounded the tired theme that we are locked in a battle with other countries over a fixed number of jobs.
Credit-Card Debt Up for First Time Since 2008
Americans’ credit-card debt rose for the first time since 2008, a possible sign they are growing more confident about the economy and opening their wallets wider.
Cost Overruns at the National Archives
A new report from the Government Accountability Office finds that the National Archives and Records Administration’s Electronic Records Archive project is headed for major cost overruns. Initiated in 2001, the project was originally projected to cost $745 million but could end up costing $1.4 billion. The project’s development phase was supposed to be completed by September, but the GAO estimates that it won’t be completed until 2017.
Which Parts of Stimulus Worked Best?
Economists trying to figure out how stimulative the stimulus package that Congress approved in early 2009 was have got bogged down in the sort of problem economists are always getting bogged down in: There’s no way to know what the world would have looked like sans stimulus.
Four Reasons Why Big Government Is Bad Government
A new video from the Center for Freedom and Prosperity gives four reasons why big government is bad fiscal policy.
Paper, it doesn't look so good on paper.
The commercial paper market has historically been affected by financial crises, and this one is no exception.
Small Business Confidence Up to Pre-Recession Levels
In another sign of steady, if modest, improvement in the economy, the National Federation of Independent Business announced that their small business optimism index increased by 1.5 points to 94.1 last month. Though this is still way below trend levels, it's the highest level the index has seen since December 2007, the official beginning of the recession.
MONDAY
National debt: Whom does the US owe?
The US is indebted mainly to ... Americans. Still, foreigners hold about 47 percent of the national debt, with China and Japan owning the biggest chunks.
Today's great businesses will die off like the dinosaurs
Governments don't like it, but capitalism creates and destroys businesses.
SEC's Own Books are A Mess
This is not an issue of malfeasance; it's an issue of competence. But give that the competence at issue is supposed to be, um, the core competence of the SEC, this is a mite worrisome.
Unofficial Problem Bank list at 946 Institutions
Here is the unofficial problem bank list for Feb 4, 2011.
Cataloging Improvements in Americans’ Living Standards
Reprise here two posts from January 2006 in which I compare Sears-catalog offerings from 1975 to products available in 2006.
New Paper on ‘The Effects of Fiscal Stimulus’ Looks at Cash for Clunkers
Did Cash for Clunkers work?
Why Wal-Mart Is the Embodiment of Economic Stimulus
To transact with Wal-Mart or any other business entity is ultimately a voluntary act, and as such, Wal-Mart should be allowed the opportunity to set up shop wherever it desires. That its continued growth will expand the range of goods within our reach in concert with a more efficient deployment of capital makes plain that its continued good fortune will be economically stimulative too.
Reports
FRIDAY
Time to End Obama’s Costly High-Speed Rail Program
President Barack Obama’s high-speed rail program promises to spend hundreds of billions of dollars in federal and state funds to provide mediocre passenger rail service to an extremely small fraction of travelers. In this time of tight budgets, neither the federal government nor the states can afford such extravagance. Instead of creating a heavily subsidized, underutilized passenger rail system, Congress and the Administration should promptly end the program and use the recovered funds to reduce the federal budget deficit.
End Fannie Mae and Freddie Mac to Build Tomorrow's Housing Finance System
The era of Fannie Mae and Freddie Mac is over, and it is time to formally close them down.
THURSDAY
Economics Group
MONTHLY OUTLOOK
The Lost Cause: The Failure of the Financial Crisis Inquiry Commission
It should not have been difficult for the Financial Crisis Inquiry Commission to identify the causes of the
financial crisis. Everyone on the commission, and everyone interviewed, believed that the crisis was caused largely by the losses to financial institutions arising from the high rates of delinquency and failure among subprime and other low-quality mortgages in the 1997–2007 housing bubble. Where the commission lost its way was in its refusal to inquire why so many subprime and other weak mortgages were created in the first place—why, in other words, there was such a significant deterioration in mortgage underwriting standards in the years before the bubble’s collapse. Without an answer to this question, the commission could only produce a narrative about the financial crisis, not a coherent description of what caused the financial crisis.
Did the Stimulus Stimulate? Real Time Estimates of the Effects of the American Readjustment and Recovery Act
We use state and county level variation to examine the impact of the American Readjustment and Recovery Act on employment. A cross state analysis suggests that one additional job was created by each $170,000 in stimulus spending.
WEDNESDAY
Best Practices For Public Pension Transparency
The underfunding of public pensions, and the threat this poses to the fiscal solvency of cities and states, has emerged as an urgent policy concern. But pension accounting rules are so convoluted that many lawmakers are themselves in the dark about the true costs of the unsustainable pension promises they’ve made. This report recommends five steps that public pension plans could take that would disclose their finances more fully. This would clarify the magnitude of states’ total accrued liabilities and their annual impact on budgets. Making this information available is the first step in helping states adopt policies that would save taxpayers money in the long run.
MONDAY
Economics Group
Weekly Economic & Financial Commentary
Urban Transportation Policy Requires Factual Foundations
The 2010 Heritage Foundation report “Washington’s War on Cars and the Suburbs” disputed Transportation Secretary Ray LaHood’s claims that public transit produces substantial economic benefits, consumes only one-fifth the energy of cars, and saves billions in other costs. The author of the 2004 American Public Transportation Association report, Todd Litman, has taken issue with “Washington’s War.” The following paper is a response to Litman’s recent claims—and finds that new rail transit systems have not attracted drivers from their cars for commutes; transit funding increases are far out of proportion to any increase in ridership; transit attracts few drivers because of its limited competitiveness with the car; and the purported cost benefits have been exaggerated. Wendell Cox explains how outdated numbers and ambiguous definitions form the basis of today’s urban transportation policy.
