IMF Bonds (!!!!)

I put the exclamation points there because, OK it sounds dull. Bonds, you think, are dull. International Monetary Funds, probably more so.

But this is one of those stories that brushes up against the profound.

The news: The Internaional Monetary Fund has decided to issue what could be $70 billion dollars worth of bonds. It's the first time the IMF has raised money through bonds. The fund has been short of cash to lend out because of the financial crisis.

The interesting bit: The bonds are denominated in a kind of synthetic currency called Special Drawing Rights (SDR's). SDR's are used internally at the IMF as units of account. But China has proposed turning them into a new kind of global currency that could one day replace the dollar's central role.

The IMF's official position: "The dollar is the principal reserve currency in the global economy and will remain so as far as we can see."

We'll have a story on All Things Considered tonight, with commentary from Eswar Prasad who used to run the IMF's China division. About the bonds, he writes "A Win-Win Proposition? Almost, but Not Quite"

David Kestenbaum

2:27 PM ET | 07- 2-2009 | permalink

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Send In Your Madoff Claims

At least there's one benefit to being a Madoff victim. korafotomorgana/flickr

 

Bloomberg reports that the agency liquidating Bernie Madoff's company has committed $231 million to pay 543 claims by his victims. Depending on how much money can be recovered from Madoff's assets, claimants may be able to receive up to $2.74 billion later on. Thousands more claims are waiting to be evaluated, and the deadline to file one is tomorrow -- so if you happen to be one of his victims, you can still hand-deliver it to AlixPartners LLB by midnight tomorrow.

It's a far cry from how much money was actually lost, but hey -- at least it's something.

Mathew Katz

1:10 PM ET | 07- 1-2009 | permalink

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Fee For All

Think of an overdraft fee like a parking ticket. eflonFlickr/CC by 2.0

 

How much does your bank account cost you? An article by Nancy Trejos and Jonathan Starkey in the Washington Post this weekend looked at how banks have been increasing fees for overdrafts and ATM usage. It's full of statistics designed to irritate: "the average ATM surcharge in 2008 was up more than 10 percent," and "Bank of America this year raised the maximum number of times customers can get hit with overdraft fees from five a day to 10," and "overdraft revenue will reach $38.5 billion this year."

Are these fees a new necessity, part of what Anne Pace, a spokeswoman for Bank of America, calls "a landscape that has changed"? I asked John Hall, from the American Bankers Association, whether the increase in fees would really make them a big part of bank profits.

Continue reading "Fee For All" »

Jacob Ganz

12:50 PM ET | 07- 1-2009 | permalink

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Case, Shiller Surprised by Case-Shiller

Story here, and the actual data.

David Kestenbaum

4:47 PM ET | 06-30-2009 | permalink

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States Win Round of Regulatory Turf War

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" »

Chana Joffe-Walt

11:20 AM ET | 06-30-2009 | permalink

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150 Years

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.

Mathew Katz

11:46 AM ET | 06-29-2009 | permalink

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Bernie's Big Day

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.

Mathew Katz

9:32 AM ET | 06-29-2009 | permalink

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What It's Costing Us

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."

David Kestenbaum

7:44 AM ET | 06-29-2009 | permalink

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China To Hummer: You're Too Dirty

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.

Mathew Katz

11:33 AM ET | 06-26-2009 | permalink

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GM Speeding Through Bankruptcy

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.

Caitlin Kenney

2:18 PM ET | 06-25-2009 | permalink

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Tying Spending To Housing

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 " »

Caitlin Kenney

10:40 AM ET | 06-25-2009 | permalink

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Morning Roundup: Up And Down

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.

Jacob Ganz

9:48 AM ET | 06-25-2009 | permalink

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Fed: No Game Change

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" »

Jacob Ganz

3:43 PM ET | 06-24-2009 | permalink

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Missing Data At Citigroup

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.

Caitlin Kenney

11:54 AM ET | 06-24-2009 | permalink

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President Obama: This Is Going To Be A Difficult Year

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 " »

Caitlin Kenney

3:45 PM ET | 06-23-2009 | permalink

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Another Frightening Chart

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.

Mathew Katz

11:47 AM ET | 06-23-2009 | permalink

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Give Me Some Credit

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.

Mathew Katz

10:34 AM ET | 06-23-2009 | permalink

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Bankers Still Raking It In

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.

Caitlin Kenney

10:40 AM ET | 06-22-2009 | permalink

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Farewell To Silent Swiss Banks

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.

Mathew Katz

12:03 PM ET | 06-19-2009 | permalink

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Recovery In New Haven

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.

Caitlin Kenney

10:30 AM ET | 06-19-2009 | permalink

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Dodd, Shelby Thwack Geithner Over A Bigger Fed

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."

Mathew Katz

12:09 PM ET | 06-18-2009 | permalink

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Yglesias: Curb Your Enthusiasm

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.

Laura Conaway

11:59 AM ET | 06-17-2009 | permalink

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Elliott: Reform Not Bold Enough

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" »

Laura Conaway

10:05 AM ET | 06-17-2009 | permalink

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Russ Roberts: 'I Don't Get It'

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?

Laura Conaway

9:50 AM ET | 06-17-2009 | permalink

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Bank Lobby Loves Reg Reform

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" »

Laura Conaway

9:42 AM ET | 06-17-2009 | permalink

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Time To Change The Sign

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" »

Chana Joffe-Walt

6:46 PM ET | 06-16-2009 | permalink

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Walking Off With $134B In Bonds

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.

Laura Conaway

4:31 PM ET | 06-16-2009 | permalink

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IMF: U.S. Not Doing So Bad

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

Mathew Katz

10:32 AM ET | 06-15-2009 | permalink

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What Disappeared From The Plan

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.

David Kestenbaum

9:53 AM ET | 06-15-2009 | permalink

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The Cost Of Not Smoking

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.

David Kestenbaum

11:29 AM ET | 06-12-2009 | permalink

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Don't Call Him Czar

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.

David Kestenbaum

6:58 PM ET | 06-11-2009 | permalink

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Warren: Stress Test Banks Again

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.

Mathew Katz

4:15 PM ET | 06- 9-2009 | permalink

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Bankruptcy Filings Jump Up

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.

Caitlin Kenney

11:02 AM ET | 06- 9-2009 | permalink

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Supreme (Bankruptcy) Court

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" »

David Kestenbaum

10:11 AM ET | 06- 9-2009 | permalink

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Madoff Math

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.

David Kestenbaum

8:27 AM ET | 06- 8-2009 | permalink

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Jobless Benefits Draining States

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.

Laura Conaway

4:21 PM ET | 06- 4-2009 | permalink

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Shopping Keeps Dropping

Spotted in Boulder, Co. Jason Arentz

 

Goldman Sachs and the International Council of Shopping Centers are reporting that same-store sales, meaning sales at stores open at least a year, fell 4.6 percent last month. Analysts had predicted a drop of 3 percent. Check out individual store performance over at the WSJ's Real Time Economics blog.

Caitlin Kenney

11:20 AM ET | 06- 4-2009 | permalink

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So Much For Vacation

Source: Ipsos/Reuters

 

A new Ipsos/Reuters poll says that worldwide consumer confidence is stabilizing after falling for a year and a half. The poll also found that while consumers around the world did cut back on household spending due to the recession -- travel's near the top of the list -- they don't seem to be cutting still further. The poll gives a picture of how people around the world are dealing with the recession.

We'll have to wait to see whether that translates into a measurable boost for the world's economy, but this could be an indicator that consumer spending is going to stabilize in the coming weeks.

