Just Playing The Numbers

Welcome to July, and a week of waiting for the latest lab reports on the economy.

The June figures on manufacturing are due in later today, from the Institute on Supply Management. The Wall Street Journal picks apart the consensus forecast -- still shrinking, but more slowly -- and says we've still got inventory to burn before factories crank into gear again.

The Bureau of Labor Statistics releases the June unemployment figure on Thursday. Meanwhile, the private ADP payroll report shows the U.S. job market shedding 473,000 gigs in June. With an average loss of 492,000 jobs a month for the last three months, we're still falling, but more slowly.

Laura Conaway

8:57 AM ET | 07- 1-2009 | permalink

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Bernie's Not Alone

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.

Mathew Katz

9:41 AM ET | 06-30-2009 | permalink

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Spending Up, A Little

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.

Caitlin Kenney

9:17 AM ET | 06-26-2009 | permalink

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New Homes Waiting For Buyers

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.

Caitlin Kenney

10:16 AM ET | 06-24-2009 | permalink

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First Time Buyers Jump In

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.

Caitlin Kenney

10:00 AM ET | 06-23-2009 | permalink

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Before It Gets Better

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.

Mathew Katz

9:34 AM ET | 06-22-2009 | permalink

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Give It A Go In Hawaii

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.

Mathew Katz

9:31 AM ET | 06-19-2009 | permalink

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Housing Starts Are Up Again

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.

Laura Conaway

9:16 AM ET | 06-16-2009 | permalink

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Alarms And Rumors Of Alarms

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.)

Laura Conaway

7:47 AM ET | 06-15-2009 | permalink

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Fun At Home And Away

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.

Laura Conaway

7:56 AM ET | 06- 9-2009 | permalink

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A New Mantra For New Times

On days like this, I love to read the hometown paper. Detroit's Free Press is filled with the hard news and the soft love as it covers General Motors' move into bankruptcy. My favorite bit, from the editorial page:

There's a clear message -- no, let's call it a mandate -- for Michigan in these events that are rocking the state's economic foundations. Nothing stays the same through this kind of process. Hard choices have to be made. Survival can be a powerful motivator.

Survival can be a powerful motivator. That's my new mantra, with the banks under TARP eyeing the exit, EU unemployment hitting 9.2 percent, and Tim Geithner grinning and bearing it in Beijing.

Survival can be a powerful motivator.

Laura Conaway

9:36 AM ET | 06- 2-2009 | permalink

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Detroit's Drive-thru Bankruptcy

One out, one in.

Judge Arthur Gonzalez has cleared the way for Chrysler's move out of bankruptcy by approving its new incarnation as a company owned by Fiat, UAW retirees, the Canadian public and U.S. taxpayers. As the Detroit Free Press reports, at least $4 billion of the $8.9 billion in U.S. federal aid so far will not be repaid.

Meawnhile, GM has filed for bankruptcy. From the DFP:

The U.S. government has promised to shepherd GM through Chapter 11 in a plan that will see the company sell off its good assets to a new GM, while the less desirable assets are expected to remain in bankruptcy to be liquidated. The U.S. Treasury plans to provide an additional $30 billion to finance GM during its bankruptcy.

That will bring the total amount of federal money lent to GM to around $50 billion.

Laura Conaway

9:42 AM ET | 06- 1-2009 | permalink

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News From A World Of Hurt

The Wall Street Journal greeted us with a roundup of the world's shrinking economies. In the first quarter, the U.S. was falling at 6.3 percent, Germany at 14.4, Japan at 15.2, and Mexico at 21.5. With America's biggest trading partners in that kind of swoon, it's no wonder the recession just keeps dragging on.

Layoffs continue to pile up, if more slowly. The Department of Labor reports 631,000 new claims in the week ending May 16, down 12,000 from the revised figure the week before. That means some 6,662,000 are drawing unemployment benefits. Economist Ian Shepherdson of High Frequency Economics notes that last week's numbers were revised upward, which suggests that "the underlying pace of claims is not slowing as much as appeared to be the case a few weeks ago."

Whatever the numbers, there's a whole lot of hurt out there. Glenn writes:

Continue reading "News From A World Of Hurt" »

Laura Conaway

9:30 AM ET | 05-21-2009 | permalink

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One Really Stinky Fridge

Click to enlarge. Calculated Risk

 

Shoppers spent 11.4 percent less in April 2009 than in April 2008, and .4 percent less than they had in March, the Census Bureau reports. As a category, retail and food fell 10.1 percent from last year.

Which brings us to the news from San Jose. From the AP:

An office worker cleaning a fridge full of rotten food created a smell so noxious that it sent seven co-workers to the hospital and made many others ill.

Firefighters had to evacuate the AT&T building in downtown San Jose on Tuesday after the fumes led someone to call 911. A hazmat team was called in. What crews found was an unplugged refrigerator crammed with moldy food.

Here's our question: Were more people bringing lunch to work and trying to save on buying food out? But if that's true, then why were so many lunches left to rot?

Laura Conaway

10:18 AM ET | 05-13-2009 | permalink

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Banks Talk Back

As it prepares to release the results of its stress tests tomorrow, the government has told Bank of America it needs $33.9 billion more in capital -- money it could either raise privately or derive from converting the preferred shares Uncle Sam holds now into common voting stock. Citigroup's reportedly on the hook for about $10 billion -- the smaller number comes in part because Citigroup already plans to swap the stock around. Reuters says the deals not done yet:

Citigroup may need less if regulators accept its arguments about its financial health.

Earlier this week, Brad DeLong won the prize for clarity on that point:

The banks should not be negotiating with the government over this.

Laura Conaway

10:04 AM ET | 05- 6-2009 | permalink

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Chrysler Rains Pain In Detroit

From the auto industry's hometown paper: "Chrysler bankruptcy slams state." Whatever the company's long-term viability, reports the Detroit Free Press, in the short run "pain rained down on metro Detroit." Like this:

Three metro Detroit plants -- Sterling Heights, Detroit Axle and Conner Assembly -- are to close by December 2010, along with three other U.S. plants. While Obama billed it as a "surgical" bankruptcy, stamping plants in Sterling Heights and Warren shut down Thursday afternoon because suppliers stopped shipping parts out of fear they won't be paid.

Chysler plans to close all its American plants for 60 days, starting Monday, while it gets reorganized.

Laura Conaway

9:27 AM ET | 05- 1-2009 | permalink

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Report: Big Banks Need Capital

From Bloomberg, "Fed Is Said to Seek Capital for at Least Six Banks." The report cites sources who've been "briefed on the matter."

This comes as the Treasury's stress test results are approaching their due date next week. Bloomberg reports that the extra capital could come converting the preferred stock the U.S. already owns in banks into common shares. It's a strategy that economist Simon Johnson told us amounts to an accounting trick, since it doesn't actually create more money.

Converting preferred shares to common ones does shift the government's position, though, from that of a lender to that of an owner, and in some cases a majority owner. Common shares come with voting rights, for one thing. Also, the owners of common shares wait much further down the line of folks to be paid if the company (or bank) goes kaput.

With Congress signaling that it's unlikely to fork over more millions for bank bailouts, troubled banks may have no choice but to seek new private investors and/or convert the government's shares. Once the government's in the position of common stockholder, one question will be whether it could afford to let a bank fail -- since the taxpayer would be at the same risk of losing money as any common stockholder in any bank.

Laura Conaway

11:49 AM ET | 04-29-2009 | permalink

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Flu Gives Globe Fever, Chills

Masked fear. hmerinox/Flickr

 

People, people, let's not freak out over this swine flu thing, OK? Being prepared is one thing, but panic is just not helpful.

"Everyone is running around like a chicken without head," writes Carl Weinberg of High Frequency Economics. "The writing of economic analysts on bird flu bordered on science fiction. . . as does more recent analysis of a flu pandemic."

