Story here, and the actual data.

Reader @spectagirl just tweeted us a link to a job listing at an LA architecture firm, which has an interesting note under "Compensation":

The bad news is we can't pay you what you're worth. The good news is you can stay in the profession, advance your skills, and have an opportunity to grow with us as the market recovers.

Well, at least they're honest. Perhaps applicants will feel lucky the job pays anything. These days many people work for free -- or even pay -- for an internship that gives them a small chance at establishing a career in their field of choice.

Yesterday on the podcast we talked about how the Great Depression gave us the long-term mortgage. In the years following, thanks to major government intervention, we became a nation of homeowners. There are still people who make it all the way through a 30 years and burn the mortgage but the numbers are declining. I've been struggling to figure out whether that's good or bad.

Continue reading "Should We All Burn Our Mortgages?" >

Processing facilities at the Athabasca Oil Sands in Alberta thedarkerside.to/flickr

 

If the American Clean Energy and Security Act passes through the Senate, it could be bad news for the Alberta oil sands.

In Alberta, Canada, there's thought to be more oil buried underground than in the whole of Saudi Arabia. Alberta's oil sands can be processed to yield billions of barrels of oil, and many believe that they could be key to providing North America with energy security and independence -- the sands now are now the top provider of oil to U.S.

But the oil is dirty. Really dirty. And the House version of the climate bill calls for largely increased tariffs on environmentally-unfriendly goods and commodities, which this oil easily falls into. President Obama has warned against this sort of environmental protectionism, but it looks like the Senate may be facing a decision between environmental safety and energy security in the coming weeks.

While Congress gets ready to talk financial regulation reform, the regulators continue to push and shove behind the scenes. There are so many regulators and none of them want to lose any power in the deal.

The Supreme Court ruling yesterday handed the states a victory in this ongoing battle. It said a state attorney general can demand information from federally regulated banks. This may seem like a small victory but it is vindication for state regulators. National regulators say it's a big mistake.

Continue reading "States Win Round of Regulatory Turf War" >

Even after he scammed millions from investors, some people still heart Conrad Black. gordasm/flickr

 

Bernie Madoff, who was sentenced to 150 years in prison yesterday, may be the mastermind behind America's biggest Ponzi scheme, but he's certainly not the only person to run a scam for millions of dollars. Financial corruption has been around as long as people have been making money. And some of the corrupt have had some pretty quirky personalities.

Continue reading "Flamboyant Financial Felons" >

In the wake of Bernard Madoff's sentencing yesterday, the AP reports that federal authorities have begun an investigation into ten of Madoff's associates. Up until now, only two people have faced criminal charges -- Madoff himself, and an accountant, David G. Friehling, who is accused of aiding in the fraud. There are no details on who the ten are, but it appears the circle of blame for the massive Ponzi scheme is about to get wider.

A crowd gathers for Bernard Madoff's sentencing. Timothy A. Clary/Getty Images

 

On today's Planet Money:

-- Does anyone really pay off a 30-year mortgage? NPR's National Desk Editor Steve Drummond asked Chana Joffe-Walt to find out, and after some digging, Chana found a couple that did just that. Tamar and Chris Pearsol of Seattle share the story of their mortgage.

-- Bernard Madoff's 150 years prison sentence is the big news of the financial world today, but is there anything new to say about Madoff? Curt Nickisch, of NPR member station WBUR in Boston, says so. The citizens of his hometown view today's events with a particular pride, Nickisch says, since the man who first alerted the world to Madoff's ponzi scheme was their own Harry Markopolos.

Bonus: Comments of the day, from the blog.

Download the podcast; or subscribe. Intro music: The Detroit Cobras'"Bye Bye Baby." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Paying It All Back" >

The Times reports that Bernie Madoff has been sentenced to 150 years in prison for being the mastermind behind a giant Ponzi scheme. Federal Judge Denny Chin called his crimes "extraordinarily evil." Our math genius David Kestenbaum says the sentence is about one day in prison for every $1.2 million of fraud in the $65 billion scheme.

Bernie Madoff, the villain in the nation's largest Ponzi scheme, faces his fate today as he learns his sentence. Federal Judge Denny Chin could sentence the 71-year-old Madoff to as many as 150 years. Last week, Madoff's lawyer told Chin that a prison term of twelve years would be a fitting punishment for the crime, but many of Madoff's victims say they'd like to see him behind bars for the rest of his life.

The Congressional Budget Office has put out its latest calculation of the loss taxpayers will take on the TARP bailout.

CBO estimates that the subsidy cost of the transactions (broadly speaking, the difference between what the Treasury paid for the investments or lent to the businesses and the market value of those transactions, including repurchases of preferred stock) amounts to $159 billion.

The automobile bailouts look particularly grim. Of the $55 billion that went out the door, CBO expects $40 billion will never be returned. Table 1 has a full breakdown.

These numbers obviously have some caveats. No one knows what will happen to GM in bankruptcy. And other loss estimates depend on the market value of mortgage-backed-bonds. Those could go up. Or down.

The CBO doesn't expect any of the bailout efforts to make money for the taxpayer, despite the fact that Treasury has sometimes called them "investments."

Empty stores along Pico Boulevard in Los Angeles. S. Ira Grossman

 

On today's Planet Money:

Special guest host Lisa Chow of WNYC shares the story of a major pension scandal here in New York. Two placement agents, who essentially act as brokers between pension funds and Wall Street, are accused of taking kickbacks in return for providing special access to the state's pension fund. With the help of former comptroller Carl McCall, Chow explains why the relationship between private equity and pension funds is ripe for corruption.

The case has put a spotlight on the relationship between private equity and pension funds and it's raising all kinds of concerns beyond corruption. Since these funds are private, taxpayers don't know where the pension money is actually going. So what happens to the retirement of firefighters and garbage collectors if the private equity bubble pops? NYU Stern School of Business Professor Roy Smith explains how the two got together in the first place.

Bonus: A recession-worthy lunch deal in Paris.

Download the podcast; or subscribe. Intro music: The Pains of Being Pure at Heart's "Young Adult Friction." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Private Equity, Public Money " >

Back in May, we wondered if American consumers might have too many choices. Well, it looks like some companies think so. The Wall Street Journal [subscription req'd] reports that some of the nation's largest retailers, like Wal-Mart and Rite Aid, will be cutting the assortment of products in their stores by at least 15 percent. It's a huge move for the retail industry, where big-box stores have dominated the market by offering consumers a huge variety of products. According to Walgreen vice president Catherine Linder, that's no longer good for business:

All that go-go 1990s where we were adding items in and adding items in, and people wanted more, more, more, more choice... just didn't pay off. People say, 'Whoa, you're bombarding me. Help me figure out what I need.

China and Hummer may not get along so well, after all. AaverageJoe/flickr

 

Tengzhong, the Chinese road equipment company buy Hummer, may face some unexpected challenges in its bid to acquire Hummer from GM. The AP reports that China's planning agency, the National Development and Reform Commission, is likely to reject the deal partially because Hummers pollute too much and guzzle too much gas. China's state radio reported that the agency feels that Hummers conflict with Beijing's conservation goals.

You know the brand is in trouble when China -- the world's biggest carbon polluter -- doesn't want to touch it.

Former Federal Reserve Chairman Alan Greenspan weighs in on the current state of the economy in the Financial Times. Here's some of what he has to say:

The US is faced with the choice of either paring back its budget deficits and monetary base as soon as the current risks of deflation dissipate, or setting the stage for a potential upsurge in inflation. Even absent the inflation threat, there is another potential danger inherent in current US fiscal policy: a major increase in the funding of the US economy through public sector debt. Such a course for fiscal policy is a recipe for the political allocation of capital and an undermining of the process of "creative destruction" -- the private sector market competition that is essential to rising standards of living. This paradigm's reputation has been badly tarnished by recent events. Improvements in financial regulation and supervision, especially in areas of capital adequacy, are necessary. However, for the best chance for worldwide economic growth we must continue to rely on private market forces to allocate capital and other resources. The alternative of political allocation of resources has been tried; and it failed.

Matt writes:

I'm a recent college graduate from UW-Madison. I just finished a phone interview for an entry level position at a large company (NYSE traded). The listed requirements are 2 yrs lower than my education level and the job pays lower than I'd like (~25,000) but right now I only have a part time job and need both more work and health insurance.

I'm currently working as a page at the Madison Public Library. I interact with the public and like my coworkers. The busy work I do isn't very rewarding, but it isn't difficult for me either. I think another part time job might be better than a full time job I wouldn't enjoy -- if they would result in the same pay anyway. Health Insurance is the real issue but I think the first job out of college dictates future opportunities in some way too.

Continue reading "'Agh Economy!'" >

Consumer spending rose in May for the first time in three months. The increase came as incomes jumped 1.4 percent. The jump in incomes is partially due to reductions in payroll tax witholding that were part of the stimulus package.

Consumer spending is an important factor in judging the health of the economy because it accounts for 70 percent of total economic activity. Meantime, the savings rate increased to 6.9 percent, the highest level since December 1993.

Adam & David live at WBUR. Sarah Abdurrahman/On Point

 

The audio from Adam & David's live show at WBUR is now available. Listen to them take questions from On Point listeners.

General Motors continued its dash through bankruptcy court today with a hearing that granted the company $33 billion of debtor-in-possession financing in just 15 minutes. The bulk of the money, $30.1 billion comes from the U.S. Treasury, the rest from the Canadian government.