The poll focused on 23 countries that make up 75 percent of the world's GDP. I have to wonder how confident the other 25 percent are feeling right now.

Mathew Katz

9:47 AM ET | 06- 2-2009 | permalink

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What 2,100 Dealerships Means

Still more dealerships than the rest.

 

GM says it will be shutting down about 2,100 dealerships in the U.S. That would still leave it with more dealerships than Nissan, Toyota, and Honda combined.

Mathew Katz

4:51 PM ET | 06- 1-2009 | permalink

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Saab Sweats It Out

Saab's fate is still up in the air. gmeurope

 

For people in Sweden, today's news about the bankruptcy of GM is really all about the future of Saab. The GM-owned car manufacturer entered the Swedish version of Chapter 11 back in February. On Saturday, it was announced that GM's other European brands, Opel and Vauxhal, would be sold to a consortium owned by Magna International and Sberbank of Russia. Saab, however, was left out of the deal. Saab's now in a vulnerable position, according to Swedish Prime Minister Fredrik Reinfeldt.

GM has been talking about selling Saab for months. A number of bidders have shown interest in acquiring the company, including Renco Group, a U.S. investment company, and Fiat. Fiat was also interested in acquiring Opel, so this could be its shot at a consolation prize.

Mathew Katz

2:33 PM ET | 06- 1-2009 | permalink

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Watch: GM Speaks

GM's bankruptcy announcement is the big news of the day around here, and we'll have the story for you on the podcast. In the meantime, we're watching a couple of speeches over our lunch break. President Obama and Fritz Henderson, the interim president and CEO of GM, will each talk about the outlook for the car company.

If you want to follow along, C-SPAN is carrying both speeches. President Obama starts talking at 11:55am, and Henderson's scheduled to start at 12:15.

--Both of those times are New York time (thanks to Aaron M. for catching my omission). As of 1:00pm, Henderson's still talking; President Obama's video is up on C-SPAN.

Jacob Ganz

12:00 PM ET | 06- 1-2009 | permalink

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GM Blogs Its Bankruptcy

Along with this morning's bankruptcy announcement, GM has put together a Web blitz campaign to explain its restructuring plan to consumers.

The company has launched a "Restructuring" page to guide people through its attempts to become a leaner company. There's a blog where you can follow the company's daily updates. Another site, gmreinvention.com, is already chock-full of highly-produced videos, and even gmcourtdocs.com, where you can get your legal document fix.

Of course, GM has been tweeting non-stop all day about everything from which product lines will be sold or discontinued to whether GM services to customers will be cut.

Mathew Katz

11:19 AM ET | 06- 1-2009 | permalink

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First, Do Not Steal From Shareholders

In the past few days, we've heard from a couple of different sources about something that's creeping out from the campus of Harvard Business School. It seems that a group of MBA candidates at HBS, surveying the wasteland that that has been made of their soon-to-be profession, have decided that new business managers should hold themselves accountable to something more than insane short-term growth and ridiculous bonuses.

And so, this month, the MBA Oath was born. It's sort of "a management equivalent of the Hippocratic Oath," writes Max Anderson, a 2009 HBS grad, on the website. Anderson notes that while graduates of law or medical schools are admitted into guilds like the Bar Association or the American Medical Association, no such organization exists for MBAs.

The oath is strictly voluntary, but so far it's been signed by over 100 recent HBS grads, plus a handful of new MBAs from other institutions around the country. The short version of the oath is after the jump:

Continue reading "First, Do Not Steal From Shareholders" »

Jacob Ganz

1:38 PM ET | 05-29-2009 | permalink

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GDP Down, Less Than Predicted

The Commerce Department says the country's gross domestic product fell at a seasonally adjusted annual rate of 5.7 percent in the first quarter of 2009. A 6.1 percent GDP drop had been predicted. From the Commerce Department:

The smaller decrease in real GDP in the first quarter than in the fourth reflected a larger decrease in imports, an upturn in PCE (personal consumption expenditures) for durable goods, and a smaller decrease in PCE for nondurable goods that were partly offset by larger decreases in private inventory investment and in nonresidential structures and a downturn in federal government spending.

Consumer spending, which makes up a significant part of GDP, increased 1.5 percent this quarter, after a 4.3 percent drop in the fourth quarter.

Caitlin Kenney

10:32 AM ET | 05-29-2009 | permalink

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The Economy of North Korea

The North Korean electrical grid, as viewed by Google EarthFrom North Korea Economy Watch

 

On today's podcast we're talking to Curtis Melvin about his excellent blog on North Korea's economy.

My first thought was, hunh, they have an economy? And, of course, they do. It's a strange one: an official, top-down Stalinist centrally controlled system alongside a chaotic, bottom-up and awfully meager market system.

Melvin created a great plug-in for Google Earth that identifies key features in North Korea. You can see the huge estates of the elite and the explosive growth of public markets. You can compare the nice neighborhoods in big cities to the near absence of development in the North East mountains.

He says you can actually get a really good sense of the tensions within North Korea from any computer with an internet connection.

Continue reading "The Economy of North Korea" »

Adam Davidson

9:06 AM ET | 05-29-2009 | permalink

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The End of Advanta

Advanta is wrapping up its credit card business, quickly. News of the company's plans to cut off credit were reported earlier this month, and the company said would notify customers at "the appropriate time prior to June 10." Apparently the appropriate time was yesterday. My boyfriend received a second day air letter at our apartment informing him that his card was being cut off -- in just two days. The Philadelphia Inquirer reports:

Advanta Corp. said yesterday that it expected to move up the date after which its customers would no longer be able to use their credit cards, to next Saturday from June 10.

The Spring House company, which specializes in credit cards for small businesses, said last week that it was freezing nearly one million accounts to cut its losses and preserve its capital reserves.

Continue reading "The End of Advanta " »

Caitlin Kenney

10:53 AM ET | 05-28-2009 | permalink

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AP Source: GM Closing 14 Plants

From the Dayton, Ohio, Daily News, "AP Source: GM to announce 14 plant closures Monday." The lede:

A person briefed on General Motors Corp.'s plans says the company on Monday will identify the 14 factories it will close as it heads toward a likely Chapter 11 bankruptcy protection filing.

The person says United Auto Workers officials in Detroit have told plant-level union leaders that the company will make the announcement, not the union.

The paper reports that a GM spokesperson wouldn't comment.

The Detroit Free Press say the GM board meets this week to decide whether to file for bankruptcy. UPDATE: GM and Treasury have reached a deal with major bondholders giving them more equity in exchange for not fighting the government's bankruptcy plans.)

(Thanks, @maple_fan, who lives outside Dayton and tweets, "This is surreal in an ex-GM town.")

Laura Conaway

10:01 AM ET | 05-28-2009 | permalink

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Mafia Sailing Through Recession

Apparently, it's all about cash.

Laura Conaway

11:58 AM ET | 05-27-2009 | permalink

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Bling Goes Cubic Zirconia

Lil Wayne brings, is the bling Kevin Winter/Getty Images

From the Wall Street Journal, word that the recession is really, seriously everywhere (except for maybe North Dakota):

In an attempt to keep up appearances, celebrity jewelers say rappers are asking them to make medallions with less-precious stones and metals. Some even whisper that the artists have begun requesting cubic zirconia, the synthetic diamond stand-in and QVC staple.

Which development has led 50 Cent to holler up competitors for pulling back from the bling, a term Lil Wayne is said to have coined. But the decline is only natural. "A lot of these rappers simply don't have the money for real stuff anymore," jeweler Jason Arasheben tells the paper. "It's to the point where they are wearing imitation jewelry, and that's ridiculous."