Weinberg cites a World Bank paper on the H1N1 that says a pandemic could kill 71 million people. But we're here for the money: The paper says a pandemic could pull $3 trillion from the global economy -- just under 5 percent. Weinberg writes: "The report astutely notes that losses of that magnitude would throw the economy into a depression. With advice like that from the World Bank, no wonder the financial markets have swooned at the first sign of the disease. (Emphasis his.)

To help you make sense of the outbreak, NPR has launched a blog called Flu Shots.

Continue reading "Flu Gives Globe Fever, Chills" »

Laura Conaway

10:19 AM ET | 04-28-2009 | permalink

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An Unwanted Vacation At GM

General Motors is likely to close most of its U.S. factories for up to nine weeks this summer. The automaker typically closes its plants for two weeks during the summer months. This time NPR reporter Frank Langfitt says the long break has to do with overwhelming inventory. "They don't want to keep pumping out products people aren't buying and...filling up those dealer parking lots," Langfitt told Morning Edition.

While GM has not said which plants will shut down, the Detroit Free Press reports that workers at a plant in Orion, Michigan ,which makes the Pontiac G6 and Chevy Malibu, have been told the factory will closed for May and half of June. As for what will happen to GM workers, the Free Press says UAW workers will receive state unemployment benefits and "company supplemental pay that roughly equals about 70% of their gross pay."

Caitlin Kenney

10:14 AM ET | 04-23-2009 | permalink

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The Search For Hope

Some days, it's hard telling whether you're being more responsible by looking at the news or away from it. Police say David Kellermann, the 41-year-old chief financial officer of Freddie Mac, killed himself in the basement of his Virginia home this morning. And investigators in Maryland now say the strain of debt and foreclosure may have played a role in a father's killing of himself, his wife and their three children last week.

If you prefer the news in numbers, take two: The IMF estimates that banks and other financial institutions worldwide will lose a total of $ 4.1 trillion in the financial crisis, against the $1.1 trillion the G20 pledged for the recovery.

Or, you could consider the opportunities a little farther afield.

Continue reading "The Search For Hope" »

Laura Conaway

10:14 AM ET | 04-22-2009 | permalink

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Tone-Deaf Banking

This is why we need print newspapers. On page one of the New York Times business section today, Floyd Norris swims around in the question of why the good-hearted bankers of Goldman Sachs feel so unloved -- might have something to do with that $1.8 billion profit they just posted after receiving $10 billion in TARP money and another $28 billion borrowed with a guarantee from the FDIC, he writes.

Not to mention the $13 billion the firm got from AIG, out of the insurer's bailout funds.

I let my eye wander over to the lower right of the page, for this headline: "AIG Chief Has Millions in Goldman." Edward M. Liddy holds $3 million in Goldman stock, which the paper says he got for serving on the bank's board and audit committee until he took the AIG job in September. His press person told the Times that the stake represents:

"a small percentage of his total net worth."

I think that's supposed to make the public feel better about it. I think.

Laura Conaway

10:01 AM ET | 04-17-2009 | permalink

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Won't You Help A Bank Today?

The Obama administration's new idea gives you a chance to get in on the action: bailout bonds. The New York Times reports that they'd be sort of like the war bonds:

The idea is that these investments, akin to mutual funds that buy stocks and bonds, would give ordinary Americans a chance to profit from the bailouts that are being financed by their tax dollars. But there is another, deeply political motivation as well: to quiet accusations that all of these giant bailouts will benefit only Wall Street plutocrats.

Plus: Unemployment claims hit an all-time high, and Warren Buffet's Berkshire Hathaway gets downgraded.

Laura Conaway

9:04 AM ET | 04- 9-2009 | permalink

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Feeling Better Yet?

Some days I feel optimistic about the economy, and others I suffer a sinking sense that we're in for a very long haul. Today, at my breakfast table, I met both in one newspaper. From the New York Times, a pair of headlines:

-- Poll Finds New Optimism on Economy Since Inauguration, in which we learn that 20 percent of Americans surveyed think things are getting better -- up from 7 percent in January;

-- Economy Falling Years Behind Full Speed, in which we learn that in the last recession of this scale, 1981-82, the U.S. took seven years to regain all the ground lost.

It's the last part that sticks with me, I guess. We've been hearing it most directly from economist Howard Rosen, who says he's worried about what happens after the downturn levels out or reverses. Will we see a jobless recovery, as we did in after the 2001 recession? For Rosen, the sheer scale of unemployment -- and underemployment -- matters.

Continue reading "Feeling Better Yet?" »

Laura Conaway

9:14 AM ET | 04- 7-2009 | permalink

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G19? France Says It May Walk

World leaders are supposed to be sitting down for a one-day economic summit on Thursday in London, when the G20 meets to consider the global recession. Facing an enormous to-do list, they're also showing signs of a severe split in priorities.

The U.S. and the U.K. want a global stimulus package, with British Prime Minister Gordon Brown calling for a "global new deal." Other European Union members say they're doing enough to stimulate the economy already. They want strict new rules to regulate the financial system. Now French President Nicolas Sarkozy says he won't sign on to any agreement that lacks a strong global regulator.

Continue reading "G19? France Says It May Walk" »

Laura Conaway

8:40 AM ET | 03-31-2009 | permalink

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Washington Rolls In

The Obama administration is wading into the auto industry in an amazingly big way. All this time, we've been wondering whether the U.S. government will nationalize banks, and whether the stakes it has taken in banks will result in regulators ordering bank bosses to stay or go or change course.

Set that aside for a moment. The auto industry's hometown paper, the Detroit Free Press, runs today's news this way: "U.S. Shreds Auto Plans." Key bit:

President Barack Obama will give General Motors Corp. 60 days to craft a new survival plan without Chairman and Chief Executive Rick Wagoner, and set a 30-day deadline for Chrysler LLC to either partner with Fiat SpA or shut down.

Continue reading "Washington Rolls In" »

Laura Conaway

9:41 AM ET | 03-30-2009 | permalink

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A New Plan For Troubled Assets

The news this morning is of course dominated by the Treasury Department's new plan to buy troubled assets or as the government is now calling them "legacy assets." The plan calls for using $75 to $100 billion in TARP capital along with funds from private investors to purchase as much as $500 billion to $1 trillion worth of these loans and securities. The price for the assets will be set by private investors "competing with one another." The New York Times reports:

Simply hoping for banks to work legacy assets off over time risks prolonging a financial crisis, as in the case of the Japanese experience," the department said. "But if the government acts alone in directly purchasing legacy assets, taxpayers will take on all the risk of such purchases -- along with the additional risk that taxpayers will overpay if government employees are setting the price for those assets.

Continue reading "A New Plan For Troubled Assets " »

Caitlin Kenney

9:12 AM ET | 03-23-2009 | permalink

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8.1 Percent Unemployment

The U.S. Bureau of Labor Statistics says February unemployment checks in at 8.1 percent up from 7.6 in January. You could look at that as 91.9 percent employment. Or you could look at it like this:

In February, job losses were large and widespread across nearly all major industry sectors.

The new 8.1 percent is the worst since 1983. The numbers from recent months were all just revised, too, in the direction of misery -- but you knew it was bad, right?

Continue reading "8.1 Percent Unemployment" »

Laura Conaway

9:20 AM ET | 03- 6-2009 | permalink

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Not So Productive After All

The revised numbers for American productivity are in. For the fourth quarter of 2008, the Bureau of Labor Statistics had calculated that nonfarm productivity -- the total output divided by the total hours worked -- grew by 3.2 percent. Instead, folks, it shrank, by .4 percent.

"So much for the surprising strength in productivity late last year; the only bit of good news from Q4 is gone," writes economist Ian Shepherdson. Output and hours worked are in unsettling territory, ground not crossed since the recessions of the 1970s and '80s.