Debate over one potential conflict, the fees the automaker is paying its investment adviser, has been postponed until July 2. G.M.'s next big hearing, for final approval of its asset sale, is scheduled for June 30. If all goes well, the automaker could be out of bankruptcy by mid-July.

Seen in Changzhou, China. Andrea

 

Andrea recently moved to China to teach English. She writes:

I work in Changzhou, China which is a fairly middling size city for China but which has been hopping aboard the business/development train. I don't think work has ENTIRELY halted because occasionally I see a worker or two, but I pass these buildings every day on my way to work, and they are just sitting there. I haven't seen a change in 3 weeks.

After the jump, more pictures.

Continue reading "Half-Built China" >

Clay from Maryland writes:

I think did everything right. (and I'm pretty lucky) I live within my means and put 20% down when I bought my home in 1999. I have a 14-year old truck, a steady job and a 1 mile commute. After this latest meltdown and the interest rates dropped, I took advantage of the situation and enacted my very own stimulus program.

Even with the recent drop in home prices, my home is still worth double what I paid for it. So I got a re-fi (30 yr fixed) and pulled out some cash. I am now taking advantage of every tax credit and incentive I can get my hands on -- new Energy Star appliances, new energy efficient heating and a/c units. And to top it off, I'm even putting on solar panels.

Continue reading "'My Very Own Stimulus' " >

Amir Sufi and Atif Milan of the University of Chicago Booth School of Business argue in today's Wall Street Journal that the recent decrease in consumer spending has been directly fueled by a drop in housing prices. The article is a response to a piece last week by Charles Calomiris and several other economists which suggested the relationship between the two has been overstated. From Sufi and Mian:

...We find striking results: from 2002 to 2006, homeowners borrowed $0.25 to $0.30 for every $1 increase in their home equity. Our microeconomic estimates suggest a large macroeconomic impact: withdrawals of home equity by households accounted for 2.3% of GDP each year from 2002 to 2006.

Continue reading "Tying Spending To Housing " >

Two bits of economic data from the government today: the Bureau of Economic Analysis released the Gross Domestic Product numbers for the first quarter of 2009, and the Department of Labor released new unemployment insurance claims for the week ending June 20.

The first-quarter GDP decreased at a rate of 5.5 percent from the fourth quarter of 2008. Not great news, but an improvement over the previous quarter's 6.3 percent drop. Also on the plus side: the first-quarter shrinkage is lower than the 5.7 percent rate initially expected.

The bad news? Unemployment numbers are up. The number of new claims rose last week by 15,000 to 627,000. The total number of people collecting unemployment also rose, by 29,000, to 6.74 million.

Looks like it might take a while to recover from this economic crisis. But you knew that.

The height of German inflation. natehofer via Flickr

 

On today's Planet Money:

-- When most Americans think about financial collapse, they flash back to the Great Depression. The Germans are haunted by another ghost -- hyperinflation. As countries around the globe pump money into the world economy to try to fix it, fears of inflation are once again growing. Josef Joffe, editor of Die Zeit, explains why history is haunting German Chancellor Angela Merkel.

-- Unemployment is still climbing and that's left many people thinking about Plan B. Maybe you'd like to be a rock star or an organic farmer, but you're also probably thinking about that safety net job -- a job you could easily get if you were laid off. Listener Laura Weight gives us a reality check on why that safety job may not be as attainable as we think.

Bonus: The scene in Den Haag.

Download the podcast; or subscribe. Intro music: Gang of Four's "Natural's Not In It." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: 'When Money Dies'" >

The Federal Reserve announced today that it will keep interest rates "exceptionally low...for an extended period," in a continued effort to stimulate an economy that it views as "weak" but "improved." That key interest rate, the federal funds rate, will stay within a target range of 0 to 0.25 percent.

The Fed has been working hard to lower mortgage rates, but some on Wall Street still have concerns. The New York Times reports:

The central bank's caution and the new data highlighted the difficult balancing act that policy makers increasingly face. On the one hand, the economy remains so weak that many policy makers want to keep revving up activity by printing money. On the other, they are under pressure from bond investors, who have signaled growing worry that the Fed's efforts will eventually drive up inflation.

Continue reading "Fed: No Game Change" >

It looks like Tesla Motors isn't the only auto company taking advantage of Detroit's downfall.

A Mumbai-based company, known in North America for their tractors, is planning on bringing a fleet of fuel-efficient compact pickup trucks to the United States. Mahindra & Mahrindra is hoping to become a serious competitor to light trucks like the Toyota Tacoma and Ford Ranger. The company also wants to bring two new SUVs to the U.S. next year.

The Indian company is, quite literally, picking up what American car makers are casting off. Mahindra & Mahindra is working with an American auto importer, Global Vehicles, to quickly set up a large dealer network -- which includes former GM, Chrysler, and Ford dealers that were closed down to cut costs.

We had to cancel our planned road trip this week, but Adam and David will still be appearing live tonight at WBUR. If you have any questions for them, share them here.

Ashley sends a story about how email logs may provide advance warning of a crisis at a company. Two professors at the Florida Institute of Technology in Melbourne studied messages sent by Enron employees during the year and a half before the company's collapse and found that as the situation worsened, the number of "email cliques" grew.

Daniel in Florida has been reading about the troubles at the U.S. Patent Office. Collections at the office have dropped from $6.9 million a day in January and February to $5.9 million a day last week, and employees are facing a massive backlog.

Meanwhile, Curtis from Minneapolis shares an essay that suggests more young grads may be shunning Wall Street.

Bloomberg is reporting that Citigroup has temporarily halted mortgage applications in a major unit due to missing property appraisals and income-verification documents. From Bloomberg:

According to the June 22 letter, the review identified "valuation concerns" where "appraisal documentation is missing or incomplete," or where property-assessment methods were "insufficient/lacking."

Other missing information included employment confirmations, phone numbers, credit reports and rent verification, the letter said. The review also found "income calculation errors."

The division which buys loans from banks and independent mortgage firms originated half of the company's mortgages last year. It will not be allowed to accept new loans until July 6.

The Department of Energy announced yesterday that it would be lending out about $8 billion to various car companies to help them develop high-tech, fuel-efficient cars. Ford's getting $5.9 billion to retool factories in five states, and Nissan's set to get $1.6 billion to convert a factory in Tennessee so it can produce electric cars.

The third loan is going out to Tesla Motors -- they're getting $465 million. The company is devoted to developing and manufacturing affordable electric cars, and is hoping to have them on the road by 2011. It was started by Elon Musk, the Paypal founder whose other venture also involves futuristic technology -- he's one of those billionaires that wants to get us into space.

The Census Bureau says sales of new one-family homes fell 0.6 percent last month to an annual rate of 342,000. Sales are down 32.8 percent from the same time last year. New homes for sale in May had been on the market for an average of 11.5 months.

Meantime, orders for durable goods were up 1.8 percent in May. The increase was the third in the last four months. The Commerce Department says machinery had the largest jump, a 7.7 percent increase in new orders from April to May.

President Obama says he is not satisfied by the progress his administration has made in dealing with economy. In a press conference this afternoon, the president acknowledged that his administration missed the mark in terms of estimating unemployment.

I think it is pretty clear now that unemployment will end up going over 10 percent if you just look at the pattern. Because of the fact that even after employers and business start investing again and start hiring again, typically it takes awhile for that employment number to catch up with economic recovery, and we are still not at actual recovery yet so I anticipate this is going to be a difficult, difficult year, a difficult period.

President Obama cited his mortgage program as an example of moderate sucess, saying it has helped to modify mortgages for many people, but noting that is has not kept pace with foreclosures. (A frustration many of you have expressed to Planet Money.)

After the jump, watch Obama take questions on the economy.

Continue reading "President Obama: This Is Going To Be A Difficult Year " >

Listener @azrael writes:

I was in Washington DC for Memorial Day weekend and we were walking to the Metro. This Washington Post newsstand struck me as funny. It's a picture of Barack Obama on the front page there.

The Bureau of Labor Statistics just released what could possibly be its most depressing study: the Mass Layoffs Summary. According to the study, the number of mass layoffs by American employers jumped back up to record high set in March. In May, 2,933 employers had mass layoffs, resulting in 312,880 workers losing their jobs. A mass layoff is defined by the BLS as one that involves at least 50 people. The above chart tracks individual workers who lost their job in a mass layoff, sorted by the hardest-hit industries.

Ryan Bubb and Alex Kaufman, two Harvard economics doctoral candidates, have a great article in today's New York Times explaining how a new generations of credit cards could look in the wake of new credit card regulation legislation. They write:

We have performed a study that compared credit cards issued by investor-owned banks to those issued by customer-owned credit unions. We found that credit unions are less likely to charge the fees and penalties that the new act hopes to eliminate -- and when they do, they charge less than other issuers.

Meanwhile, Moody's Investors Service re-affirmed today that the U.S. government has a "solid triple-A" credit rating. The rating agency warned, however, that if American debt continues to increase over the next two years, that high rating could be at risk.

The National Association of Realtors says sales of previously owned homes rose 2.4 percent last month. Falling prices and increasing foreclosures are likely the reasons for the jump -- the median home price fell 17 percent last month while foreclosure filings surpassed 300,000.

Tax breaks for first-time buyers are also helping out the market. Of the people who bought homes in May, 29 percent were first-time buyers. President Obama's stimulus plan includes an $8,000 tax credit for people who purchase their first home before December 1.