Laura Conaway

2:09 PM ET | 05-26-2009 | permalink

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Failure Is Expensive

Today federal regulators seized BankUnited in Florida. BankUnited was a thrift that was apparently critically undercapitalized. Its failure will cost the Federal Deposit Insurance fund an estimated $4.9 billion.

BankUnited was regulated by the Office of Thrift Supervision. It can now be added to the list of institutions that fell apart under OTS regulation, including Washington Mutual, Downey Savings and Loan and Countrywide.

BankUnited is the second most expensive failure of the crisis. The first? IndyMac, which cost more than $10 billion and was also, by the way, regulated by the Office of Thrift Supervision.

Chana Joffe-Walt

7:34 PM ET | 05-21-2009 | permalink

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Housing Starts Slide Again

Click to enlarge. via Calculated Risk

 

You've sent in lots of pictures of uncompleted housing developments and empty lots for sale, and now we've got the latest numbers to tell us just how bad the construction slowdown is. Housing starts fell to a record low last month, dropping 12.8 percent from the month before. Analysts had predicted a slight increase. According to the Census Bureau, housing starts were at a annual rate of 458,000 in April, a 54.2% decline from April 2008.

Over at Calculated Risk, they're comparing quarterly housing starts and new home sales:

In 2005, and most of 2006, starts were higher than sales, and inventories of new homes rose sharply. For the last six quarters, starts have been below sales -- and new home inventories have been falling.

There is one green shoot in the latest housing numbers -- single family housing starts increased 2.8 percent in April, the second increase in 2 months.

Caitlin Kenney

1:01 PM ET | 05-19-2009 | permalink

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Treasury Gets One More

Neal Wolin is the new deputy Treasury Secretary. Wolin was confirmed by the Senate this morning. He previously worked as the Deputy Counsel to the President for Economic Policy and was general counsel for the Treasury Department from 1999-2001. A press release sent out by the Treasury Department reads:

"I am thrilled to have Neal return to the department. Neal brings a deep knowledge of the Treasury Department and strong managerial experience in both the private and public sectors, and I look forward to working closely with Neal at this critical moment in our nation's history." said Secretary Tim Geithner.

Caitlin Kenney

10:45 AM ET | 05-19-2009 | permalink

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Study: Recession Hurts Kids

A recession lasting until 2010 is likely to "virtually undo" the progress the nation has made in the economic well-being of children since 1975, the Foundation for Child Development says in a report out today.

The philanthropy's report, coordinated by Duke University researcher Kenneth C. Land, uses a composite index of 28 indicators of child well-being.

Among its projections are that child poverty will peak at 21 percent in 2010, and that 27 percent of children will have at least one parent out of work by then. Also, the report forecasts a drop in median family income for all types of families, most significantly for single-parent households headed by men. The foundation projects that median income for those families will drop from $38,100 in 2007 to $33,300 in 2010, in constant 2007 dollars.

Along with declines in income, the report expects that this recession's housing crisis will disrupt the social relationships of poor children as more families must move or become homeless. The report also asserts that child obesity will rise as parents increasingly turn to lower-cost fast-food.

Robert Benincasa

4:57 PM ET | 05-18-2009 | permalink

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Is There A Huge Loophole In Obama's Derivative Reg Reform?

We've been studying the Obama administration's plan to rewrite how derivatives are regulated, and one big concern shows up.

The whole point is to prevent the AIG problem: where one big company has sold so many derivatives to so many financial institutions around the world that if it collapses the whole global economy might collapse.

But the administration's proposal doesn't seem to address all of the issues.

Continue reading "Is There A Huge Loophole In Obama's Derivative Reg Reform?" »

Adam Davidson

2:15 PM ET | 05-14-2009 | permalink

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Stimulus Backs 150,000 Jobs

How much so far. From Vice President Biden's report.

 

Vice President Joe Biden sent the boss a letter today, the first quarterly progress report on spending the $787 billion stimulus program. After which, the White House sent out a press release with highlights:

-- 150,000 jobs have been created or saved
-- More than $88 billion dollars has been made available for programs and projects
-- Over 3,000 transportation construction projects have been funded in 52 states and territories
-- Ninety-five percent of working families have begun seeing the benefits of the Making Work Pay tax credit in their paychecks
-- COBRA health insurance premiums have been reduced by 65 percent
-- Unemployment benefits have increased by $25 a week
-- States have drawn down $15.7 billion in Medical Assistance (FMAP) funds, allowing them to avoid budget cuts
-- Thirteen states have qualified for State Fiscal Stabilization Funds to improve education programs and save education-related jobs

But yes, we read the report itself. As of May 5, Biden writes, $28.5 billion "had already been outlaid." After the jump, who's been laying it out.

Continue reading "Stimulus Backs 150,000 Jobs" »

Laura Conaway

12:08 PM ET | 05-13-2009 | permalink

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Nation Quits Quitting

Source: Bureau of Labor Statistics

 

The number of Americans voluntarily giving up their jobs for reasons other than retirement, termination or death remained at an eight-year low in March.

The Bureau of Labor and Statistics reports that the so-called quits rate was 1.4 percent of the total U.S. workforce, the same percentage as February.

The number of quits has fallen in each of four regions of the country over the past year. People in the Northeast were leaving jobs at a rate of just 1.1 percent in March. The South was at 1.6 -- much lower than it was at this time last year, but still leading the pack.

Devin Dwyer

11:31 AM ET | 05-12-2009 | permalink

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Advanta Freezes Credit Cards

H/T Calculated Risk

 

Douglas Elliott has been warning us that the big trouble for banks these days is not so much the exotic and toxic assets but from defaults on workaday loans to businesses.

Now one of the credit card bigs is shutting down accounts. Advanta, which provides cards for small businesses, will close off accounts for its million customers in June. Bloomberg reports the company faced uncollectible debt on some lines of 20 percent.

"Advanta's a nationally visible brand," one credit card executive told Philly.com. "It's going to be seen as a leading indicator. The first one to fall."

Calculated Risk notes that the Federal Reserve looked for losses of 18 to 20 percent for consumer credit cards -- ordinary folks who run up more debt than they can pay. "Advanta is seeing that in one year for some cards!" -- and it's the businesses that are having trouble paying.

Laura Conaway

11:08 AM ET | 05-12-2009 | permalink

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Sinking in Detroit

Industry underwater. Harpy/Planet Money Flickr pool

 

Several of you have called our Apology Line (202.371.1775.) to confess responsibility for helping drag down Detroit. The messages reflect a collective guilt of sorts for dwindling sales of U.S. cars and trucks from the Big Three. But the latest slew of news may not help assuage that guilt.

Just a week after Chrysler was ushered into bankruptcy, GM seems poised for another round of deep job cuts to avert a trip to bankruptcy court of its own.

And that comes as the Bureau of Labor and Statistics reports 29,100 automotive production-related jobs vanished in April, bringing the total number lost in the past year to 221,400.

Devin Dwyer

1:05 PM ET | 05- 8-2009 | permalink

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Jobless and Searching Longer

From the Bureau of Labor Statistics

 

As the number of unemployed Americans continues to climb, so does the length of time many are out of a job.

The Bureau of Labor Statistics reports that 45.9 percent of unemployed workers this month have been idle for 15 weeks or more. That's up from 34.6 percent at this point last year.

Devin Dwyer

12:07 PM ET | 05- 8-2009 | permalink

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Manufacturing Contraction Slows

The U.S. manufacturing sector contracted further in April but at a slower rate than in March -- a sign the economy could be stabilizing.