More noise out there about unemployment numbers. February's figure is due out tomorrow. Weekly new claims were down 31,000, to 639,000. It's all just buzzing until we get the figure Friday morning.

Laura Conaway

9:07 AM ET | 03- 5-2009 | permalink

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Go Ahead And Be Mad

The news this morning ranges from a Dow that fell below 7,000 for the first time since 1997 to an Eastern European financial crisis that just won't quit.

But the big, big, big news is all AIG. The numbers are U-G-L-Y: The insurer reports a loss of $61.7 billion in the fourth quarter of 2008, the worst loss in corporate history. Fearing a devastating domino effect, the Federal Reserve and the Treasury have announced $30 billion at the ready to prevent the end of the world as we know it.

Yesterday, I talked to someone I know who works at the Fed. This person recommended Joe Nocera's column Saturday in the New York Times. Look, the person said, the Federal Reserve is still confident that it can get ahead of the overall financial crisis, though it will cost an amazing amount of money. And yes, the Fed staffer said, the situation with AIG should make everyone mad. Nocera may have put it best:

Other firms used many of the same shady techniques as A.I.G., but none did them on such a broad scale and with such utter recklessness. And yet -- and this is the part that should make your blood boil -- the company is being kept alive precisely because it behaved so badly.

Continue reading "Go Ahead And Be Mad" »

Laura Conaway

9:41 AM ET | 03- 2-2009 | permalink

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Worse Than We Thought

Fridays often bring a flood of economic numbers -- lately, most of them are awful. Today, we also have lots of news.

Economy shrinks at fastest pace in 25 years: The government first estimated the fourth-quarter contraction as an annualized 3.8 percent. Economists expected that to be revised to 5.4. The final number: 6.2. Youch!

Government to take bigger stake in Citigroup: The U.S. will get as much as 36 percent of the corporation, with Citigroup converting up to $25 billion of the government's $45 billion in preferred stock to common stock. This makes Citigroup look better by upping its level of "tangible common equity."

Plus: President Barack Obama has turned in his first budget -- with its $1.75 trillion deficit. The Washington Post calls it "eye-popping." If you're thinking about national debt, you might start with "National Debt for Beginners," a primer from Simon Johnson and James Kwak of Baseline Scenario.

Continue reading "Worse Than We Thought" »

Laura Conaway

9:47 AM ET | 02-27-2009 | permalink

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'No Sector Is Safe'

Unemployment claims have hit a 26-year high. Calculated Risk brings the cool charts. Me, I'm taking the news straight up -- thanks to the morning note from High Frequency Economics' Ian Shepherdson:

Jobless claims jumped 36K to 667K, a 26-year high and above the consensus 625K. Last week's claims were revised up 4K to 631K. The consensus forecast of a small dip in claims always looked like wishful thinking. The trend in claims is sharply upwards, reflecting the depth of the recession, and we see no reason for it to peak anytime soon.

Continue reading "'No Sector Is Safe'" »

Laura Conaway

9:04 AM ET | 02-26-2009 | permalink

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Oh, Right -- The Economy

For pure political gamesmanship, this was my favorite part.

I don't know what you heard in President Obama's speech last night, but I'm thinking that one was for Main Street. The president spent a lot of time talking about jobs and priorities, but said almost nothing about the details of rescuing the banks:

"You should also know that the money you've deposited in banks across the country is safe; your insurance is secure; and you can rely on the continued operation of our financial system. That is not the source of concern."

For the listeners who want to hear from an economist who doesn't like the stimulus or the bank bailouts, etc., take a look at George Mason professor Russell Roberts' reaction to President Obama's speech.

Continue reading "Oh, Right -- The Economy" »

Laura Conaway

10:12 AM ET | 02-25-2009 | permalink

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'Responsibility Without Power'

I read the news today, and what a crazy pileup. Big corporations like Citigroup, AIG, Chrysler and GM are adding billions to the tab for government intervention. The stock market's back in Smashing Pumpkins land.

Europe is in eight different flavors of crisis. Federal Reserve Chairman Ben Bernanke is set to tell Congress something about the economic mess this morning, as is President Barack Obama tonight.

If you've got good news for our Green Shoots category, please send it. Meanwhile, there's this, from Planet Money regular Simon Johnson of Baseline Scenario, who writes that in many ways the U.S. has already nationalized the banks:

We have state control of finance without, well, much control over banks or anything else . . .

Continue reading "'Responsibility Without Power'" »

Laura Conaway

9:51 AM ET | 02-24-2009 | permalink

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Obama's Foreclosure Plan

The White House has released an executive summary of the Homeowner Affordability and Stability Plan -- the Main Street bailout that President Obama slated to speak about today in Arizona. Take a gander and report back in the comments, please.

Here's what's catching my eye, at first glance:

Continue reading "Obama's Foreclosure Plan" »

Laura Conaway

9:47 AM ET | 02-18-2009 | permalink

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It's The Bank Lobbyists

Folks, we're mostly taking President's Day off, but we did get a couple of notes from economists that I thought you'd like to see.

The first, from Simon Johnson, details the collapse of a consensus on what to do about faltering U.S. banks. Johnson's open to ideas, but he's not moving on this:

"The banking lobby has become too powerful, in large part because big banks have balance sheets that are too big relative to the size of the economy. If a bank has total assets of over 10% of GDP, it is obviously too big to fail. Of course, the smart people who run these banks know this and act -- politically and economically -- accordingly."

Which brings me to the second note, from Amir Sufi, also a Planet Money guest. Sufi recommends this Business Week article arguing that banks are undermining efforts to keep homeowners in their homes. You'll notice yet another Planet Money guest is featured, bank lobbyist Scott Talbott.

Sufi writes:

"My take on all of this is that the banking industry has basically shot themselves in the foot over this issue. Even though they should WANT to facilitate renegotiations of mortgages to prevent foreclosures, their lack of foresight has led them to try and stall any meaningful government help in getting around the legal difficulties in writing down principal.

Continue reading "It's The Bank Lobbyists" »

Laura Conaway

9:58 AM ET | 02-16-2009 | permalink

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Good-ish News

Two bits: First, retail sales stopped their months-long slide and went -- brace yourself -- UP, by one percent. Second, the number of new claims for unemployment benefits dropped a bit, but remained near 26-year high.

Ian Shepherdson of High Frequency Economics sobers everyone up this morning, starting with retail:

The underlying trend in core is still clearly downwards -- the January core gain has to be set against five straight declines averaging 1.1% -- and there is no reason to expect any recovery soon. The headline relief today is welcome but it is unlikely to last.

Shepherdon's take on unemployment, after the jump.

Continue reading "Good-ish News" »

Laura Conaway

9:59 AM ET | 02-12-2009 | permalink

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'This Is Not A Plan'

U.S. Treasury Secretary Tim Geithner unveiled his plan for saving the economy Tuesday, or maybe left it in shrouds. So say the headlines -- and yesterday's falling stock market.

"The market is responding to vagueness," economist and Planet Money guest Simon Johnson told TPM Muckraker. "This is not a plan. In the annals of plan-announcing, this is very vague."

After the jump, the YouTube video so many of you want to talk about.

Continue reading "'This Is Not A Plan'" »

Laura Conaway

9:18 AM ET | 02-11-2009 | permalink

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Tim Geithner's Big Day

Today, U.S. Treasury Sec. Tim Geithner is unveiling his plan for saving the nation's banks. The Washington Post puts the eventual price tag on the various initiatives, including the so-called bad bank, at $1.5 trillion.

After yesterday's podcast about getting tougher on banks, these paragraphs from the New York Times caught my eye:

In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.

Continue reading "Tim Geithner's Big Day" »

Laura Conaway

9:24 AM ET | 02-10-2009 | permalink

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7.6 Percent: You Feeling That?

The U.S. unemployment numbers for January are in, and my, my, my. We're at 7.6 percent joblessness, up from 7.2 in December.