More meat for less bacon. bucknam via Flickr

 

On today's Planet Money:

-- President Barack Obama's plan for overhauling regulation of the U.S. financial system calls for eliminating the Office of Thrift Supervision. David Kestenbaum visits the OTS to get the mood from employees, but only finds one person willing to talk, spokesman Bill Ruberry.

-- Last week's podcast about tariffs prompted a lot of you to ask "Are they really so bad?" Today economist Arvind Subramanian of the Peterson Institute weighs in. Subramanian says ideally he'd like all tariffs to be zero.

Bonus: No more applications in Wooster, Ohio.

Download the podcast; or subscribe. Intro music: Cage The Elephant's "Ain't No Rest For The Wicked." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Visiting The OTS" >

You know those J.D. Power & Associates studies that you always hear about on car commercials? One of them came out today. And this one had some surprising results: Detroit is actually doing pretty well.

The survey, called the Initial Quality Study, measures the quality of new vehicles after 90 days of ownership. For years, foreign cars have largely trounced American car makers in similar quality surveys, but this year, the Big Three have improved their initial quality by an average of 10 percent. That comes even after Detroit's faced two bankruptcies and large government bailouts.

What's even more noteworthy is that the quality gap between foreign and domestic cars is now the smallest it's ever been, according to David Sargent of JD Power. Things may finally be looking up for Detroit -- at least, in the long run.

Former Chrysler CEO Lee Iacocca spoke to the Associated Press today and offered some advice to America's struggling car companies. Iacocca who helped rescue Chrysler in the 1980's with $1 billion in government loan guarantees, said the companies should pay back their loans as soon as possible. The AP reports:

''They're on you day and night. Their oversight is just too extreme,'' said Iacocca, who is promoting a new limited-edition customized Iacocca Ford Mustang. ''That's why our 10-year loan, we paid it back in three years. We couldn't stand the government. The bureaucracy kills you.''

Continue reading "Lee Iacocca Has Some Advice" >

If only all food could get 33 percent cheaper. @ceolaf/twitpic

 

Falling prices at a street food cart in New York City.

Thanks to reader @ceolaf for the picture.

Just came across this interview with Nobel Prize winner Paul Samuelson by Conor Clarke at the Atlantic.

Samuelson is 94 years old now. And you get the sense he might go on for another century.

He gives his take on other luminaries Milton Friedman ("about as smart a guy as you'll meet. He's as persuasive as you hope not to meet") and Alan Greenspan ("the trouble is that he had been an Ayn Rander. You can take the boy out of the cult but you can't take the cult out of the boy.")

Also on the importance of drinking skim milk.

A mall in Wilmington, North Carolina has come up with a unique way to fill empty store space -- add a church. The 250-member church will open in Independence Mall in mid-July. Listener Kate Burton shares this story from her hometown paper. Star News reports:

"Why a church? I'd say why not a church. These days malls are being looked at and leased for lots of nontraditional uses," such as yoga centers, medical clinics and showrooms that drive traffic to other businesses outside the mall, said Susan Godorov, vice president of marketing for Centro Properties Group, which owns Independence Mall.

Continue reading "Indicator: Church Moves Into Mall" >

The Financial Times (sub. req'd) is reporting that despite the year's economic upheaval many investment bankers are still commanding top salaries. From the FT:

Partly driven by a need to hold on to good staff -- and partly to offset the threat of bonus taxes or caps in the US -- UBS, Merrill and Morgan Stanley have all increased their basic pay substantially. Citi now plans to do the same.

According to insiders and rivals, market salary rates for managing directors have jumped from about $250,000 only a few months ago, to closer to $400,000.

Meantime, the Guardian reports that Goldman Sachs employees are set to receive the biggest bonuses the firm has ever given out.

The economy may not be doing as well as some thought. This morning, the World Bank changed its forecast for global growth to a 2.9 percent decline -- a more gloomy prediction than their previous forecast of a 1.7 percent decline. Essentially, the bank is saying that things are going to get worse before they get better, largely because of shrinking investment into developing nations.

The United Nations General Assembly will be holding a conference on the global recession's impact on these developing nations later this week -- and we'll be there to find out exactly how hard they've been hit and how they hope to recover.

Quitters in Ballard, Wash. Seven_Null7/Planet Money Flickr pool

 

On today's Planet Money:

We look back on the last century of banking regulation.

-- Chana Joffe-Walt leads a tour of Presidential responses to banking crises since 1907. Highlights of the trip include regulation posturing from Woodrow Wilson, FDR, George Bush and Bill Clinton, plus Alex Blumberg singing along with Lady Gaga.

-- Is regulation a necessity or an opiate of the market? Harvard Business School professor David Moss argues that those massive institutions that pose a systemic risk must be regulated. George Selgin, an economist at the University of Georgia, worries that the wrong kind of regulation can lead to even greater disaster.

Bonus: Comment of the week, after the jump.

Download the podcast; or subscribe. Intro music: The Cure's "Close to Me." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Crisis, Regulate, Repeat" >

Today on the podcast we're going to take a little history trip of US financial regulation. Stops include crisis, despair, regulation, stability, crisis, despair (normally in that order). Along the search I stumbled upon a video of the 1999 bill signing for the Gramm-Leach-Bliley Financial Services Modernization Act . This was the bill that allowed financial institutions to combine commercial and investment banking. It's pretty startling to compare the rhetoric here to now.

Video of the signing from C-SPAN, after the jump.

Continue reading "Regulation Is Like Clothes. You Can't Always Wear The Same Ones." >

When the President announces that he wants to shut down your regulator agency, what do you say to your staff? That was the dilemma facing the boss at the beleaguered Office of Thrift Supervision this week. The OTS regulates savings and loans. It's the agency that supervised Washington Mutual, A.I.G. and IndyMac. On Wednesday the staff received this email from the OTS Acting Director:

From: Bowman, John E Sent: Wednesday, June 17, 2009 2:30 PM To: #WASH_USERS; #REGION_USERS Subject: White House Meetings

Date: June 17, 2009

To: All OTS Employees

From: John E. Bowman

Subject: Meetings at the White House today

Late this morning, I attended a meeting at the White House with President Obama and the other federal regulators, then attended his speech on his proposal, "Financial Regulatory Reform: A New Foundation."

The President said in his speech that one element of the proposal is to "dismantle" the OTS. I realize this statement could be unsettling to you.

Continue reading "Boss To OTS Staff: Um, Keep Up The Good Work" >

T. Boone Pickens discusses clean energy with Al Gore in February. Center for American Progress/flickr

 

Oil billionaire and alternative-energy activist T. Boone Pickens was in Canada this week to extol the virtues of natural gas, and pushed for increased natural gas investment and cooperation between the U.S. and Canada:

It's going to be good for America, it's going to be good for Canada, it's going to be good for the producers, it's going to be good for everybody. I can only see that the only loser in this deal is foreign oil. And I don't call you foreign. You don't look foreign.

Continue reading ""You Don't Look Foreign"" >

tizianoj/flickr

 

It turns out Senator Johnny Isakson stepped into a very well studied, but complicated area of scientific measurement when he attempted to explain a trillion dollars.

Isakson tried to covert a trillion seconds into years, months and days.

It turns out no one can tell you how many days in the future a trillion seconds would put you. And it's not even like, 'we're not sure it's a Thursday or a Tuesday'. We don't even know what month it would be.

I called up Tom O'Brian, chief of the Time and Frequency Division at the National Institute of Standards and Technology (NIST) who works on super-precise atomic clocks.

He says there are just too many uncertainties. Among other things tidal forces with the moon are slowing down the earth's rotation. (Many years from now, he says, the moon will sit fixed above one spot on earh.)

You can listen to our conversation:

Or download it here.

Continue reading "A Trillion Seconds" >

Switzerland, known for its banks that can keep a secret, just agreed to increase the amount of tax information it shares with the United States. The Treasury Department says this will help them crack down on offshore tax evasion.

Switzerland's banks manage about $2 trillion of foreign wealth, and much of that is untaxed by foreign nations. The Swiss government has been under pressure since March to relax its policies of bank secrecy, which are a big draw for foreign customers. Swiss banks have also been hit hard by the crisis, and are still at risk to do even worse.

Our friends over at Frontline take an extended, gripping look at last fall's near-death experience in American banking, an especially the shotgun wedding of Merrill Lynch and Bank of America. John Thain and Ken Lewis, their respective chiefs, tell the story themselves.

Bonus: Simon Johnson interview.

We'll run Breaking the Bank in full, after the jump.

Continue reading "'Breaking The Bank'" >

From my home state paper, the Hartford Courant comes news that New Haven ranks in the Brookings Institution's Top 20 metro areas in overall economic performance. The ranking is based on employment, unemployment rate, wages, metro gross domestic product, housing prices and foreclosure rates.

Unemployment in New Haven increased just 2.5 percent from the first quarter of 2008 to the first quarter of 2009. In Riverside, California, unemployment increased by 5.9 percent. The report suggests New Haven's concentration of jobs in "eds and meds" may have shielded it from the type of dramatic job losses experienced in other parts of the country.

Read the full report to see how your city measures up.

If you want to attempt to actually make money during the recession, your best bet (according to the U.S. Bureau of Economic Analysis) is to go to Hawaii, or maybe Virginia:

Personal income in the fastest growing state, Hawaii, was up 0.8% while personal income in the next fastest growing state, Virginia, grew 0.3%. Earnings growth in these states was concentrated in the federal civilian and military sectors and was accounted for by first-quarter pay raises as well as some initial hiring for the 2010 Census.