The ISM Purchasing Managers' Index -- a composite survey of executives on changes in new orders, production, employment, inventories, and prices -- rose to 40.1 in April from 36.3 in March. A reading below 50 indicates contraction.

Economist Ian Shepherdson with High Frequency Economics predicts the index will continue to rise, hitting the 44 mark by June or July.

"That's immensely significant," he says, "because 44 is consistent with stable GDP." Shepherdson is quick to add, however, that "there are still deep problems in the economy."

Devin Dwyer

10:49 AM ET | 05- 1-2009 | permalink

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Coming Soon to a Showroom Near You

Riding to the rescue? Fiat

 

It isn't likely to stave off plant closings or impending layoffs, but the Fiat 500 could be the car to ultimately save Chrysler.

Detroit Free Press columnist Mark Phelan predicts the Italian minicar could hit American streets early next year and that high-volume U.S. assembly of the 500 could make or break the Chrysler-Fiat alliance. He writes:

The best estimates are that Chrysler factories in North America may be producing between 400,000 and 600,000 Fiat-based vehicles a year by 2013 or 2014. That should be enough to keep two or three Chrysler factories open. Early indications are four plants are in the running for that work: two in the United States, one in Mexico and one in Canada.

Devin Dwyer

9:49 AM ET | 05- 1-2009 | permalink

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Capitalist Pig Flu?

The folks here at NPR have been mapping the reported swine flu cases.

The cases seem to be concentrated in high GDP countries. Is this some virus that prefers rich people? The U.S., Canada, Germany, the UK?

Why none in Guatemala, right over the border from Mexico?

Continue reading "Capitalist Pig Flu?" »

David Kestenbaum

4:43 PM ET | 04-30-2009 | permalink

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Less Money To Spend

Only two stores remain inside the Totem Lake Mall in Kirkland, Washington. Seven_Null7/Planet Money Flickr pool

 

With incomes falling, Americans are spending less and saving more. The Commerce Department says consumer spending dropped 0.2 percent in March, following an increase of 0.1 percent in February. Incomes were down 0.3 percent last month, the fifth drop in six months. Meantime, savings are up. Americans socked away $455.3 billion in March -- that's about 4.2% of disposable personal income.

Caitlin Kenney

11:41 AM ET | 04-30-2009 | permalink

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There Goes Chrysler

NPR's Don Gonyea and Frank Langfitt have confirmed that Chrysler will file for bankruptcy. They're sourcing it to a senior administration official. Details to follow.

Langfitt writes:

The government had long hoped to stave off bankruptcy for Chrysler, but negotiations with hedge funds that hold its outstanding debt crumbled overnight.

President Obama is expected to address the nation about the matter at noon today. Meanwhile, the Detroit Free Press notes that the bankruptcy comes after workers agreed to concessions in benefits and pay. In the end, it appears that the parties who'd loaned Chrysler money weren't willing to accept an offer of $2 billion in cash to settle $6.9 billion in debt. Says the paper:

Of 46 firms, the three holdouts -- Oppenheimer Funds, Perella Weinberg Partners, and Stairway Capital -- had balked at the original $2-billion offer, as well as an increase of $250 million from Treasury on Wednesday evening.

Laura Conaway

10:05 AM ET | 04-30-2009 | permalink

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Fed Sees Signs Of Stabilization

The Fed's Open Market Committee wrapped up a two-day meeting in Washington today without changing the federal funds rate or increasing its purchases of Treasuries and mortgage securities. In a statement released this afternoon, the committee said the contraction of the economy appears to be slowing.

Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

Caitlin Kenney

3:08 PM ET | 04-29-2009 | permalink

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More Than Five

The Treasury Department just sent out this note:

The Treasury Department today announced the receipt of more than 100 unique applications from potential fund managers interested in participating in the Legacy Securities portion of the Public Private Investment Program (PPIP).

These fund managers are the private in the "public-private investment program" to buy up toxic assets. And Treasury has said it wants to partner with just 5 managers. 100 is greater than 5. So it looks like there are some investors willing to participate.

Now will the banks be willing to sell?

Continue reading "More Than Five" »

David Kestenbaum

12:25 PM ET | 04-29-2009 | permalink

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GDP Down: Consumers Save Day

The American economy is still shrinking, and uncomfortably fast. U.S. GDP fell at an annualized rate of 6.1 percent in the first quarter, only a little better than the 6.3 percent decline from the quarter before and about a point more than most economists expected. Why the surprisingly bad number?

Companies pulled back from investing in equipment, buildings and software -- at an annualized pace of 37.9 percent. Exports fell 30 percent, the most since the 1970s.

The good news? Ordinary people spent money. Consumption had been falling by 4 percent, but it rose last quarter by 2.2 percent. That was enough to boost GDP by 1.5 percent.

Laura Conaway

9:15 AM ET | 04-29-2009 | permalink

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Who Should Regulate Our Banks?

Today the Attorney General of New York told the Supreme Court it should be allowed to make banks in his state follow its consumer protection laws. Federal bank regulators will tell the Supreme Court that's not their place. Here's the back story:

In 2005, then NY Attorney General Eliot Spitzer wanted banks in his state to follow his anti-discrimination laws. The banks did not want to. So they sued. Their regulator, the Office of Comptroller of the Currency, sued, too.

This isn't the first time states and federal authorities have faced off on who gets to regulate our banks. But it is a battle that states generally lose. Two years ago the Supreme Court blocked states from supervising mortgage subsidiaries owned by national banks.

These days, people aren't feeling great about our regulatory structure. The state attorneys general make that case in their brief, writing, "The recent (and continuing) fallout from the subprime lending debacle demonstrates the need for more oversight and consumer protection enforcement in the area of mortgage lending."

Chana Joffe-Walt

5:30 PM ET | 04-28-2009 | permalink

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More Help For Homeowners

The Obama Administration has announced a new program to help homeowners lower payments on second mortgages. The AP reports:

The administration initiative, funded out of $50 billion in financial rescue money, relies on a series of payments to mortgage companies as an incentive to modify second loans at lower interest rates. Mortgage companies would get $500 upfront for each modified loan, plus $250 a year for three years as long as the borrower doesn't default.

Similarly, borrowers would get up to $1,000 over five years applied to the principal balance of their primary mortgage, and the government would pick up part of investors' costs as well. Lenders would also be given the ability to remove second mortgages entirely in exchange for larger government payouts.

Continue reading "More Help For Homeowners " »

Caitlin Kenney

3:52 PM ET | 04-28-2009 | permalink

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Stressing Out Over FASB

A few weeks ago we blogged about the change to Financial Accounting Standards Board's accounting rule 157. The new rule allows banks to value the assets they can't sell -- the ones that have been eating holes in their balance sheets -- using their own "judgment."

On Friday, officials at the Federal Reserve
announced that the new guess work won't cut it, at least not for considering what would happen to the banks in a deep and lasting recession.

[I]n order to reflect greater uncertainty about realizable losses in stressful conditions, supervisors did not incorporate the new FASB guidance.

Translation: the Federal Reserve wants these stress tests to unearth what a loss would look like in the case of financial Armageddon. Officials want this number to be the bogey man who will scare bankers' in their beds at night. By comparison, FASB's rules are the equivalent of rose-tinted glasses.

Continue reading "Stressing Out Over FASB " »

Kathleen Brooks

12:29 PM ET | 04-27-2009 | permalink

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Swine Flu Hits The Markets

Global stock markets are lower as more cases of swine flu are reported worldwide.