That's 7.6 percent of the American workforce waking up today with no clear way to provide for themselves and their families, no clear sense of where or when they'll work next, no clear sense of when this will get better or which resume will finally do the trick. The Bureau of Labor Statistics writes, "Payroll employment has declined by 3.6 million since the start of the recession in December 2007; about one-half of this decline occurred in the past 3 months."

Ian Shepherdson's take, after the jump:

Continue reading "7.6 Percent: You Feeling That?" »

Laura Conaway

8:53 AM ET | 02- 6-2009 | permalink

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Here Comes The Bad Bank

This week, we're planning to talk a lot about the Obama stimulus plan, starting with today's podcast. We're also planning to dive into the proposal for creating a single "bad bank" to buy up and sell off toxic assets.

Obama administration wrestles with the central problems of launching a bad bank. At issue: How to price the stuff no one wants. Meanwhile, the European Central Bank is planning its own "bad bank."

We asked last week whether you've changed your saving/spending habits. After the jump, a note on this from Ian Shepherdson. Plus: Keynesian report of the week.

Continue reading "Here Comes The Bad Bank" »

Laura Conaway

10:00 AM ET | 02- 2-2009 | permalink

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Incredible Shrinking Economy

Today's Planet Money is brought to you by the number 3.8.

That's the annualized percentage rate by which the American economy shrank in the last three months of 2008. Gross domestic product, or GDP, fell by less than expected in the fourth quarter. GDP is the sum of all the goods and services produced in this country -- as Adam Davidson likes to say, every cup of coffee bought and every house sold and every last widget made.

Continue reading "Incredible Shrinking Economy" »

Laura Conaway

9:03 AM ET | 01-30-2009 | permalink

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New Unemployment Record

The new job loss numbers are in -- Ian Shepherdson of High Frequency Economics says the weekly figures are shifting, with something like 588,000 new claims for unemployment benefits last week. Shepherdson notes that 4,776,000 people are getting benefits, a new record, as hiring slows and layoffs increase:

The net result of this is soaring unemployment, and we see no chance of this picture changing in the foreseeable future. We expect net job losses of about 3 million through the first half of this year.

Calculated Risk says the U.S. situation is already as bad as it was in the 1990-91 recession.

At the World Economic Forum in Davos, global leaders are blaming the U.S. for the economic crisis. And Democrats in the House of Representatives muscled the economic stimulus bill through, which now goes to the Senate as an $819 billion package.

Laura Conaway

9:14 AM ET | 01-29-2009 | permalink

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House Weighs $900B Plan

The U.S. House of Representatives is expected to vote on its version of the now nearly $900 billion stimulus bill today.

From the Washington Post:
Democrats Among Stimulus Skeptics:Some say it fails to reshape American economy.

From the New York Times:
Stimulus reshapes American economy: A flood of money for education/ Republicans call it a back-door path to universal health coverage/ Leonhardt looks at merits and misses.

In other news: World's growth worst in 60 years/ Global search for growth turns to U.S./ FDIC may run "bad bank" to purge toxic assets/

Laura Conaway

9:47 AM ET | 01-28-2009 | permalink

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Welcome To Layoff Land

Big layoffs make big news. American corporations cut jobs on the order of 60,000 yesterday -- one estimate put the global figure at 75,000.

The question now is what those layoffs mean in terms of the overall economy. Yes, those are scary numbers. Yes, economists expect unemployment to rise and keep rising. But the economy creates and sheds jobs all the time. Do this week's mass layoffs wreck the curve?

One place to start understanding what economists call "churn" is with the Bureau of Labor Statistics' Job Openings and Labor Turnover Survey -- aptly shortened as JOLT.

Continue reading "Welcome To Layoff Land" »

Laura Conaway

9:16 AM ET | 01-27-2009 | permalink

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Iceland's Government Falls

The news out of Reykjavik is a whopper: Iceland's prime minister says the government has collapsed. Since the economy there tanked, Icelandic protesters have taken to the streets over spikes in unemployment and prices. Hey, the Belgians went first.

Elsewhere, Britain talks recession, economists say things are getting worse, and Washington wonders about nationalizing the banks.

Laura Conaway

10:00 AM ET | 01-26-2009 | permalink

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Oh, Mercy

Leading today's news: Corporate earnings reports.

The Wall Street Journal says, "Earnings gloom sinks stocks." Economist Nouriel Roubini says slowing demand from China will force stock prices down all over the world.

Layoffs are piling up, with cuts at major outfits like Microsoft, Intel and Digg. Still very little news about what a union official calls nearly 3,000 layoffs at IBM, which posted a 12 percent jump in profits this week. You can peek in on the layoffs in real time on the union website.

Continue reading "Oh, Mercy" »

Laura Conaway

10:07 AM ET | 01-23-2009 | permalink

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Welcome To The Disaster Area

This morning, I'm turning the mic over to Ian Shepherdson, chief U.S. economist at High Frequency Economics. Shepherdson sends two notes today. (Bonus note on deflation after the jump.)

On weekly unemployment numbers, he writes:

Jobless claims jumped by 62K to 589K, well above the consensus 543K and matching the cycle peak recorded in the week of December 20. Last week's claims were revised up by 3K. . .The labor market remains a disaster area.

Continue reading "Welcome To The Disaster Area" »

Laura Conaway

9:54 AM ET | 01-22-2009 | permalink

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It's All About The Banks

On the first full day for the new Obama administration, financial institutions are still leading the way down.

From the New York Times: Obama has no quick fix for banks. Key quote after the jump.

Calculated Risk runs the list of banks whose stocks got hammered Tuesday.

From the BBC: UK to expand bank rescue plan/ Germany's shrinking economy/ IBM bucks gloom with rosy outlook

Continue reading "It's All About The Banks" »

Laura Conaway

9:43 AM ET | 01-21-2009 | permalink

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It's So Not Over

Way back in the fall, economist Raghu Rajan warned us that the federal government could spend a ton of money on the bailout and yet still not spend enough to fix the problem. In today's headlines, news that two big recipients of government capital are still on the ropes. From the Wall Street Journal:

Stocks opened higher on Friday as the U.S. government injected $20 billion into Bank of America and guaranteed losses on over $400 billion in assets of both Bank of America and Citigroup.

In October, Uncle Sam invested $45 billion in Citigroup and $25 billion in Bank of America. Meanwhile, the European Central Bank just slashed the benchmark interest rate to its lowest level ever (sound familiar?) and Floyd Norris says the cheaper rate, Stateside, just might be showing signs of working.

Laura Conaway

9:52 AM ET | 01-16-2009 | permalink

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Bernanke on You Tube

After speaking publicly at the London School of Economics on Tuesday-- his first speech since the Fed's decision to lower rates to 0.25% in December -- Federal Reserve chairman Ben Bernanke held a 20-minute question and answer session that is available online.

Continue reading "Bernanke on You Tube" »

Daniel Costello

10:35 AM ET | 01-14-2009 | permalink

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TED Spread Party!

Twitter listener @saalon starts us off today: The TED spread has fallen below one! This key measure of anxiety among banks crept toward the unholy height of five during the worst of the economic crisis last fall. Now, it has finally re-entered the safer zone of sub-one. It's at .98 -- the widget on our right rail should catch up soon. Meanwhile, open the bubbly, I guess.

More news: Credit crunch over? Best week for debt sales in a year/ Obama shelves jobs-credit proposal/ Trade deficit down sharply

After the jump, Ian Shepherdson's morning note, this time on the drop in trade.