Meanwhile, R. Allen Stanford, who is under investigation for an alleged $8 billion dollar ponzi scheme, surrendered to the FBI yesterday outside of his girlfriend's home. He's set to appear in court today. Up until now, the only person from Stanford Group Co. to face criminal charges is his chief investment officer, Laura Pendergest-Holt.

Senator Johnny Isakson (R-GA) has his math wrong. I just heard him on Morning Edition dramatizing the trillion dollar price tag for health-care reform.

"If you converted dollars to seconds and you said how many years will it take for a trillion seconds to pass its 317,097 years 11 months and 2 days."

He's off, by a lot. Isakson is describing what a much more expensive, 10 trillion dollar program would be.

And he forgot about leap years.

Continue reading "Senator We Have a (Math) Problem" >

New housing projects behind old shacks in Equatorial Guinea. Steve Coll/newyorker.com

 

An awfully interesting post by Steve Coll just went up over at the New Yorker's Think Tank blog. Coll writes that he recently spent a week in the central African nation of Equatorial Guinea researching the country's new prosperity -- he says that they are "the only country in the world that appears to be immune from the global recession."

Equatorial Guinea's good fortune surely has much to do with the fact that the country, which Coll says was among the world's poorest just six years ago, discovered large oil reserves in the mid-90s. But the fact that China has invested heavily in the country doesn't hurt. Billions of dollars in grants and loans from the Chinese government have gone toward construction projects, many staffed by Chinese laborers. China gets to buy some of Equatorial Guinea's oil at a reduced price.

Along with the wealth has come a degree of political unrest.

Continue reading "Prosperity in Equatorial Guinea" >

Treasury Secretary Timothy Geithner defended the Obama administration's overhaul of financial regulations on Capitol Hill this morning. Speaking before the Senate Banking Committee, Geithner faced intense questioning on one key element of the plan -- giving the Federal Reserve greater regulatory powers over large financial institutions.

Both Committee Chairman Christopher Dodd and the committee's top Republican, Sen. Richard Selby, both told Geithner they didn't like the idea of giving the Fed more regulatory control, largely because of its failure to see the financial crisis coming.

Dodd quoted one critic's view that giving the Fed more power was like giving a kid a "bigger, faster car right after he crashed the family station wagon."

Empty stores in Kaohsiung, Taiwan. Josef Lieck

 

Listener Josef Lieck just spent a week in Taiwan. He writes:

At first you might think it's a shopping mall a night, but then you'll see that all the doors are wide open on an early afternoon. It is actually a whole bunch of completely deserted flag ship stores in a shopping mall (Star Place) in Kaohsiung, Taiwan. People here tell me, yes, they have been hit and hit hard.

Continue reading "Postcard From Taiwan " >

An empty dealer in Kalamazoo, Mich., makes a go of it as a repair shop. Jay P./flickr

 

We've had some questions from you about our slide show of empty car dealers -- mainly about what happened to all the cars that were left on the lot after Chrysler's June 9 deadline for dealers to shut down.

I called up Howard Sellz, who owned Big Valley Chrysler Jeep Dodge in Van Nuys, Calif., until it closed down with 140 cars left on the lot. He said that dealers had two options: some chose to sell the cars after the deadline, without Chrysler warranties or benefits. Others, he said, took up Chrysler's offer to redistribute the cars to surviving dealerships to be sold.

"I've been here 44 years, to have an empty lot is the most depressing thing I've ever gone through in my life," he said.

Sending your cars to surviving dealership comes with some fees, he said.

Continue reading "What Happens To All Those Cars?" >

Click to enlarge. Department of Labor

 

New claims for jobless benefits ticked upward last week by 3,000, to 608,000, the Department of Labor reports. For a sense of scale, consider that last week's number was revised upward by 4,000. The overall trend in new claims is still downward, if painfully slowly.

Keep your eye on those continuing claims, though, meaning the pool of people who've been canned and haven't yet found work. This time, those claims fell by 148,000, but they'd climbed by 78,000 the week before. It's hard to tell what to make of that, exactly. Ian Shepherdson of High Frequency Ecnomics takes a stab. He writes that continuing claims "lag initial claims by a few weeks; they ought to be falling now given that initial claims peaked more than two months ago."

After the jump, why so many people still can't get a job.

Continue reading "U.S. Companies Still Not Hiring" >

No more fat wallets. Steve Rhodes/Planet Money Flickr pool

 

On today's Planet Money:

President Barack Obama unveiled his plan for overhauling regulation of the U.S. financial system. We get responses from:

-- Lobbyist Scott Talbott of the Financial Services Roundtable, who represents a lot of big banks and loves the plan.

-- Lobbyist Diane Casey-Landry of the American Bankers Association, who represents a lot of small bankers and thinks that for them, the plan creates costly redundant legislation.

-- Representative Brad Miller (D-N.C.), who says some redundancy is good -- it works for NASA's space missions.

-- Representative John Campbell (R-Calif.), who likes some of the plan but says it gives too much power to the Federal Reserve.

-- Columbia economist Charles Calomiris, who says the whole thing is a big disappointment.

Bonus: Photo evidence of boom times on the way, and a correction.

Download the podcast; or subscribe. Intro music: American Analog Set's "Hard To Find." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Reform School" >

Today President Obama announced his plans to make it harder to for companies to "shop for the regulator of their choice."

Maximilian M raises this very good question:

What was the rationale behind allowing regulator shopping in the first place?

The (sort of) simple answer is that we've added layer after layer to our regulatory system over many years. No one ever sits down and says, "This would be the absolute best system of regulation for us right now." Instead, every couple of decades (preferably in a time of crisis), we add an agency and tweak some rules, ultimately creating an incredibly complicated system.

Continue reading "Where Did Regulator Shopping Come From?" >

This slideshow requires version 8 or higher of the Adobe Flash Player. Get the latest Flash Player.

TEXT.

As automakers wade through bankruptcy and thousands of car dealerships are closing down, you've sent in photos and stories of the closings in your communities.

Of course, we're always looking for more.

Add your own photos of empty dealers to our Flickr pool or Facebook page, Twitpic them and make sure to let us know on Twitter, or e-mail them.

Matthew Yglesias of Think Progress says the Obama regulatory reform plan is strong on a couple of points. Yglesias likes the creation of a Consumer Financial Protection Agency (a sentiment we're not hearing much of in here), and he likes the plan for giving regulators more leeway for resolving the problems of "too big to fail" institutions.

But don't get your hopes up, he writes:

Our past two bubbles have brought extremely low unemployment, and created huge quantities of paper wealth that individuals became psychologically anchored to. You can give regulators all the statutory authority you like, and the fact remains that there's bound to be enormous reluctance to actually pull the trigger. It's always hard to get government to clamp down on activities that very rich and powerful people want to engage in. When you're talking about doing so in a way that could also jeopardize the jobs and 401(k)s of a mass public, well, it's very hard.

Milk's getting more expensive, again.

 

One effect of the recession, as you can see from this chart, was that food prices fell from their record highs during mid-2007 to mid-2008. Now, according to the United Nations' Food and Agriculture Organization, food prices are starting to grow again. The 6 percent increase in between April and May is the second-highest jump since the FAO began to track the numbers in 1990.

FAO economists have said that food commodity prices usually strengthen with a general economic recovery, so this could be a positive sign for the economy. If food prices continued to rise this fast, it would be bad news for people on the margins, who suffered when prices peaked last year. The Organization for Economic Cooperation and Development warns that "[F]ood insecurity and hunger is a growing problem for the world's poor."

Douglas Elliott of the Brookings Institute says the proposed regulatory form is fine enough but left out "bolder steps." Elliott considers the lonely death of the Office of Thrift Supervision and says it's not enough.

There are significantly too many bank regulators in the United States. Different banks and bank-like institutions are regulated by: state regulators; the Office of the Comptroller of the Currency (OCC); the Federal Reserve; the Office of Thrift Supervision; the National Credit Union Administration; and, for certain important purposes, the Federal Deposit Insurance Corporation (FDIC). It appeared earlier that the administration would propose significantly reducing the number of bank regulators, perhaps to as few as a single regulator. This thought appears to have died in the face of intense opposition by many in Congress and elsewhere. No one would design the banking regulatory system the way it is now if they were starting from scratch, but there are many entrenched interests who do not want the present system to change.

Continue reading "Elliott: Reform Not Bold Enough" >

President Obama's plan for overhauling financial regulation includes a proposal that lenders keep some skin in the game by hanging on to 5 percent of the risk they securitize. They couldn't just bundle and slice loans for investors and wash their hands of it.

George Mason economist Russ Roberts says he doesn't quite get it:

Here's my guess. Securitization has gotten a bad name because banks originated loans with no incentive to be careful. So to keep securitization going, we have to force people to take a stake.

But maybe we should have less securitization. This does not seem to be on the table. Why not? Could it be because some one has hopes of making money on it again?

One way to gauge a proposal like President Obama's plan for overhauling regulation of the financial system is to look at who likes it and who objects.

In this case, the bankers like it -- a lot. From the Financial Services Roundtable, which represents a hundred of America's largest banking institutions:

The Financial Services Roundtable applauds the Administration's announcement of a proposal for modernizing regulation of the financial services industry. Our economic recovery depends on these reforms. The Roundtable has long advocated regulatory reform, and believes reform must be comprehensive, creative and bold.