Mexico is already bracing itself for the economic fallout of swine flu. Since the outbreak became public, a number of countries are banning imports of Mexican meat and some countries are imposing travel restrictions to Mexico just as the summer tourist season gets into full swing.

Authorities in Mexico have requested that bars and movie theaters close during the outbreak. They are also urging people to stay home, which could lower demand and have a negative impact on GDP and financial assets.

Pharmaceutical companies may be the only winners in a pandemic, as demand for medicine to treat the virus would surge.

Continue reading "Swine Flu Hits The Markets" »

Kathleen Brooks

12:22 PM ET | 04-27-2009 | permalink

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New Home Sales Down Again

Seen in California. harpy/Planet Money Flickr pool

 

New home sales fell in March, with the Northeast part of the country taking the biggest hit, a 32.1 percent drop from last month. Sales of single family homes in the Western part of the country actually increased 15 percent, but it wasn't enough to prevent an overall decline of 0.6 percent from February.

Meantime, the average price of a new home dropped 12.2 percent from the same time last year. The average price of a new home in March 2009 was $201, 400 -- in March 2008 the average price was $229, 300.

The Commerce Department says there were over 311,000 homes for sale at the end of March.

Caitlin Kenney

10:54 AM ET | 04-24-2009 | permalink

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Durable Goods Continue To Fall

The Commerce Department says new orders for durable goods, manufactured products expected to last more than one year, fell last month by 0.8 percent. The drop was the seventh decrease in the last eight months and likely means that February's reported increase was just a blip. February's 3.4 percent increase was also revised downward to 2.1 percent. New orders for communications equipment took the biggest hit, falling 8.1 percent over last month followed by primary metals which fell 3.2 percent.

Caitlin Kenney

10:24 AM ET | 04-24-2009 | permalink

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BOA Pressured By Feds?

New York Attorney General Andrew Cuomo says former Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke pressured Bank of America CEO Ken Lewis to complete the bank's purchase of Merill Lynch. In a letter sent to members of Congress and federal regulators today, Cuomo says the government officials threated to get rid of the bank's management, including Lewis, if the deal did not go through. The Wall Street Journal reports:

Mr. Paulson told Mr. Cuomo's office that he made the threat to remove Bank of America's management and board at the request of Mr. Bernanke.

According to people present when Mr. Paulson was interviewed by Cuomo investigators, the then-Treasury chief said that the "threat to remove" was meant to convey a message to Mr. Lewis from the Fed.

Two days later, Mr. Paulson said in his testimony, Mr. Bernanke called Mr. Lewis. Mr. Bernanke then called Mr. Paulson and told him that Mr. Lewis had gotten the message, according to people present during the interview.

Continue reading "BOA Pressured By Feds? " »

Caitlin Kenney

6:35 PM ET | 04-23-2009 | permalink

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Breakfast In California

I'm on the road today, in San Francisco, where I opened the newspaper to find a very, very active economy. Foreclosures in the Bay Area have fallen off, but defaults just hit a record.

"People are hoping that Obama's house saver plan will kick in and abort the new wave of foreclosures," one real estate tracker told the Chronicle. "There is just no way. There is a pig the size of Godzilla in the foreclosure python."

But hey, rents are falling.

Continue reading "Breakfast In California" »

Laura Conaway

1:25 PM ET | 04-23-2009 | permalink

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Open Thread: Credit Cards

President Obama is set to meet with top executives from the country's major credit card issuers today at the White House. The House Financial Services Committee approved a Credit Cardholders' Bill of Rights yesterday, and the Senate is considering similar legislation. The Washington Post reports that the House measure "would prevent such practices as arbitrarily raising interest rates on existing balances, assessing late fees if not enough time was given to pay, and charging interest on debts already paid." What else do you think it should include? What should be done to protect credit cardholders?

Caitlin Kenney

12:18 PM ET | 04-23-2009 | permalink

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Quick, Painless Surgery For GM?

On yesterday's podcast we spoke with Steve Jakubowski of the Bankruptcy Litigation Blog about the feasibility of a "surgical" bankruptcy to save GM. He wasn't so hot on the idea, and he has company.

Mark Phelan of Detroit Free Press points out in today's paper that surgery always hurts and sometimes doesn't cure:

"It sounds, if not pleasant, at least quick, precise and scientific. A drastic treatment for General Motors Corp.'s many ills. The amputation of diseased limbs to create a stronger, healthier automaker.

Except this is experimental surgery. It's never been done before. There's no procedure, no prognosis, no track record to predict the survival rate.

While GM has tried to avoid filing for bankruptcy, new Chief Executive Officer Fritz Henderson has acknowledged that the possibility that it may be forced to seek protection has become more probable.

One thing's fairly clear: Anyone who promotes it as a quick, painless cure is wrong."

Devin Dwyer

10:00 AM ET | 04-21-2009 | permalink

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SIGTARP's Second Report

We profiled Neil Barofsky here the other week. He's the Special Inspector General charged with overseeing the $700 billion being used in TARP.

And Barofsky's office (SIGTARP) has just released its second report to congress.

He talked about it on Morning Edition today:

"Sadly, it's almost limitless the type of opportunities for fraud when you have $3 trillion going out the door."

Continue reading "SIGTARP's Second Report" »

David Kestenbaum

8:23 AM ET | 04-21-2009 | permalink

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Bailout For College Tuition?

You are a responsible parent or grandparent and you're planning for your kid's future. You hope it includes college, so you prepay. You get today's prices for tuition and fees instead of the higher costs later. Those payments that are put into a state-managed investment fund. When the child is ready to attend a state college, the tuition and fees are paid from the fund...or not.

Nineteen states that offer tuition prepay programs are worried they may not be able to afford the tuition, thanks to severe stock market losses. Stateline reports that while none of the states has failed to pay tuition for plan participants in the current school year, some are promising to bail out programs in the future. Even if it means they have to take funds from somewhere else, freeze enrollment and raise fees.

Chana Joffe-Walt

7:16 PM ET | 04-20-2009 | permalink

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The Paperless White House

NPR's Robert Benincasa sends this bulletin:

First craigslist, now this. Cutting millions in newspaper advertising fees is among the measures the Obama Administration's cabinet agencies are undertaking to slash $100 million in agency spending over the next 90 days.

In a White House statement released in advance of President Obama's first cabinet meeting today, this item appeared under the heading "Going Paperless": "The U.S. Attorneys and the U.S. Marshals Offices' Asset Forfeiture program is converting publication of judicial forfeiture notices from newspapers to the Internet. This change is expected to save $6.7 million over the first 5 years."

Continue reading "The Paperless White House" »

Laura Conaway

2:47 PM ET | 04-20-2009 | permalink

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U.S. Banks, Literally....

The government is planning to convert the loans it gave to troubled financial institutions to common stock. This would transform the government's position from a lender to a majority owner of some of the world's biggest banks.

The downside of this deal is that the government will take on more risk when it converts the original preferred shares to common equity. The government can only retrieve taxpayer money if stock prices go up. Also, preferred shares have a superior claim to a firm's assets if it files for bankruptcy. With common shares, you're much further down in the pecking order.

Continue reading "U.S. Banks, Literally...." »

Kathleen Brooks

11:34 AM ET | 04-20-2009 | permalink

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Housing Starts Near Record Low

Housing starts hit their second-lowest mark in March, falling 10.8 percent. The government has been keeping records on home-building for half a century. We know developers built too many houses, so we can expect they'll hold off for a while before breaking out the bulldozers again.