Continue reading "TED Spread Party!" »

Laura Conaway

8:58 AM ET | 01-13-2009 | permalink

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Our Lousy Decade

Calculated Risk starts the day with a look at America's "lost economic decade." At least the news still comes with free refills -- links below:

Economy made few gains in Bush years/ World markets fall after U.S. unemployment rises/ Russia 'to resume gas supplies'/ Economy tops Seoul summit agenda

Laura Conaway

9:50 AM ET | 01-12-2009 | permalink

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Hello, 1993

A new report on unemployment tops the news today. The jobless rate has hit 7.2 percent, the highest since January 1993. Looking for a bright spot? Better squint.

"[T]he only possible glimmer of light is that the maximum rate of fall of payrolls is hopefully not far off," writes Ian Shepherdson of High Frequency Economics.

First person to see the bottom, holler out, OK? Meanwhile, Treasury Secretary nominee Timothy F. Geithner is planning an overhaul of the $700 billion bailout. (Bonus: Obama Cites Grim Economy at Start, as Predecessors Have.)

Laura Conaway

9:06 AM ET | 01- 9-2009 | permalink

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What You're Reading

Joe sends this story about China cutting back on buying U.S. debt.

Thomas Beckett suggests 3 as an economic indicator, as in the number of U.S. states that suffered a crash in their electronic unemployment claims systems.

And Brent passes along this list from the Twitter feed The Media is Dying -- it's the top 10 messiest layoffs of 2008.

Caitlin Kenney

10:33 AM ET | 01- 8-2009 | permalink

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Ebbs And Flows

Lots of news today, lots to think about.

European countries say Russia's Gazprom turned off gas supply.

ADP says U.S. companies cut 693,000 jobs in December.

Obama pushes states to cover more unemployed.

Hill aide: Congressional Budget Office to project $1.2 trillion deficit in 2009.

Asia stocks rise after Obama indicates stimulus spending to last for years.

Laura Conaway

9:44 AM ET | 01- 7-2009 | permalink

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Maybe Decaf This Morning

A big headline this morning : U.S. Auto Sales Fell 36% last month. I think headlines like that are a little unfair. It's a 36% drop when compared to last December. That's a smart comparison in steadier times. But auto sales were just as bad last month, down 36.7% compared to a year before. So are we going to keep writing headlines for the next ten months saying "Auto Sales Down 30%"?

And here's an economic indicator for you; there's less mail flowing through the U.S. Postal system.

Meanwhile, the auto repair business in Branson, Missouri is thriving.

The Planet Money minds are gathering here in DC today so we won't be tending the blog, but check back this evening -- we have a good podcast for you that includes our first ever Planet Money book review, which I'm sure will not be the usual affair since Mike Pesca did it.

David Kestenbaum

9:38 AM ET | 01- 6-2009 | permalink

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Open Thread: New World Now?

Michael Lewis and David Einhorn have fired up a major op-ed in the New York Times: "The End of the Financial World as We Know It." It's long. Pour yourself a cup of coffee and dig in -- I want to know what you think of it. Here's the opening:

Americans enter the New Year in a strange new role: financial lunatics. We've been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet's college graduates seemed to want nothing more out of life than a job on Wall Street.

This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don't know what they are doing with money, who does?

Laura Conaway

9:25 AM ET | 01- 5-2009 | permalink

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A New Steel Curtain

Next in the line to seek government intervention: America's steel industry. The nation's steel mills stand to benefit from the incoming Obama administration's stimulus package, especially if that package includes the promised infrastructure upgrades. Industry leaders told the New York Times they want a "buy America" clause in "every provision."

In the more locally minded Wheeling, W.V., Intelligencer, the industry's request sounds more starkly protectionist. What they want is "American-made only," one United Steelworkers union official said. John Saunders told the paper that the fate of Wheeling businesses is at stake.

"We can't put a stimulus package in that will create opportunity for imports," he said. "If we could get this language, it could be the biggest shot in the arm we've had in years for Wheeling Nisshin and Wheeling Corrugating."

Laura Conaway

9:06 AM ET | 01- 2-2009 | permalink

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Where Are The Loans?

Let's start the headlines with a question, the one so many people are asking:

Banks have money. Why aren't they lending?

And now, more news:

Russia's Gazprom threatens Ukraine supplies again/ Belgium gets a government/ IMF backs Obama stimulus plan/ GMAC to get $6 billion lifeline

Laura Conaway

9:26 AM ET | 12-30-2008 | permalink

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High And Dry

My goodness, we're back and the news is all still here. I'll keep this short. Drop more news/blog links in the comments, please.

Cancel that bet: Kuwait punts joint venture with Dow Chemical, citing the financial crisis.

The Washington Post opens a three-part series on the crash. Up first, a look at the drive to master risk: The Beautiful Machine.

Fun you can use: Skateboarders in California take to pools of foreclosed homes.

NPR's Mike Pesca was just talking about this very conundrum, now in Paul Krugman's column -- federal government goes to stimulus spending as states cut back.

Laura Conaway

9:21 AM ET | 12-29-2008 | permalink

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Holiday Gift: New Numbers

Fresh data this morning. Oh, boy. Plus general news:

Sales of new and existing homes plummet in November/ Recession slows migration to U.S./ World economies limp to Christmas/ Foreign automakers in U.S. cut back/ Toyota freezes new plant construction in Tupelo, Miss.

Laura Conaway

11:03 AM ET | 12-23-2008 | permalink

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You Were There First

Good morning from the holiday crew at Planet Money. Adam and I are enjoying the peace and quiet, we think. Jonathan Kern, our genius radio editor, sends a link from the Washington Post:

Trade Barriers Toughen with Global Slump.

The economists we talk to have been warning us about this, saying that governments might decide to protect their own factories at great risk to the world economy. Meanwhile, I woke up this morning to news I already knew, thanks to the whole Planet Money crowd: Businesses are trimming costs by slicing wages, 401k contributions, and work hours. From the New York Times:

More Companies Are Cutting Labor Costs Without Layoffs.

Laura Conaway

10:52 AM ET | 12-22-2008 | permalink

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Morning Note

The big news happened moments ago. President Bush announced that the government will loan automakers $17.4 billion. "The time to make hard decisions to become viable is now, or the only option will be bankruptcy," he said.

The loans have strings attached, and the companies have to come up with the restructuring plan by March 31. Note that $17.4 billion is about all that's left of the $350 billion Treasury has been authorized to spend. Time to go back for the rest of that $700 billion.

Remember we promised you we'd find out how the stock injection idea got into big bailout bill? (Adam got a mysterious late night phone call at the time telling him it was in there.) Well, we'll have the answer for you on the podcast today.

Most of the Planet Money folks are in meetings, but we'll be talking to you soon.

David Kestenbaum

9:20 AM ET | 12-19-2008 | permalink

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Low, Lower, Lowest

I'll drop more news after the jump, but first, the banner headline. From the New York Times: Fed cuts key rate to a record low. First sentence:

The Federal Reserve entered a new era on Tuesday, lowering its benchmark interest rate virtually to zero and declaring that it would now fight the recession by pumping out vast amounts of money to businesses and consumers through an expanding array of new lending programs.

We aim to talk a lot more about this on today's podcast.

Continue reading "Low, Lower, Lowest" »

Laura Conaway

9:47 AM ET | 12-17-2008 | permalink

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The Human Toll

Demographers like to refer to my cohort as Generation X. But anymore, when we talk about our growing up, my friends and I sound like Generation Recession. We grew up in the 1970s malaise. We graduated into the early 1990s contraction. And now we're looking at a wave of layoffs just when we're hitting the prime of our careers.

Because it's on my mind, I'll start the morning headlines with a Houston Chronicle story about school kids moving because their families have hit hard times. I'm guessing I'm not the only who has so been there.

From the Houston Chronicle: Schools say kids suffer as families move in weak economy.

From the BBC: U.S. rate cut toward zero expected/ Goldman Sachs reports huge loss/ Watchdog queried over Madoff case.