Continue reading "Bank Lobby Loves Reg Reform" >

Martin writes:

I lost my job as a teacher here in CA. Laid off due to our economy, to make it short. Anyway, yesterday I went in to pack up the last of my belongings and hand in my keys. After moving my belongings out I was waiting for my wife to arrive to haul me and my stuff home. Sitting on my desk was the collection of Boxtops For Education that my Kindergarten students collected so diligently and turned in so proudly. ($0.10 each) So there I was, let go due to budget problems, my very last moments as a teacher, counting out bundles of coupons to help the school pay for balls and paper next year. It really struck me as ironic and sad.

OTS, R.I.P. David Kestenbaum

 

It's now official. The Treasury Department has confirmed that it wants to get rid of the Office of Thrift Supervision. The OTS regulates savings and loans and it was in charge of many the biggest failures of this crisis (you can hear all about that here). The administration's new regulatory reform proposal calls for the OTS to be merged with the Office of the Comptroller of the Currency. And they want it to have a new name -- National Bank Supervisor.

The goal here is to make it harder for banks to "regulator shop." Although the plan does not eliminate all shopping options. There's always state banking regulators. Unlike the OTS or the OCC, state regulators don't charge fees.

Continue reading "Time To Change The Sign" >

Here at Planet Money, we're waiting for a briefing with the U.S. Treasury about President Obama's regulatory reform agenda for banks. It's embargoed until 7.

Meanwhile, listener Ron Deutsch sends this to help pass the time:

Japanese pair arrested in Italy with US bonds worth $134 billion

Prosecutors say the bonds were hidden in the false bottom of a suitcase.

There's been another development in the love-hate relationship between the four BRIC countries (Brazil, Russia, India, and China) and the U.S. dollar. Yesterday, Russia's finance minister said his country had full confidence in the American dollar as the world's main reserve currency.

Now, leaders of each country, at a summit in Russia, are considering buying each other's bonds and swapping currencies so they don't have to depend as heavily on the greenback. Russian President Dmitry Medvedev also called for a "supranational currency" to dethrone the dollar.

And the BRIC countries didn't even mention the dollar in their official statement. Needless to say, it didn't take the snub very well.

I'll smile for $4.8 million. ucumari/Flickr

 

UPDATE: Turns out the stimulus isn't so polar bear friendly. Details after the jump.

We're looking for your favorite (or least favorite) stimulus project.

On our Planet Money (mini) road trip next week I'd like to check in on how some of the hundreds of billions of stimulus dollars are being spent.

Have any suggestions along our route?

The website Stimulus Watch by some folks at George Mason University has been collecting a lot of thumbs-downs. Example: a $4.8 million project for a polar bear exhibit in Rhode Island that would create 192 jobs. (No idea how up-to-date the website is.)

Here's a list of state websites for stimulus spending.

Continue reading "Your Favorite Stimulus Project" >

Economist Nouriel Roubini says he's worried about the continued decline in manufacturing. He told a Reuters gathering that the economy won't recover until the end of the year, and then only weakly and with the risk of contracting again.

Roubini's not countenancing talk of green shoots.

"To me it's more like yellow weeds," he said.

As the Obama administration prepares to announce its plans for financial regulation reforms, several academics are focusing on the issue of executive compensation. In an op-ed in today's Wall Street Journal (subsq req'd.), Harvard's Lucian Bebchuk and Berkeley's Jesse Fried argue how to best tie compensation to long-term performance. They write:

...The period during which vested equity incentives may not be cashed out should be fixed. For example, when an executive's options or shares vest, one-fifth of them could become unblocked, and the executive would subsequently be free to cash them out, in each of the subsequent five years. Because the blocking period would be fixed, the executive's actions wouldn't be distorted by a desire to accelerate the cashing out of equity incentives. And as long as the executive is working for the firm and options and shares continue to vest, the executive would always have an incentive to care about the company's performance several years down the road.

Bebchuk and Fried argue against so-called "hold till retirement" requirements. They say forcing executives to wait until retirement to cash out only provides them with an incentive to leave their firms.

Bonus: Bebchuk's testimony before the House Financial Services Committee.

In our efforts to understand what went wrong at the credit rating agencies, we visited Frank Raiter. He worked at Standard and Poors but is now far from Wall Street, happily clearing land for a farm in rural Virginia and caring for a turtle in his office.

Raiter has been critical of his former employer, who he says rejected his requests to get better data and build better models. S&P disputes that.

In the interest of letting you all make up your minds, here's a link to video of an interview and lecture Frank Raiter gave at Cornell University.

And here's part of a response S&P gave to Congress after Raiter testified on Capitol Hill.

As we understand it, Mr. Raiter's claim is that S&P refused for commercial reasons to adopt an allegedly superior "new" model to analyze the credit risk of mortgage loans underlying certain RMBS transactions. The allegation is baseless.

Continue reading "Rating Agencies, Appendix 1" >

Click to enlarge. Calculated Risk

 

Housing continues its slow climb back to normal. The U.S. Census Bureau and the Commerce Department report building permits were up in May by 4 percent over April, though still down 47 percent from the year before.

Housing starts were up 17.2 percent last month, though down 45.2 percent from the year before.

The U.S. still has way too much unused housing, but hey, we got ahead of April. "The inventory overhang means any recovery in building will be very muted for an extended period, but at least the very worst is over," writes Ian Shepherdson of High Frequency Economics, who's usually first to land in the Planet Money inbox.

Grow. filmonger/Planet Money Flickr pool

 

On today's Planet Money:

You may have heard something about the new iPhone. But have you heard about the Harmonized Tariff Schedule? That's the giant book of guidelines by which import specialists like Brett Ewing and Jim Henderson classify everything from wood flooring to handheld gizmos for importing into the United States.

Their mission is to determine whether importers have paid the right duties on their goods, and whether exporters are illegally dumping their wares on the American markets. Economists say tariffs, their main tool, make things more expensive for everyone.

Bonus: View from a passing train.

Download the podcast; or subscribe. Intro music: Kasabian's "Underdog." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: The Trouble With Tariffs" >

Russian Finance Minister Alexei Kudrin and President Dmitry Medvedev in London in April. London Summit/flickr

 

The dollar rose more than every other major currency (except the yen) this afternoon, to a three-week high. And who's behind the greenback's rising?

Russia. Earlier today, Russian Finance Minister Alexei Kudrin helped to quell fears about the specter of weakening dollar falling out of favor as the world's main reserve currency, saying that his nation has full confidence in the U.S. dollar.

Earlier this month, Russian President Dmitry Medvedev cast doubt on the greenback's reliability.

Kudrin's comments come at the start of the first BRIC Summit, a meeting of Brazil, China, Russia, and India. Those four nations control 42 percent of global currency reserves.

Getting ready for "a nightmarish summer of dust." Kelly Adams

 

Kelly Adams checks in from Tumwater:

My economic indicator is $4.29 million. That's the budget for a road works project we here in Tumwater, Washington, have been suffering through on one of our major arterials. A couple of months ago all construction stopped when the contractor abruptly went out of business.

Littlerock Road runs north/south, parallel to I-5. It's been a two-lane road forever, connecting the rural south end to the strip-mall center of Tumwater. Suburban growth has made it a mess so the City of Tumwater decided to upgrade the northern strip.

Where this leaves the project and the community is in limbo. The project (aside from utilities installation) is completely halted and remains a mess of patched up roads, detours, dirt, dust and hay on the verges. We've been told the bond-holding company will now have to decide what action will be taken, from assigning a contractor to take over the project or return to a bid stage. Either way, it is unlikely to restart construction before the end of the year. What a mess!

UPDATE: Unfortunately we have to postpone this trip, due to powers beyond our control. Thank you for sending your story ideas and hopefully we'll see you on the road real soon.

Caitlin, David, and I are hitting the road for Planet Money's first mini-road trip.

We are doing an event with WBUR in Boston next Wednesday, June 24th so thought we'd leave a bit early and run the blog and podcast from the road. It's a quick trial run before some more ambitious road trips we want to do later this summer.

Please help us. We need stories.

Continue reading "Planet Money Road Trip" >

May the experimental spaceships rest in peace. Jeffrey Wachs

 

Jeffrey Wachs from Los Angeles listened to Friday's podcast on the space economy and sent us this picture from the Mojave Air and Spaceport, where new space companies are testing their rockets. Nearby is a cool junkyard -- a final resting place for experimental aircraft and spaceships.

Another bit of news that hints at the possible winding down of the recession: the International Monetary Fund has raised its outlook for the American economy and is calling for a plan to help ease us out of the downturn. The details, from the IMF:

The combination of financial strains and ongoing adjustments in the housing and labor markets is expected to restrain growth for some time, with a solid recovery projected to emerge only in mid-2010. Against this background, GDP is expected to contract by 2 1/2 percent in 2009, followed by a modest 3/4 percent expansion in 2010 on a year-average basis

This book recommends excising daily. Chana Joffe-Walt

 

Jim Henderson and Bret Ewing are import specialists. That means they sit in an office near the Port of Seattle and monitor every kind of product that enters the country. They are supposed to make sure that importers have paid the appropriate customs duties.

Jim has an encyclopedic knowledge of the U.S. Tariff Schedule (he's also got that enormous book to help him). The tariffs are essentially in place to protect American industry. And lately Jim's been worried about pencils -- pencils from China, to be exact.