Here's my question: Where are we in that cycle? Are we looking, as the NYT says, at "more evidence that the steep slump in housing . . . has yet to run its course"? Or, as Ian Shepherdson of High Frequency Economics writes this morning, are we perhaps "levelling off after a calamitous plunge"?

Calculated Risk expects the market to hit bottom sometime this year.

Continue reading "Housing Starts Near Record Low" »

Laura Conaway

8:58 AM ET | 04-16-2009 | permalink

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Mall Giant Falls

After months of trying to get extensions on its loans, the #2 mall owner in the country, General Growth Properties, has filed for bankruptcy.

You can hear our story explaining GGP's troubles here. GGP really was a victim of the credit crisis. It owned plenty of profitable malls. But it had borrowed billions to buy some of those malls, and the way these things work is that these big real-estate loans come due in say five years with a huge balloon payment. In normal times the company simply refinances before that happens. But with the credit crisis, GGP couldn't do that.

Some of the banks that had lent GGP money were on shaky ground. So I wonder what this means for them.

Continue reading "Mall Giant Falls" »

David Kestenbaum

8:43 AM ET | 04-16-2009 | permalink

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Remember The Stress Tests?

With the stress tests of the nation's banks nearly complete, the Obama administration is struggling with just how much information it should disclose. All banks are expected to pass the test, but revealing too much or too little about specific institutions' balance sheets could scare off investors. The Wall Street Journal reports:

It isn't clear precisely what information the government might disclose. It remains possible the data won't be specific to individual banks. But some within the administration believe a certain amount of information needs to be released in order to provide assurance about the validity and rigor of the assessments. In addition, these people also are concerned that the tests won't be able to fulfill their basic function of shoring up confidence unless investors are able to see data for themselves.

Continue reading "Remember The Stress Tests? " »

Caitlin Kenney

10:21 AM ET | 04-15-2009 | permalink

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Obama: 'Good Jobs, Rising Incomes'

Gerald Herbert/AP Photo

 

This part of President Barack Obama's speech at Georgetown University struck me. As the New York Times quoted him, the president envisions:

"a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation and fleeing profit, but is instead built by skilled, productive workers; by sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovations and discoveries that will shape the 21st century."

Only not right away, see?

Laura Conaway

1:06 PM ET | 04-14-2009 | permalink

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Ports Slow Down

A few weeks ago we heard from Peter Tirschwell, editor of the Journal of Commerce, about the creepy quiet at the ports of Los Angeles and Long Beach. Today the Wall Street Journal has the numbers: "container volume at Los Angeles was down 6% in 2008 and fell 32% in February from a year earlier." Why the slowdown? It isn't just that people are buying fewer lime green coats. The Journal reports that the ports are facing some new competition:

This drop in volume comes just as ports from Portland, Ore., to British Columbia are rolling out new infrastructure in a bid to grab more of the container business. Some offer quicker transport times from Asia, or fewer environmental restrictions on trucks -- pitches that are increasingly compelling in the global trade slowdown.

It isn't likely that the ports of Los Angeles and Long Beach will lose their title as the country's largest port complex by volume, but the slowdown in shipments is certainly not good for the state's longshoremen.

Caitlin Kenney

11:41 AM ET | 04-14-2009 | permalink

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Retail Sales Shrink In March

Retail sales (click for previous month) U.S. Census Bureau

 

We've been on the lookout for "green shoots" lately, and U.S. retail sales -- up 0.3 percent in January and 1.9 percent in February -- seemed to fit the bill.

But today the Commerce Department reported retail sales decreased by 1.1 percent in March, defying many economists' expectations.

Continue reading "Retail Sales Shrink In March" »

Devin Dwyer

11:03 AM ET | 04-14-2009 | permalink

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GM Bankruptcy June 1?

GM is getting closer to filing for bankruptcy, according to this article in the New York Times. The bankruptcy filing could come as early as June 1 unless GM can come to an agreement with their bond holders and re-negotiate their loan terms. According to the report:

The preparations are aimed at assuring a G.M. bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in G.M. and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders.

One way to deal with a bankrupt GM is to borrow the model used by the Treasury in their bank recovery plan. GM would create a "good" company and "bad" company. The "good" GM would reemerge from bankruptcy as a leaner, meaner machine that might stand a chance of competing in the global market. The "bad" GM would be lumbered with the "toxic" parts of GM including health care costs, bondholder debt and the loss-making factories and brands. The cost to the federal government of the "good" GM is estimated to be $7 billion.

Continue reading "GM Bankruptcy June 1? " »

Kathleen Brooks

11:03 AM ET | 04-13-2009 | permalink

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TARP's Report Card

On a quick read, a couple of points strike me in the new Congressional Oversight Panel report on the progress of TARP.

COP leader Elizabeth Warren still isn't convinced she's getting a straight enough story about the bank bailout from Treasury Secretary Tim Geithner. "[T]he need for a clearly articulated strategy remains paramount," the report says.

COP thinks the bank bailout is still batter, and not yet cake. The COP report says it's too early to tell whether the economic assumptions TARP is based on will hold. "Economic forecasters have predicted that a recovery in GDP will commence in the fall," the commission writes. "However, the trend line in adjustments to those predictions has been consistently downward, with the projected beginning of the recovery receding into the future and its scale diminishing."

And then, of course, there's this bit about troubled banks:

Continue reading "TARP's Report Card" »

Laura Conaway

2:41 PM ET | 04- 8-2009 | permalink

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Making It Easier

The Treasury Department is hoping to attract more private investors to its plan to purchase toxic assets by relaxing some of the requirements for participation. The deadline for the Legacy Securities part of the program has been pushed back two weeks until April 24, and the Treasury Department is now emphasizing that applications will be "viewed holistically -- failure to meet any one criterion will not necessarily disqualify a proposal." The holistic approach could open the door for smaller investors who may not have been able to meet initial fundraising and capital requirements.

Continue reading "Making It Easier " »

Caitlin Kenney

11:50 AM ET | 04- 6-2009 | permalink

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Services Bank On Stimulus

The Bureau of Labor Statistics' March jobs report shows the service-providing sector had the biggest number of job losses last month -- down 358,000 jobs.

Services have been primary engine of U.S. economic growth in recent years, and the latest numbers don't seem to offer much hope for resurgence anytime soon.

The Institute for Supply Management today released its non-manufacturing index for March, which shows the service sector as a whole remains under pressure. The index is a composite indicator of changes in business activity, the number of new orders, employment levels and rate of supplier deliveries.

The Index fell to 40.8 in March from 41.6 in February.

The drop means the services sector is still contracting, which some economists hadn't expected due to recent gains in retail sales. But there is hope among non-manufacturing outfits that the federal stimulus package will turn things around.

Continue reading "Services Bank On Stimulus" »

Devin Dwyer

11:48 AM ET | 04- 3-2009 | permalink

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Show Me The Money...Or Not

The G-20's pledge of $1.1 trillion in new resources for fighting the global economic crisis is a noteworthy outcome of yesterday's summit. The communique says the funds will "restore credit, growth and jobs in the world economy." The leaders also agreed to tighter regulations on hedge funds, rating agencies and tax havens.

But will these things help resolve the crisis in the short term?

Carl B. Weinberg, chief economist with High Frequency Economics, says the measures are praiseworthy but aren't a prescription for restored economic growth:

"The health of the biggest countries in the world, the locomotives of the global economy, is not improved by any of these measures... No economic recession was ever reversed by regulation. Money talks, and the money on the table right now for the European economies and Japan is not enough to do what has to be done to support demand."