Continue reading "The Human Toll" »

Laura Conaway

9:15 AM ET | 12-16-2008 | permalink

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About That $50 Billion

At my breakfast table in Brooklyn, the news was all Bernard Madoff -- the New York investment fund manager accused in a $50 billion fraud case.

From the New York Times: Spain's Banco Santander reports $3 billion exposure to Madoff/ The 17th floor of Madoff's office, where wealth went to vanish.

From the BBC: Banks hit worldwide by alleged Madoff fraud.

Continue reading "About That $50 Billion" »

Laura Conaway

8:59 AM ET | 12-15-2008 | permalink

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Big 3 Look To White House

The U.S. Senate spiked a bailout for the Big 3 automakers yesterday. Let's start in Detroit.

From the Detroit Free Press: Editorial: A dreadful outcome for Detroit/World markets drop on rescue rejection/ Hope for auto rescue turns to White House.

From the Miami Herald: Retail, wholesale prices fall again in November.

Continue reading "Big 3 Look To White House" »

Laura Conaway

9:07 AM ET | 12-12-2008 | permalink

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It's A Round World After All

A number of you have asked about the situation in South Korea, so we'll start there today. And where do we end? With job cuts in West Virginia, after the jump.

From the Korea Herald: Central bank cuts rate to record low/ Turbulence rocks financial sector.

From the Straits Times: EU to tackle stimulus plan.

From the Detroit Free-Press: House OKs aid for automakers; Senate picture hazy/ Why are these GOP senators unhappy with auto aid?

Continue reading "It's A Round World After All" »

Laura Conaway

9:42 AM ET | 12-11-2008 | permalink

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Kittens And Lollipops

Some days, you just need a little cheery news, you know? And now for the headlines, alas:

From the Times of London: Deflation risk hits China as exports tumble.

From the New York Times: Dire forecast for global economy and trade.

From the Miami Herald: U.S. companies say hiring on hold for winter 2009.

Continue reading "Kittens And Lollipops" »

Laura Conaway

11:01 AM ET | 12-10-2008 | permalink

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Headlines From A Recession

Morning, everyone. Those of you who've been asking about the "uptick rule," pay particular attention to the second headline. The rest of you, bad news starts at the top and continues after the jump.

From the Financial Times: World's hungry "close to one billion".

From the Wall Street Journal: Charles R. Schwab calls for return of uptick rule.

From the New York Times: Washington takes risks with its auto bailout plans.

Continue reading "Headlines From A Recession" »

Laura Conaway

9:51 AM ET | 12- 9-2008 | permalink

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What's Causing the Crisis?

Another Monday, another round of news, plus a deeper look at the Crisis from Simon Johnson's crew at Baseline Scenario. (Hat tip of the day goes to @saalon.)

From Baseline Scenario: What's causing the crisis? (Part 1, part 2)

From the New York Times: Omens of a long recession/ Where were the credit ratings agencies?

From the Financial Times: Company crashes set to hit record next year?

From the Wall Street Journal: Economic-stimulus hopes rally indexes in Asia.

From the LA Times: College application plans change as family budgets shrink/ Debt-laden Tribune Company explores possible bankruptcy filing.

From the Chicago Tribune: Plant sit-in reaches fourth day.

Laura Conaway

9:44 AM ET | 12- 8-2008 | permalink

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Really Bad Job Numbers

Just yesterday on the podcast, we talked about a slight dip in new claims for unemployment insurance. So much for that.

From NPR: Employers cut 533K jobs in Nov., most in 34 years.

From the New York Times: Washington's new tack: Helping homeowners.

More news after the jump.

Continue reading "Really Bad Job Numbers" »

Laura Conaway

9:38 AM ET | 12- 5-2008 | permalink

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Cheaper Mortgages, Maybe

For Americans feeling secure enough to contemplate buying a home, Uncle Sam is considering a plan to drop the interest rate on 30-year mortgages by a full point. Excited? Mortgage brokers certainly are.

With loans available at 4.5 percent, "it would be a dream come true," Silicon Valley mortgage broker Cathy Warshawsky tells the San Jose Mercury News.

Details in the linkfest, after the jump, with more to come on the podcast later today.

Continue reading "Cheaper Mortgages, Maybe" »

Laura Conaway

9:45 AM ET | 12- 4-2008 | permalink

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Down In Detroit

The Big Three automakers took their case for a bailout to Congress yesterday. As you can see below, their hometown paper chimed in, too.

From the Detroit Free Press: Hey, America: Detroit's automakers are asking for a loan.

From the New York Times: GM accepts need for drastic cuts/ Even in Michigan, not everyone wants a lifeline.

From the Wall Street Journal: Paulson debates second infusion.

From the Irish Times: Finance Minister renews plea to consumers to shop at home.

From the BBC: Eurozone sales slump 2.1 percent.

From the Financial Times: Fear in China.

Laura Conaway

9:38 AM ET | 12- 3-2008 | permalink

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Bad Mortgages On The Rise

This is one of those days when you could spend several hours just swimming around in the headlines from the Wall Street Journal. There's a lot going on, you know?

From the WSJ: Stocks enjoy slight recovery from steep drop/ Delinquent mortgages set to nearly double in 2009/ Ford to speed green-car launches/ China fears restive migrants as jobs disappear in cities.

After the jump, a linkfest:

Continue reading "Bad Mortgages On The Rise" »

Laura Conaway

9:16 AM ET | 12- 2-2008 | permalink

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Bad News Piles On, Up

We're back. And the economy, such as it is, is still here.

From the Financial Times: Wall Street starts week in pessimistic mood.

From the International Herald Tribune: Weak EU and China data weigh on stocks.

From the Times of London: London Scottish Bank collapses.

From the Los Angeles Times: A wealth of ideas for Obama's stimulus program/ Government coffers feel drop in auto sales.

From the Detroit Free Press: Automakers urged to think globally/Credit crunch hits small firms.

Laura Conaway

9:11 AM ET | 12- 1-2008 | permalink

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Citigroup's Rescue Mashup

Is it just me, or is the rescue plan for Citigroup essentially a case of Plan A meets Plan B, then bails out major financial institution?

The rescue package calls for regulators to back $306 billion in risky assets on Citigroup's balance sheet -- an amount not quite half of the original $700 billion Congress approved for buying up toxic mortgage-backed securities. Let's call that Plan A, or at least a rather loud echo of it.

Continue reading "Citigroup's Rescue Mashup" »

Laura Conaway

10:03 AM ET | 11-24-2008 | permalink

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Money Just Draining Away

Morning! We're planning to talk in-depth about what's driving the stock market down, but for now, let's just say it's going down, miserably down. Other goodies:

As featured on Wednesday's podcast, "A Central Banker's Dilemma" by the Astroturf (video version above).

From Aaron, "Nordic Countries Add $2.5 Billion to Iceland's Bailout"

Jen takes comfort in the Japanese situation and sends "Not Yet the Last Resort"

Miles et al send this weirdness about a spider drawing on e-Bay.

Laura Conaway

10:09 AM ET | 11-20-2008 | permalink

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Do They Know Something We Don't?

Four top Citigroup executives, including chief executive Vikram Pandit, bought 1.3 million shares of their company yesterday as the firm's stock slid to a 12-year low.

Daniel Costello

10:11 AM ET | 11-14-2008 | permalink

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Biting The Hand That Feeds

ProPublica, the new New York-based investigative non-profit, has a joint story with the Los Angeles Times this morning that is quite interesting.

According to confidential documents obtained by ProPublica, Goldman Sachs has been playing both sides of the coin with California taxpayers' money. On the one hand, it was making millions from fees selling California bonds.

At the same time, it appears to have been making lots of cash advising people on how to profit from California's deepening financial misery and helping push down the price of those bonds and increase the interest rate California pays on its debt.

Nothing illegal to all that. But it's not exactly the kind of financial advisor you want to bring home to Mom.