Continue reading "Scared Of Chinese Pencils" >

We've been waiting to see the White House proposal for regulatory reform. (Let's just call it the plan for How To Prevent This From Happening Again.) Tim Geithner and Larry Summers have an op-ed in the Washington Post this morning, giving a preview. It's interesting to compare the emerging plan with Geithner's testimony on the hill in March. Back then he said:

"We can't allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints."

That was when there was talk about eliminating some regulators, like the Office of Thrift Supervision, which oversaw AIG.

There's no mention of that in the op-ed today.

In suburban Arizona, false alarms in abandoned houses are giving local fire departments fits. From ABC 15:

"Neighbors can hear the alarm so they call us, but when we get up to the home, it's vacant, locked up and we're unable to access them," said Kevin Pool, assistant chief with the Surprise Fire Department.

There's nothing to do but wait until the batteries run out.

Meanwhile, Paul Krugman has some advice for the folks warning about inflation and calling for President Obama to step back from stimulating the economy: Not yet. Krugman writes:

It's much too soon to give up on policies that have, at most, pulled us a few inches back from the edge of the abyss.

(Thanks, BLDG BLOG, for the Arizona link.)

Voting in Iran. Majid/Getty Images

 

On today's Planet Money:

-- Voters in Iran went to the polls today to decide whether President Mahmoud Ahmadinejad would keep his job. The race between Ahmadinejad and his main challenger was tight, and the deciding factor may end up being Iran's economy. Sayed Mohsen Naquvi, a Shi'a Islamic scholar who runs the non-profit Independent Viewpoints, says that if you want to understand Iran's economy, there's one book you need to read. Plus, fact-checking the particulars of a voluntary tax system with Alex's father-in-law.

-- Your private investment in outer space doesn't have to be limited to paying $12 to see Star Trek. Planet Money intern Matt Katz visited a Space Business Conference in New York and says that the 257 billion dollar industry attracts everyone from wealthy space-obsessed geeks to investment analysts from Morgan Stanley.

Bonus: a listener indicator from Boston, by way of the Islamic Republic of Mauritania.

Download the podcast; or subscribe. Intro music: Women's "Black Rice." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Iran's Shi'a Economy" >

Click to enlarge. Congressional Budget Office Director's Blog

 

I'd almost forgotten, but before President Obama's $787 billion stimulus package, President Bush signed a stimulus package called the Economic Stimulus Act. It contained roughly $95 billion in tax rebates that went out last spring. (This was a huge economic experiment: the package was more than twice as large as the $35 billion in rebates that went out in 2001.)

Ever since then economists have been trying to figure out how well it worked.

The Congressional Budget Office just posted this analysis.

And I'm afraid the answer is that we may never know.

As the graph above illustrates, our economy is so large that it's hard to detect whether $95 billion in rebates really spurred people to spend more.

The Federal Reserve may ease up on its buying of U.S. Treasury notes and bonds, reports the Wall Street Journal (subs. requ'd.). Buying Treasurys has been a key part of its plan to get cash to financial institutions, stimulate lending and drive down the interest rate. The paper says Fed officials think the economy has begun to stabilize, so it can back off the buying.

After the jump, an actual slideshow of charts about Treasury notes -- and more.

Continue reading "Chart: Geek Out On Treasurys" >

Turn right at the 10,022nd blade of grass. underoak

 

Andria Krewson sends this picture from a project on hold not far from downtown Charlotte, N.C.

She writes that the WWII-era Morningside Apartments used to be here, before they were bulldozed in August 2007 to make way for ... you know, for something.

"In the mean time, grass and weeds hold down the dirt," Krewson writes.

The $65 million project was to have been a planned community of 10 blocks, with 400 apartments and 600 residences for sale. Residents were to enjoy 25,000 square feet of restaurants and shops. The developer told the Charlotte Observer last year that the site provides "a unique opportunity to provide quality homes in a setting with history, character and green space."

In a dramatic shift, Congress yesterday voted to give the FDA authority to regulate tobacco.

Everyone seems to agree this could save many lives. Interesting note from a post on the Congressional Budget Office Director's blog:

Counterintuitively, a reduction in smoking might add to the government's costs in many cases by enabling some people to live longer and to incur health care costs over longer periods. In those cases, government spending for Social Security, Medicare, and other retirement and mandatory spending programs, would increase.

The House and Senate passed slightly different versions of the bill. Both require large labels on cigarette packages ("WARNING: Smoking can kill you." is one option). The House calls for the statement to occupy "30 percent of the front and rear panels of the package." The Senate version calls for labels that take up 50% of the front and back.

Click for a larger version

 

Today's fun chart shows the number of job openings and the number of hires, in the U.S since the end of 2006. As you'd expect, both numbers have gone down drastically. Note the growing gap between the reported number of hires and the reported number of job openings. This suggests companies are filling their openings either right away, without actually advertising that a job is open -- perhaps by calling back people who've been laid off .

These numbers come from the monthly Job Openings and Labor Turnover Survey (or JOLTS) put out by the Bureau of Labor Statistics.

We took a righteous stab this morning at explaining the basics of how a cap-and-trade program like the one being considered in congress might be used to limit global warming and carbon emissions. Or, say, limit the use of the word dude.

Internally, there was much debate here about what movie clip to use. Our producer Jacob Ganz emailed : "Dude, you can totally tax a turtle."

Our editor Uri Berliner remembered the Bud Light ads (video above, other ads here and here.)

Continue reading "Where's My Carbon Credit, Dude?" >

This interview with Kenneth Feinberg is worth a listen. Feinberg was just put in charge of overseeing pay for executives at some of the financial firms that got bailout money. He says he "recoils" when he reads his job described as executive compensation czar. (The proper title is "special master for executive pay compensation.")

Feinberg is building a resume of difficult jobs. Previously he oversaw payouts for 9-11 victims.

Seen in Lexington, Ky. Joe

 

Joe writes:

It has been so long since I've seen a sign like this that I actually stopped and took a photo.

Click for a larger version

 

If you took out a mortgage in 2007, there's an over 20 percent chance you'll default on it.

At least that's according to the number-crunchers at the the Federal Housing Administration. Their data comes from the Mutual Mortgage Insurance Fund -- the FHA fund that insures mortgages on homes for one to four families. Their report shows the percentage of mortgages that have defaulted over their loan lifetime, and how they expect the default rate to continue in the future, based on the year they were taken out.

(Thanks to Twitter pal @ananelson for the nudge.)

Lara Sirois heard our story about homeowners struggling to navigate their way through the federal Making Home Affordable program. She adds her name to the list of frustrated homeowners seeking help, and asks this question:

My husband and I found a loophole in this program (not the good kind): he's been laid off since last November. I got laid off in February but have had short-term contract work that's ending this week. We'll both be on unemployment and so are not eligible as Citibank does not consider unemployment benefits to be reliable income. If one of us were working -- and making less than we do on unemployment -- then we'd be eligible. Both of us out of work and needing help more than ever? Not eligible. We're not sure how this is supposed to be helpful. Isn't it better if we try to be proactive and get help BEFORE we're in dire straits?

Continue reading "Can I Refinance Without A Job?" >

The big one is Lehman Brothers. Good and Always With Honor

 

For your lunchtime diversion, check out this great bankruptcy graphic from the folks over at Good. The size of the boats represent each company's pre-bankruptcy assets in billions. (Thanks to Amanda for the link.)

A group of academics are on the lookout for protectionism. The group led by the Centre for Economic Policy Research have started a new website, Global Trade Alert to provide "information in real time on state measures taken during the current global economic downturn that are likely to affect foreign commerce."

Right now the website is tracking two U.S. measures that may affect trading relations with Canada -- the Water Quality Improvement Act of 2009 and new EPA procedures on the construction or maintenance of water infrastructure.

BONUS: The World Trade Organization tracks similar data on their site.

Canadian mayors would like to see "Buy American" thrown in the trash jayKayEss/flickr

 

On Saturday, an organization of Canada's mayors issued a resolution that would block U.S. bidders from municipal contracts. The resolution will take effect after 120 days unless the U.S. exempts Canada from the "Buy American" clauses in the American economic stimulus package.

Of all the countries that have problems with the "Buy American" limits on foreign suppliers, Canada has the most to lose. About $1.5 billion in goods move across the Canadian/U.S. border a day, and the U.S. buys 76 percent of Canada's exports. Much of that trade consists of three things Canada has a lot of: oil, water and lumber. The trade restrictions left Canadians a bit perplexed.

Canadian Industry Minister Tony Clement met with American politicians last month to warn them of a "Don't Buy American" backlash, but it looks like it's on the way.

"Don't Buy American" D-Day is coming, if this dispute isn't resolved. Mark it on your calendars: Oct. 5, 2009.

How we're doing. Source: Department of Labor

 

Some 24,000 fewer souls made initial claims for unemployment insurance last week, the Department of Labor reports. If you squint hard at the last two bars on our chart, you can see the averaged week-to-week difference. The difference from April, and certainly from this time last year, is easier to spot.

However small the change may be, when economists say that the downturn is moderating, this is the kind of number they mean. Of the states, Florida registered the biggest decrease in new claims, citing fewer layoffs in construction, manufacturing and agriculture among other industries. Michigan noted 4,385 fewer layoffs, a change it attributed to fewer cannings in the automobile industry.