The sum total of international fiscal stimuli to date, according to the communique, is $5 trillion.

Devin Dwyer

10:44 AM ET | 04- 3-2009 | permalink

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Banks Get The Best Of It

Today the Financial Accounting Standards Board voted to let banks and other companies change the way they value assets. The idea is to give them a break from mark-to-market accounting, which requires them to price the assets at whatever they could sell them for now.

Lately, those prices haven't been so high. But what about when times are terrific, and the market value of assets is implausibly great?

Continue reading "Banks Get The Best Of It" »

Kathleen Brooks

4:13 PM ET | 04- 2-2009 | permalink

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The Communique Is Here

The G-20 final communique is here. Adam Posen gave us a preview of the document on Wednesday's podcast, and the final draft mentions many of the agenda items he discussed. It says:

The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy.

Continue reading "The Communique Is Here " »

Caitlin Kenney

11:54 AM ET | 04- 2-2009 | permalink

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So Long, Mark-To-Market

First the news, from AP:

The independent Financial Accounting Standards Board voted to adopt new guidelines under the so-called mark-to-market accounting rules, which require companies to value assets at prices reflecting current market conditions.

The changes will allow the assets to be valued at what they would go for in an "orderly" sale, as opposed to a forced or distressed sale. The new guidelines will apply to the second quarter that began this month.

Now an analyst's take, after the jump.

Continue reading "So Long, Mark-To-Market" »

Laura Conaway

9:55 AM ET | 04- 2-2009 | permalink

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Smashing Windows At The G20

"Capitalism is bad." That's what the G20 protesters smashing the Royal Bank of Scotland's windows in London are saying, according to the CNN reporter on the scene. Another global summit, another battle with the police.

I don't mean to get moralistic here, but I don't think the protesters have any right to smash windows -- and in any case, they're only making business for whichever capitalist windows company gets called in to replace the glass. The bank and its insurers take the hit for fixing the windows, the taxpayers take the hit for police wages, and the glazier gets the business. It's all money that might have been spent more productively elsewhere. (See also "The Broken Windows Fallacy.")

More generally, I would hope we can get past the scripted nature of these big confabs -- from the protesters egging each other on to the world leaders charged with fixing this economic mess. More on that in today's podcast.

Bonus: Citizen photos from a peaceful march.

Laura Conaway

11:40 AM ET | 04- 1-2009 | permalink

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Home Values Continue Fall

Click to enlarge S&P/Case-Shiller

 

The price of existing single-family houses continued to fall in January, according to the S&P/Case-Shiller Home Price Indices. They track home prices across 20 major U.S. metropolitan areas.

The index of the 10 biggest cities is down 30.2 percent from its mid-2006 peak; January prices were off 2.5 percent from December. The 20-city index is down 29.1 percent from its peak, and off 2.8 percent in January. Both indices have fallen every month since August 2006.

Bonus: Calculated Risk on house prices and stress testing banks

Continue reading "Home Values Continue Fall" »

Devin Dwyer

12:07 PM ET | 03-31-2009 | permalink

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Crisis Of Confidence Continued

The New York-based Conference Board reported consumer confidence rose slightly in March to 26, from its all-time low of 25.3 in March. A year ago, the index was near 70.

The consumer confidence index measures Americans' take on the current economic situation and their expectations for the future. Those expectations make up 60 percent of the total index, with current conditions accounting for the other 40 percent. The Conference Board surveys 5,000 households every month.

Economist Ian Shepherdson with High Frequency Economics attributes the overall bump to a rise in the the expectations index -- it's up by 1.6 points. That, he says, "has to be seen in the context of the disastrous 6.4-point drop in February."

Economists with the Federal Reserve Bank of New York have studied whether consumer sentiment can influence or predict the direction of our economy. The short answer: yes.

Continue reading "Crisis Of Confidence Continued" »

Devin Dwyer

9:41 AM ET | 03-31-2009 | permalink

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(More) Georgia on My Mind

One more Friday, one more Georgia bank falls. Omni National Bank of Atlanta, a bank that specialized in urban real estate re-development loans, failed this evening. SunTrust Bank, also in Atlanta, will assume its insured deposits.

Continue reading "(More) Georgia on My Mind" »

Chana Joffe-Walt

5:52 PM ET | 03-27-2009 | permalink

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A New Reality For Savings?

Click to enlarge: Personal savings rates since 1959. Calculated Risk

 

Today the Commerce Department reports that for the second straight month Americans are saving more than 4 percent of their disposable personal income.

The personal savings rate -- disposable personal income less personal outlays -- was $450.7 billion in February, or 4.2 percent. That's down slightly from January, when Americans saved $478.1 billion or 4.4 percent.

Still, the current savings rate is a far cry from just three years ago, when it hit minus 0.5 percent -- its lowest level since 1933. At that time, Americans were, on average, spending all their after-tax earnings plus some money stashed away or on credit.

Devin Dwyer

11:30 AM ET | 03-27-2009 | permalink

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Taking Stock Of Taxes

Former Federal Reserve Chairman Paul Volcker has been appointed to head a new tax-code review. The review, set to be completed by December 4, will make recommendations on how to simplify the code and close loopholes.

Budget Director Peter Orszag says the changes could help reduce tax evasion and "corporate welfare." Bloomberg reports:

"There are hundreds of billions of dollars in uncollected taxes each year," Orszag said in a conference call. The Volcker board "will be examining ways of being even more aggressive on reducing the tax gap."

Continue reading "Taking Stock Of Taxes" »

Caitlin Kenney

12:43 PM ET | 03-25-2009 | permalink

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Trade Expected To Fall 9 Percent

The World Trade Organization is predicting that global trade will drop by 9 percent in 2009 -- the biggest drop since the Second World War.

A report from the WTO specifically points to a drop in demand, tightening of credit, and the increasing presence of global supply chains as factors in the downturn. The global economy is expected to shrink by 1 or 2 percent in 2009, and the WTO says "its impact is magnified in trade."

The report says recovery is dependent on proposed fiscal stimulus plans and repairing world's banking system:

Despite the large size of this expected drop in world trade there are still substantial downside risks to the projection. Further adverse developments in financial markets could prolong the current crisis, as could a surge in protection. Recovery could be slower than expected if household consumption does not return to a more normal growth trend soon.

Continue reading "Trade Expected To Fall 9 Percent" »

Caitlin Kenney

12:13 PM ET | 03-24-2009 | permalink

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Geithner Testifies on AIG

Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke are testifying on Capitol Hill today about the government's involvement in AIG. In prepared remarks, Geithner said the government needs to find a way to "unwind a non-bank financial institution like AIG." How does he plan to do that? Take a look:

The proposed resolution authority would allow the government to provide financial assistance to make loans to an institution, purchase its obligations or assets, assume or guarantee its liabilities, and purchase an equity interest.

The U.S. government as a conservator or receiver would have additional powers to sell or transfer the assets or liabilities of the institution in question, renegotiate or repudiate the institution's contracts (including with its employees), and prevent certain financial contracts with the institution from being terminated on account of the conservatorship or receivership.

Continue reading "Geithner Testifies on AIG" »

Caitlin Kenney

11:00 AM ET | 03-24-2009 | permalink

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CBO Predicts $1.8 Trillion Deficit

The Congressional Budget Office says it expects the deficit to reach $1.845 trillion this year, if President Obama's current budget proposals are enacted. The most recent estimate is nearly $600 billion more than the CBO predicted just six weeks ago before Congress passed the stimulus package and an omnibus spending bill.