Here's an excerpt:

Goldman, Sachs & Co. urged some of its big clients to place investment bets against California bonds this year despite having collected millions of dollars in fees to help the state sell some of those same bonds.

The giant investment firm did not inform the office of California Treasurer Bill Lockyer that it was proposing a way for investment clients to profit from California's deepening financial misery. In Sacramento, officials said they were concerned that Goldman's strategy could raise the interest rate the state would have to pay to borrow money, thus harming taxpayers.

"It could exaggerate people's worries about our credit," said Paul Rosenstiel, head of the public finance division of the treasurer's office.

Daniel Costello

10:51 AM ET | 11-11-2008 | permalink

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The iPod Index

It isn't one of our normal Planet Money indicators, but today we're looking at the CommSec iPod index. The index determines whether a currency is under or overvalued by comparing the cost of one product worldwide. Similar to the Big Mac index, it's based on the theory that if exchange rates are working properly, the same product should cost about the same worldwide.

According to the latest index, the cheapest place in the world to buy an iPod 8gb nano music player right now is Australia, where it costs $131.95 US dollars. The reason for the low price: the country's currency has been declining steadily, 27% in the past three months.

So how do other countries stack up? The iPod costs $149 here in the United States and $189.51 in China. The most expensive country place to buy it right now is Argentina, where it will run you $353.20. Check out the full index here.

Caitlin Kenney

10:13 AM ET | 11- 7-2008 | permalink

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Jack Welch On Leadership: The Abridged Version

John Francis "Jack" Welch, Jr., the famed former chairman of General Electric, has a interesting column with his wife Suzy on BusinessWeek.com this morning. It's a "what can business leaders learn from the campaign" column. In short, work hard, don't make mistakes, pick your friends wisely and your enemies even more wisely. Makes sense.

If that doesn't interest you enough: Welch was a big John McCain supporter and I always think it's fun to see how people who so loudly endorse one candidate navigate the day after their side doesn't win. Should be an interesting parlour game to play in the next few days.

Daniel Costello

10:26 AM ET | 11- 5-2008 | permalink

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Recession Now?

The big, big news is the latest numbers on the U.S. economy. An initial report on the gross domestic product shows the economy shrank by 0.3 percent in the third quarter.

Economists had expected a decline closer to 0.5 percent. But they also think the economy is still shrinking. When the economy contracts for two quarters in a row, then you're not just worried about being in a recession -- because you're probably really technically in a recession.

Another bit: AIG's collapse is making life miserable for transit authorities around the nation, including in Washington, D.C.

Laura Conaway

10:10 AM ET | 10-30-2008 | permalink

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Where Is Happy?

Morning, y'all.

The Federal Reserve appears ready to cut the interest rate again, maybe to 1 percent. Does that make anyone else nervous?

China just cut its rates, too, for the third time in two months, Bloomberg reports. Chinese leaders are trying to stave off a slowdown in exports and production.

Hungary got the first of what's expected to be a series of bailout loans from the International Monetary Fund. Hungary got $25.2 billion overall, with $15.7 billion of that coming straight from the IMF. The rest is coming from the European Union and the World Bank.

Latin American economies are in a freak over an Argentianian proposal to nationalize private pension funds. The idea of the government taking over individuals' investments in order to fluff up its own balance sheet has regional stocks and currencies plunging.

OK, OK. We'll have a global recession. That's what economists are saying is on the way.

Meanwhile, credit card companies are shortening the leash on customers. With job losses growing and people defaulting on payments, the plastic money crew is going into a defensive crouch. But you knew that from the podcast, right?

The TED spread's at 2.78 -- that's a tick or two up. This key measure of banks' willingness to lend to each other has been parked in the neighborhood of 2.7 for days now.

If you're wondering where the prosperity went, try Batesville, MS, where you say "recession" and they say "Do what?" That's the news from my hometown paper.

Laura Conaway

10:48 AM ET | 10-29-2008 | permalink

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Stocks Up. So What?

Housing prices are doing what the experts expect: Falling, falling, falling.

Newspaper subscriptions are falling, too -- and here come the layoffs.

The auto industry in Detroit wants a little bailout love. Kirk Kerkorian just wants out. Even Detroit's football team is in a bad way.

The American stock market is on the rebound (with help from trading overseas).

Whirlpool's laying off 5,000 people.

Consumer confidence is at an all-time low. You feeling that?

Laura Conaway

10:03 AM ET | 10-28-2008 | permalink

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Emerging Markets Go Floppy

We're lining up someone to walk us through the horror show that is the world of emerging markets. In essence, countries that were on the brink of making are now simply on the brink.

Hungary, Argentina, Korea, China -- the list of places where stocks and/or currency have plummeted is getting longer. India's calling for action, and now. Chinese leaders say they're working overtime. Even the oil-rich Gulf States are feeling it, as the price of a barrel of crude goes south.

The currency team at Brown Brothers Harriman points to this story in the Daily Telegraph. It's maybe steep going, but full of material we all need to get a grip on. Here's the gloss from Brown Brothers Harriman's morning note:

Despite the finger pointing from Europe as to how irresponsible the US has been (see UK PM Brown's recent speech), there is a crisis brewing of their own making that may turn out to more destabilizing than the US sub-prime fiasco.

You read that right: They're saying the trouble in the economic hinterlands has more potential to unhinge the global economic system than did/does the American mortgage crisis.

Meanwhile, we're starting to see the names of banks approved for a slice of the U.S. government's capital injection plan. The idea is for the Treasury to buy an equity stake -- read: stocks -- in banks it believes can survive the crisis but would benefit from an increase in capital. We'll aim to include more on this in today's podcast. After the jump, the list so far:

Continue reading "Emerging Markets Go Floppy" »

Laura Conaway

10:48 AM ET | 10-27-2008 | permalink

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Meet Henry Paulson

What I'm reading today:

Treasury Secretary Henry Paulson talks to the New York Times. (Says he couldn't have saved Lehman Brothers.)

Lehman credit default swaps settle for a few billion bucks. (What was the fuss about?)

Hungary's a mess. (But it's better off than Iceland.)

The Dow is nearing its 5-year low.

Foreclosures are way up from last year.

Unemployment claims, too.

But, hey, the TED spread's falling.

Laura Conaway

10:08 AM ET | 10-23-2008 | permalink

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Uncle Sam, Wise Investor

What I'm reading this morning:

Maybe the Bailout Will Be Profitable, which reveals that the Treasury stands to make a return of 18 percent on the stock it buys in banks.

Was Lehman Loss All That Bad?, which considers whether the investment bank's collapse provided a healthy shock to the system.

Laura Conaway

9:48 AM ET | 10-22-2008 | permalink

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Crisis Fades. Misery Begins.

Pull up a chair. You're just in time for the recession.

From the Wall Street Journal: "The Crisis Recedes. So Does the Economy."

From the New York Times: "Next Victim of Turmoil: Your Salary"

From the Washington Post: "What Went Wrong"

Laura Conaway

9:28 AM ET | 10-15-2008 | permalink

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About That Rate Cut

Today I got scared. I was making family breakfast and listening to WNYC, when the newscaster suddenly skipped a beat. The guy sounded like he was reading from a note someone had scrawled and handed to him on-air.

The news: The U.S. Federal Reserve cut interest rates by half a point, as did other central banks around the world.

Why was that so frightening to me?

Continue reading "About That Rate Cut" »

Laura Conaway

10:12 AM ET | 10- 8-2008 | permalink

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Gravity Takes New Hold On World

Not happy in Frankfurt.

Mario Vedder/Getty Images

 

European markets ran for cover this morning, dropping like a string of European banks. Asian markets got tagged "gloom spreads." Oil fell dipped below $90 a barrel, on fears that people won't be able to pay for it.

Meanwhile, Stateside, the Dow Jones Industrial Average plunged below 10,000. Investors don't like what they're seeing over there.