And so good for you, too. Benet Wilson/Planet Money Facebook group

 

On today's Planet Money:

-- Bankruptcy is a wonderful tool, says GM CFO Ray Young, whose company is now in Chapter 11. And hey, it went so well for Chrysler.

-- If you happen to be one of the jilted creditors, bankruptcy doesn't seem quite so wonderful. Clown Mandy Dalton says a mall operator that went bust still owes her $200 for a family fun day. She talks it over with bankruptcy lawyer Jay Strock.

Bonus: Twitter crowd lobs questions at GM CFO Ray Young, after the jump.

Download the podcast; or subscribe. Intro music: Dirty Projectors' "Cannibal Resource." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: GM Loves Bankruptcy" >

Honk if you get it. Marzia Niccolai writes:

I recently bought the foreign service exam study guide since I am taking the test this Friday. The test consists of, among other things, basic economics questions. I was so amused by one of the sample questions that I just had to share:

All of the following are examples of United States products that would typically fail to be produced to optimal output without government intervention EXCEPT:

A. national defense products.
B. light provided by lighthouses.
C. new automobiles.
D. new highways.

And in the answer section:

Continue reading "Question Fail" >

The Federal Reserve just released the latest Beige Book, its survey of economic conditions across the country. The good news is that the downturn seems to be moderating in five of the 12 districts. The bad news is the job market, almost the whole thing:

Labor market conditions continued to be weak across the country, with wages generally remaining flat or falling. Two Districts also mentioned employers' plans to scale back employee benefit programs. The Atlanta, Chicago, and St. Louis Districts reported that some state and local governments faced hiring freezes or outright job cuts. While manufacturing employment levels remained low, some Districts saw signs that job losses may be moderating.

The folks worrying about inflation because of all the federal borrowing may have to wait a minute. The Fed says prices are flat or heading downward at every stage of production.

Winner: The newly refinanced Noel Paterson. Race to Refinance

 

UPDATE: We have a winner. What timing, huh?

Every so often, someone comes along and pulls off a project that amazes you. Eric Sipple, also known as @saalon, a certifiable Web genius, built the Planet Money Listener Race to Refinance. Check it out in brief after the jump and in all its glory at Sipple's site. (For the intrepid few, note the possibility of joining in.)

Continue reading "Amazing: Race To Refinance" >

Hey, it's got a canopy roof. Margaret Schulte and Barry Stellrecht

 

Margaret Schulte and Barry Stellrecht write:

We tend to drive a lot on back roads, and one of the things we've noticed all across the USA are the elaborate, landscaped gates with fancy subdivision names -- and nothing behind them. This one, which is in coastal North Carolina, is offering a free boat "with homesite purchase."

As a wacky couple who eschews living in a house and lives on a boat anyway, we thought it was particularly funny. We'll take a free boat, but you can keep the homesite!

The developers of Bogue Watch have a handy map of what's been sold.

On Monday's podcast, we talked about the economics of buying votes for the election last Sunday in Lebanon. The going price was about $1,000 apiece. An coalition backed by the U.S. government defeated one pushed by Hezbollah.

A pair of responses, the first from Leandro Serrano, who forwards Thomas Friedman's NYT column on the glories of a free and fair elections. Serrano writes:

He is saying the opposite that you are saying in your podcast. Whom do I have to believe?

The second comes from Zaher Hulays, a Lebanese American working in Massachusetts, who writes that the price of an individual vote sounds like a bargain:

I do have a few issues with the way you addressed the economics of vote buying, indeed the $1000 per vote seems to be an excellent value considering that a Hezbollah win would severely restrict foreign aid to the Lebanese government and army, limit foreign investment, curtail tourism in Lebanon, and possibly create a conflict with Israel that would make the destruction of the summer 2006 war seem like child's play.

Continue reading "A Bargain: Votes In Lebanon" >

Looks great, right? dmcdevit

 

This is not the most important economic story today, but it's the one I keep thinking about: College in Need Closes a Door to Needy Students.

Facing a deficit, Reed College -- raise your hands, alums -- went back through its list of accepted students and replaced more than 100 who'd need financial aid with others who could pay full freight. I'm not saying it's wrong. I'm just saying it's such a drag.

Continue reading "Moral Values, Meet The Economy" >

The Treasury Department should stress test the banks again, Elizabeth Warren told the Joint Economic Committee of Congress today. The chair of the Congressional Oversight Panel warned that the first round was based on unemployment figures that weren't dire enough:

Let's face it, the numbers are bad and they're heading in the wrong direction. The worst-case scenario number for 2009 is in fact not the worst case. We're going to see worse numbers.

As the Treasury today announced a list of 10 banks that can start paying back the bailout money and exiting TARP, Warren's panel released a full report calling for another look.

The Nielsens have kept both their home and sense of humor. Jeff Nielsen

 

This little drawing came in from Jeff and Chiara Nielsen, who are feeling pretty good these days in their recently refinanced Salt Lake city home.

The first time we heard from Jeff, he was not making art. He was banging his head against the wall trying to get through to his mortgage servicer. On paper, Jeff was the perfect candidate for President Obama's plan to stem home foreclosures. He kept trying to apply, but despite a 100-page application and at least 100 calls to his servicer, he says he could not get any response..

Continue reading "'Getting Struck By Lightning'" >

Even after the 10 big banks pay back their bailout money and exit TARP, say analysts, the Treasury stands to make as much as $4.6 billion on the $68.3 billion it loaned them. In exchange for the loans, the Treasury got warrants giving it the option to buy a bank's shares at a set (read: discounted) price until 2018 -- a situation most banks don't like.

Continue reading "What's Up With Warrants?" >

Treasury Department just sent out this statement saying that 10 of the largest financial institutions have been cleared to repay their bailout money, totaling as much as $68 billion.

In addition to Treasury's potential income from sale of the warrants, these 10 institutions have already paid dividends on the preferred stock totaling approximately $1.8 billion over the last seven months. Dividend payments received for all CPP participants are approximately $4.5 billion to date.

(CPP is the capital purchase plan, where the government bought preferred shares in over 600 banks, totaling $199 billion.)

There are plenty of other places for the taxpayers to lose money, with the auto companies, for instance, or through the programs administered through the Federal Reserve Bank.

But so far so good with the banks.

It's not just the country's automakers who are dealing with bankruptcy. The Administrative Office of the U.S. Courts says bankruptcy filings for the year ending in March 2009 are up 33.3 percent from 2008. While the majority of the filings are for non-business debts, filings involving business are up 59.7 percent from the same period last year.

There were 330,477 bankruptcy filings in the first quarter of this year, the highest since 2005. Read the full report here.

I've been talking to bankruptcy lawyers recently, trying to understand the rules of bankruptcy, and whether our listener Mandy Dalton, who is a clown, will get paid the $200 she was owed when the giant mall owner General Growth Properties filed for Chapter 11.

It's been confusing because one big bankruptcy in the news, Chrysler, hasn't exactly been following the traditional rules.

That's why Supreme Court Justice Ruth Bader Ginsburg put the deal on hold yesterday with minutes ticking down on the clock.

Continue reading "Supreme (Bankruptcy) Court" >

In Detroit, the Supreme Court's hold on the bankruptcy sale of Chrysler to Fiat looks like a "bump in the road" or maybe a "television time-out in the last 30 seconds of a basketball game."

The hometown paper says Justice Ruth Bader Ginsburg, who issued an order Monday holding up the sale and who typically fields appeals from the bankruptcy court in New York, could still decide the matter herself.

In Indiana, home of the pension funds seeking to block the Chrysler sale, the state treasurer tells the Indianapolis Star why he's fighting over $6 million. Richard Mourdock says, "If the changes that the federal government has made indiscriminately go through, the capital markets of the United States are at risk."

Meanwhile, the New York Times goes all-out on economic tensions inside the European Union. It's worth a read, and never mind that odd lead photo of the mom with her hand over her baby's face.

Voting in Lebanon. Sana Tawileh

 

On today's Planet Money:

-- Voters in Lebanon picked a coalition backed by the U.S. over one supported by Hezbollah in elections on Sunday. In the weeks before the vote, Ben Gilbert of Executive magazine (paid sub. requ'd.) says he began hearing reports of people offered plane tickets and even cash to vote a particular line. Gilbert says both sides seem to have been courting voters, at an eventual cost of $1,000 a vote. He explains the economics of buying someone's ballot.

-- An economic puzzle: Automakers wring bigger profits out of bigger vehicles like trucks, SUVs and the GM Hummer, but why? Robert Frank, a Cornell economist and author of The Economic Naturalist, says the dismal science explains everything. Frank answers the Hummer riddle in three and half minutes.

Bonus: Paying more for car repair?

Download the podcast; or subscribe. Intro music: Aqualung's "Good Times Gonna Come." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Buying The Vote" >

At the former Los Angeles Air Force Base, homes were cleared for takeoff. Jake Rome

 

Jake Rome writes from Southern California:

Trekked out to the old Los Angeles Air Force Base to witness first-hand the deterioration that's taken place since the Great Recession forced the 360 South Bay developers to abandon their once-hopeful housing development.

The website for the project, 360 South Bay, says, "Happiness, prosperity and sunshine are a part of everyday life when you call Los Angeles and Ventura home." It also notes that at 360 South Bay, sales are "temporarily unavailable."

This one went bad right from the start. "There were essentially no sales when we had our grand opening in October of 2007," the developer wrote in a proposal to turn some of what had been built into apartments. The developer withdrew the proposal.

With the news that Congress is considering taxing workers on the value of their health benefits, the rest of the America is wrestling with a proposal that's standard procedure for families like mine.

Continue reading "A Tax On Health Insurance" >

Right after we all talked over assignments for our latest This American Life hour, I started making calls. One hour later I had my head in my hands. Financial regulation is one of those things where the more you dig, the foggier the picture becomes. There are so many layers and it's really hard to separate the multiple moving parts.

The Office of Thrift Supervision stood out for a number of reasons, one biggie being that they regulated some of the largest failures of this crisis. Michael Roster, the regulation lawyer at the end of our story, had something to add this morning. He says that when you see the list of failures, yes, the OTS looks pretty bad. But imagine if all those "too big to fail" institutions were allowed to fail, instead of getting bailed out:

Continue reading "Plenty Of Blame To Go Around" >

 

Update: due to popular demand, we've added a chart of commercial airline accidents per million departures after the jump. There seems to be no real link to recession years using that data, either.

Do recessions lead to airplane crashes?

Investigators looking into the disappearance of an Air France flight over the Atlantic last week believe the jet's airspeed indicator failed. Airbus, the manufacturer of the plane, had recently recommended that Air France replace the parts that calculate airspeed, but Air France hadn't completed the work yet.

Air France's stock has been hurting since last year, as it suffers along with the rest of the air industry. That's caused some to wonder whether the economic downturn -- and the cost-cutting that goes with it -- will make flying more dangerous.

Using stats from Air Disaster, a website that pulls in data from the Federal Aviation Administration, I plotted the number of commercial airline accidents during past American recessions above, through 2004. If you see a pattern, let us know -- because I don't.

Continue reading "Flying While Broke" >

Inside a 'dying industry.' Teresa Daily

 

Teresa writes:

In April, my husband and I read in our local paper, the Kansas City Star, that they would be reducing the number of sections by eliminating some and combining others. As twenty somethings, we know we are supporting a dying industry. A stark reminder of that occurred Friday night as we walked by the headquarters of the paper (see attached picture). My husband, a teacher, commented he might ask them if he could have some of those chairs for his elementary school.

I'm wondering, is the Star waiting for the economy to rebound, at which time they might need that office equipment? Until then, why keep it in such plain view?

That's just Volume 1

 

As we mentioned over the weekend on This American Life, the credit rating agencies at the center of the financial crisis have been around for something like a century. The folks at Standard and Poors pulled the tome in the photo above from their library for us. Back in the day the rating agencies published these phone book sized things on a regular basis for investors. (The binding on this one read "Feb-June 1942 VOLUME 1".)

Clearly the ratings provide a valuable service.

Continue reading "The Ratings Puzzle" >

If you're looking for solar, it's way down at the bottom. Alan Cordova

Alan Cordova writes:

This spring, the Department of Energy updated the Annual Energy Outlook, which forecasts the prices and volumes of the energy we generate and consume, to reflect the provisions in the American Reinvestment and Recovery Act. Over the next two decades, the outlook projects that two renewable sources, wind and biomass, will generate four and 13 times as much energy, respectively, as they currently do.

By 2030, according to the estimate, they will account for 44 percent of all renewable energy (hydropower will still be king at 48 percent). For all the buzz surrounding solar power -- soon after taking office, President Obama made a visit to Denver-based Namaste Solar's field of photovoltaic generators -- it is not predicted to make much of an impact. Note: the outlook does not include solar power systems not connected to an electrical grid, such as a rooftop installation in a remote mountain home. The DOE says those will never account for more than 16 percent of domestic energy consumption.

After the jump, what's winning big.

Continue reading "Report Dims The Lights For Solar" >

See, it wasn't just us. The question we tackled on that podcast back in March, of how to add up the size of Bernie Madoff's Ponzi scheme, has surfaced in federal court.

Attorney Barry Lax is arguing the victims are owed the amount shown on the last financial statement Madoff sent them. From the New York Times:

"We are talking about some of the saddest cases imaginable," he said. "These are people in their 70s and 80s who cannot work and have no possible source of income to replace the money" lost in the fraud.

Irving Picard, the trustee charged with making these awkward calculations about who should get paid what, argues that the numbers on the financial statements were fictions. And Madoff gave his friends higher (fictitious) returns.

In a recent interview, Mr. Picard argued that recognizing these fraudulent transactions as the basis for actual cash losses would be to "allow the thief to pick the winners and losers."

It's a tough issue. People planned their lives around Madoff's lies, so the numbers on those financial statements had consequences. But those numbers were lies.

Outside Boston, a shuttered mortgage services store. Chris Devers/Planet Money Flickr pool

 

On today's Planet Money:

We're launching our fourth special this weekend on This American Life -- on some stations, you can start hearing it as early as tonight. The show is all about the people and agencies who were supposed to be watching out for the economy, and why all that watching somehow failed to stave off the financial crisis.

Chana Joffe-Walt and David Kestenbaum reveal two fascinating bits you won't hear anywhere else. The first concerns Darrel Dochow, a regulator whose tenure stretched from a bank at the heart of the Keating Five scandal to the collapse of IndyMac. The second is about Mabel Yu, a bonds analyst who tried to warn her company to stop buying mortgage-backed securities.

Plus, an interview with Jon Swan, one of the Harvard students behind the MBA Oath, and a farewell to our fabulous editor Jonathan Kern, who's retiring. He has some advice for you.

Bonus: Deer on the lawn as economic indicator.

Download the podcast; or subscribe. Intro music: Vitamin C's "Graduation (Friends Forever)." Find us: Twitter/ Facebook/ Flickr.

Continue reading "Hear: Secrets Of The Watchmen" >

It's hard out there for a high-tech manufacturer. Glenn Stevens

 

Glenn Stevens, the governor of the Reserve Bank of Australia, plotted some interesting numbers in a report yesterday. According to his research, the more a country's economy relies on manufacturing high-tech goods, the harder its GDP got hit by the recession.

Continue reading "High Tech, Low GDP" >

Click to enlarge. Lincoln Ritter

 

This week the Dow Jones Industrial Average dropped General Motors and Citigroup from its index. The Dow Jones Industrial Average uses the stock prices of 30 companies to gauge the health of America's industrial sector.

GM was replaced by Cisco Systems. Citi's spot went to Travelers Companies. Which is ironic, seeing as Citi used to own Travelers. In fact, Citi got its corporate identity from Travelers -- the red umbrella (check out a cool video about Citi's designer Paula Scher). Two years ago, they split and Citigroup sold the red umbrella logo back to Travelers.

Continue reading "Dow Jones Sheds More Metal" >

Green power?Huntz/Flickr

 

ScienceFriday today will tackle the economics and politics of nuclear power.

Reactors cost billions of dollars to build. SciFri's got Stewart Brand on the guest list who has been urging other environmentalists to get behind nuclear power as a way to address climate change.

AFP reports that Sweden also just picked a site to bury its waste, near the town of Oesthammar.

Two towns were actually competing for that privilege.

"Public acceptance in both towns hovered around 80 percent."

Continue reading "Nuclear Economics" >

You can file this under Purely Anecdotal, but I find it noteworthy: Of the three people Planet Money has followed through the process of losing work and finding a new job, each one has taken what amounts to a pay cut in the new job.

Terri Weiss, an educational proofreader laid off in Ohio, found another gig at roughly the same pay, except that the new company was under a temporary salary reduction. Noel Paterson, a game developer in Washington state, found new work at about 10 percent lower pay. Daniel Cross, a circuit designer in Florida, found a new job and a 25 percent smaller salary. "I'm happy to get it," he says, echoing what the others told us about their situations.

Here's something you can file under Actual Statistics: Workers are losing the ground they've gained in wages.

Continue reading "'Wage Gains Tanking'" >

I have to say, a lot of those fancy info-graphic data-visualization techniques, designed to make numbers and statistics easier to absorb, often just leave me confused.

The video above from the folks at gapminder.org is an exception.

I love how Rosling has to narrate the graph as it's changing, like he's a baseball play-by-play announcer. (And I love his accent.)

You can play with the graph here.

Continue reading "Video: '200 Years That Changed The World'" >

Unemployment hit 9.4 percent in May, the Bureau of Labor Statistics reports. That's compared to 8.9 percent in April and higher than the 9.2 percent some economists expected. The broadest measure of unemployment -- U-6, which includes people who'd like a job but have given up looking -- reached 16.4 percent, up from 15.8 percent in May.

Howard Rosen of the Peterson Institute for International Economics sent over a series of charts this week on the current labor market. The theme? As a recession eases, joblessness lingers -- the old "lagging indicator" effect. He writes that in our current market, it may be getting harder to find a job:

"Forty-seven percent of UI recipients exhausted their assistance before finding a new job in April," Rosen notes. "Twenty-seven percent of unemployed are unemployed for more than 27 weeks."

As of May, the average job search was clocking in at 22.5 weeks. That's up from 21.4 in April.

ProPublica runs the numbers on jobless benefits and how the states are handling them:

Fourteen states have simply run out of money to pay benefits and been forced to borrow from Washington a total of more than $8 billion. That number is almost certain to grow as more states reach the brink. If they are not able to pay that amount back before 2011, which most will not be able to do, they face paying hundreds of millions of dollars in interest.

Among the hardest hit: California and the automobile-heavy Midwest.

Bonus: Homeowners fed up with government's loan modification program.