The news in trading comes even as the U.S. Federal Reserve announced it's riding to the rescue of the credit and commercial paper markets (the what?). Under the Troubled Asset Relief Program, or TARP, or the bailout, the U.S. aims to buy up bad loans that are sinking banks' balance sheets; that could keep more firms from going under. With the moves into the short-term lending world of commercial paper, regulators are trying to get the clogged pipes of the workaday financial system moving again.

We're aiming to talk more about this later, in the podcast.

Laura Conaway

10:21 AM ET | 10- 6-2008 | permalink

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Bailout Bill Is So Back

Leaders in the House of Representatives say they'll call for a vote today on the reworked $700 billion bailout bill. Debate began this morning.

Wachovia's off the block. Wells Fargo is buying the bank for $15.1 billion in stock. So much for Citigroup's bid.

California says it might need a $7 billion emergency loan from the federal government in the next few weeks. The LA Times has the scoop.

Employers whacked another 159,000 jobs last month -- the most in more than five years, but not enough to change the umemployement rate of 6.1 percent.

Laura Conaway

11:00 AM ET | 10- 3-2008 | permalink

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What's Going On

The U.S. Senate is scheduled to vote today on its version of the $700 billion bailout plan rejected by the House of Representatives on Monday. The Senate's take includes tax breaks for businesses and individuals, plus more federal insurance for bank accounts.

Some of that has to do with unclotting the credit system, some with adding a spoonful of sugar to an awfully unpopular dose of medicine.

Meanwhile, the consequences of the credit crisis are hitting the streets -- literally. The state of Maine has been unable to borrow $50 million for road repairs, money it would typically have raised by selling bonds. The state joins other local governments locked out of the market.

Laura Conaway

9:17 AM ET | 10- 1-2008 | permalink

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Found In Europe: Silver Lining

One of my favorite financial notes landed this morning, a breath of calm amid the nuttiness. The currency group at Brown Brothers Harriman writes that the dollar is holding tough:

Several factors are contributing to US dollar strength. Problems in the financial sector are spreading to Europe with three European central banks injecting money into the Belgian financial company, Dexia, today. The deleveraging process appears to be continuing and finally, while politics make the implementation of the US rescue package messy, there is still movement toward a resolution.

In other words, trouble in Europe makes the dollar look relatively good. And economists are still hopeful that Congress will find a way to rescue Wall Street.

Laura Conaway

9:21 AM ET | 09-30-2008 | permalink

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Congress To Vote On $700 Billion Bailout

Congressional leaders say they've reached a deal on the $700 billion Wall Street bailout. The full body is expected to vote on the proposal today -- with dissenters on both sides of the aisle continuing to call it a gutting of the free market and a gift to the financial wizards who got the economy into this mess.

Continue reading "Congress To Vote On $700 Billion Bailout" »

Laura Conaway

7:44 AM ET | 09-29-2008 | permalink

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Morning! WaMu's Out. Bailout Hangs By Thread

Led by Sen. Richard Shelby of Alabama, Congressional Republicans are lining up against the White House's proposed $700 billion bailout of Wall Street. Shelby told reporters he thinks the bill is "flawed from the beginning."

Meanwhile, after weeks of wobbling, Washington Mutual has finally fallen over. The federal government seized the bank and sold its assets to JP Morgan Chase for $2 billion. It's the largest federal bank failure in American history. The sale to JPMC saves taxpayers from footing the bill.

Laura Conaway

7:57 AM ET | 09-26-2008 | permalink

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Close Ties

One of the huge mortgage companies at the heart of the credit crisis paid $15,000 a month from the end of 2005 through last month to a firm owned by Senator John McCain's campaign manager, according to a report in the New York Times today.

The paper says "the disclosure undercuts a remark by Mr. McCain on Sunday night that the campaign manager, Rick Davis, had had no involvement with the company for the last several years."

Both Mr. McCain, the Republican presidential candidate, and Democratic nominee Barack Obama have been slamming the two companies and the hordes of lobbyists that helped them stave off regulation and buy up so many risky mortgages in recent years.

Both also have donors and advisers who are tied to the companies.

Continue reading "Close Ties" »

Daniel Costello

9:39 AM ET | 09-24-2008 | permalink

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Omaha Stake

No less than Warren Edward Buffett, the "Oracle of Omaha" and one of the world's richest men, signaled faith in the financial markets Tuesday by investing $5 billion in Goldman Sachs, the embattled Wall Street titan.

Buffett is known for his frugality - he still lives in the same Nebraska house he has for decades and strictly adheres to an investment strategy known as value investing that essentially means he only buys when he thinks a stock is fundamentally cheap.

Considering only months ago, Buffett reportedly called the current financial correction "poetic justice," his bet on Goldman is good news for the market indeed.

All eyes will be on how Goldman and Morgan shares do when the stock market opens.

Daniel Costello

9:09 AM ET | 09-24-2008 | permalink

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Paulson, Bernanke Under The Microscope

Not exactly a friendly crowd.

Chip Somodevilla/Getty Images

 

It's sales time.

Treasury Sec. Henry Paulson (on the left above) and Federal Reserve chairman Ben Bernanke (at right) are getting grilled right now by the Senate Banking Committee on their proposed $700 billion Wall Street bailout, and things aren't going exactly smoothly.

While lawmakers seemed resigned to the fact that some bill will pass, and pass quickly, politicos on both sides of the aisle aren't hiding their anger about how we all got into this mess or the Bush Administration's power grab solution to it. Watch it live on CSPAN .

Sen. Chris Dodd, Democrat of Connecticut, argued the "economic maelstrom" was caused by a combination of "private greed and public regulatory neglect." He said:

"We all recognize the gravity of the situation."

Seated a few feet from Paulson and Bernanke, Republican Sen. Richard C. Shelby of Alabama spoke bluntly:

"I have long opposed government bailouts for individuals and corporate American alike."

The good news: Financial markets appeared somewhat more upbeat today, with stocks showing a partial rebound from a huge sell-off yesterday.

Continue reading "Paulson, Bernanke Under The Microscope" »

Daniel Costello

10:33 AM ET | 09-23-2008 | permalink

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Interest Rates Falling. Home Prices, Too

Mortgage rates are falling, now that the federal government is rescuing Fannie Mae and Freddie Mac. The average 30-year loan is now .3 percent cheaper, and may get cheaper still.

That's not the only number heading south. The estimable minds over at Calculated Risk say the value of homes -- and for buyers, the sale price -- should continue to slide. Calculated Risk sees a correction of another 15 to 30 percent on the way. Why? Simple supply and demand. Over the last six years, the site says:

[m]onths of supply increased to 11.2 months. A normal range is 5 to maybe 8 months. Until the months of supply decreases to the normal range, prices will continue to fall.

Laura Conaway

9:09 AM ET | 09- 9-2008 | permalink

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Russia And Georgia? Money Guy Says No Sweat

A column of Russian tanks leaves South Ossetian capital Tskhinvali on Aug. 21.

Kazbek Basaev/AFP/Getty Images

 

If you're watching the Russian tanks moving around in Georgia and the NATO ships sailing into the Black Sea, you're maybe thinking, hey, this has got to be bad news for the world economy.

And maybe it will turn out to be.

But if you're Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, the picture's not looking so bad. "I'd say there's two impacts," he tells us. "Slim and none."

Over the past week, the Russian ruble has fallen .75% against the dollar -- no big deal, Chandler says. For a better measure, he says you should consider other currencies in the region, like the Hungarian forint and the Czech koruna. Over the same period, the forint's down 2% against the dollar, the koruna 1.3%.

That's largely because the ruble isn't well-integrated in the global economy. Compared to the dollar and the euro, Chandler says, Russia tends to stand alone. For now, he calls the conflict between Russia and Georgia a political story, not an economic one.

Laura Conaway

11:01 AM ET | 08-28-2008 | permalink

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