Although the CBO number is higher than the White House's own estimate of $1.75 trillion, House Budget Director Peter Orszag told the Wall Street Journal that a deary economic and fiscal outlook would not keep President Obama from accomplishing his budget goals.

Continue reading "CBO Predicts $1.8 Trillion Deficit" »

Caitlin Kenney

3:00 PM ET | 03-20-2009 | permalink

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Mass Layoffs Up Again

The Bureau of Labor Statistics has released the latest figures for mass layoffs -- meaning at least 50 people from a single company opening unemployment claims in a five-week period. Last month, there were 2,796 mass layoffs up 542 from January. In total, 295,477 workers lost their jobs in February as a result of these layoffs.

Also on the rise, the total number of people receiving unemployment benefits -- in the week ending March 7, 185,000 more people filed for benefits.

Caitlin Kenney

11:23 AM ET | 03-20-2009 | permalink

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Congress Readies Bonus Tax

Click to enlarge. Nathan Wallace/Planet Money Facebook group

 

A bill to tax the bonuses paid to employees of AIG and other companies that take bailout funds is headed to the Senate. The House overwhelming approved a 90 percent tax on the bonuses yesterday, the Senate proposal calls for a 70 percent tax.

Last night on The Tonight Show, President Obama told Jay Leno he was "stunned" by the AIG bonuses and vowed again to do everything possible to get the bonuses back. Yesterday House Financial Services Committee Chairman Barney Frank proposed legislation to ban bonus payments at companies getting U.S. aid until the government is repaid.

Caitlin Kenney

10:43 AM ET | 03-20-2009 | permalink

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Fed Injection: 'A Leap of Faith? '

The blogosphere is abuzz today over news that the Federal Reserve plans to inject $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.

Here's the take from Simon Johnson at Baseline Scenario:

The big banks are essentially making themselves Too Politically Toxic To Rescue, and this has potentially bad macroeconomic consequences. So what will Bernanke do?

As he sees the world, there is only one course of action remaining: print money and hope for a moderate degree of inflation. The money part was, of course, the announcement yesterday from the Fed.

Continue reading "Fed Injection: 'A Leap of Faith? '" »

Caitlin Kenney

3:22 PM ET | 03-19-2009 | permalink

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Fed Feeling Desperate?

If you missed Adam Davidson's live chat earlier today, you can check it out here. One of the things Adam addressed was the Fed's decision to inject $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.

Geneva, Switzerland: Could you comment on the Fed injecting $1.2 trillion into the markets? Over in Switzerland, we noticed the dollar fall against the euro and CHF almost immediately upon this announcement. The WP article starts out "The Federal Reserve yesterday escalated its massive campaign to stabilize the economy..."Is this move supposed to be reassuring? To me (non-economist) it just seems desperate, like they are scraping the bottom of their tool chest.

Adam Davidson: I think desperate isn't too far off. The Fed is in a very tough position. Normally, it can respond to a slow economy by lowering interest rates. That encourages borrowing, which tends to make the economy speed up. But the Fed's short term interest rate is at zero. That means it can't go any lower. The Fed's main tool to stimulate the economy is broken. Useless.

Continue reading "Fed Feeling Desperate?" »

Caitlin Kenney

1:58 PM ET | 03-19-2009 | permalink

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IMF Criticizes Response To Banking Crisis

The staff of the International Monetary Fund says the G-20 response to the global banking crisis has so far been lacking. In a note released today, the IMF says bank restructuring measures have not gone far enough because they have "responded to market pressures rather than being based on a full diagnosis of the underlying soundness of institutions and estimating losses."

Even on a national basis, resolution strategies for the banking problems have taken place on a case-by-case basis, rather than as part of an overall assessment of the distress in the financial system. Capital injections were often not accompanied by an assessment of bank viability or by restructuring plans. Moreover, the injection of preferred shares in distressed institutions, while giving the authorities some upside benefit should the institutions recover, did not give governments a way to control or influence the bank's use of public money.

Continue reading "IMF Criticizes Response To Banking Crisis" »

Caitlin Kenney

11:23 AM ET | 03-19-2009 | permalink

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'Deflation Still Coming'

In his morning note, Ian Shepherdson of High Frequency Economics keys in on the increase in the consumer price index (CPI). He writes:

The February CPI rose 0.4%, with the core up 0.2%; both increases were a tenth bigger than expected. The headline was boosted by an 8.3% rebound in gasoline prices, a bit less than we expected. Food prices dipped marginally.

In the core, the big surprise was a 0.8% rise in new car and truck prices, the biggest increase since November 04. We can say with confidence that this is not the start of a new upward trend in this incredibly depressed sector. The same is true of clothing prices, up 1.3%. This is a partial reversal of the massive fall discounts, nothing more; the pressure on clothing prices is downwards.

Elsewhere, rents and OER were both very subdued, rising only 0.1%, and lodging costs dropped 1.8%. Headline CPI deflation is still coming, and core disinflation will continue.

Caitlin Kenney

10:28 AM ET | 03-18-2009 | permalink

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Arguing For AIG Bonuses

On Monday's podcast, we talked about the outrage over AIG's plans to pay out $165 million in bonuses. The company says they are contractually obligated to pay bonuses, and they have to follow the law. That may be true, but it's likely not the only reason they feel the need to pay up. As Adam mentioned on Monday, some people suspect that the company is concerned about its ability to retain the very people who created the complex financial products that brought them down in the first place. It's an argument Andrew Sorkin fleshes out in today's Dealbook. He writes:

A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave -- the buzz on Wall Street is that some have, and more are ready to -- they might simply turn around and trade against A.I.G.'s book. Why not? They know how bad it is. They built it.

So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.

Caitlin Kenney

11:55 AM ET | 03-17-2009 | permalink

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Getting More Trade Balanced

From the Bureau of Economic Analysis/U.S. Census

 

U.S. imports and exports continued their slide in January, with the result of narrowing the trade deficit by 9.7 percent.

The numbers are not particularly surprising given the global recession, and a shrinking trade gap can be a good thing. However, there is some eyebrow-raising to be had in the fine print.

Continue reading "Getting More Trade Balanced" »

Devin Dwyer

12:04 PM ET | 03-13-2009 | permalink

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Hear: In Court With Bernie Madoff

Bernie Madoff is headed to jail after pleading guilty to charges stemming from a massive Ponzi scheme. NPR reporter Jim Zarroli was at the courthouse today. He checks in with Planet Money to describe the scene and what happens next.

Caitlin Kenney

2:32 PM ET | 03-12-2009 | permalink

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Up Together: Job Loss, Foreclosure

Foreclosures spiked by 30 percent last month. All told, 290,631 homeowners got either the news or the boot, depending on how far along in the process they were. The Mortgage Bankers Association calculates that 11.18 percent of all loans was either in foreclosure or at least one payment behind.

The fear now is that the new foreclosures are driven by rising unemployment, and not fallout from the subprime mortgage crisis. New weekly claims rose by 9,000, to 654,000.

Continue reading "Up Together: Job Loss, Foreclosure" »

Laura Conaway

1:12 PM ET | 03-12-2009 | permalink

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Low Fees Hurt FDIC

Earlier this month, the FDIC put in place new fees for the banking industry in order to shore up the fund it uses to protect bank deposits. While small bankers were outraged at the new increases, FDIC Chairman Shelia Bair argued that they were necessary to keep the deposit insurance fund from becoming "insolvent this year."

The number of bank closures has skyrocketed this year, already 17 banks have failed in the first months of 2009, compared to just 25 total failures last year. But before the recent crisis, the FDIC was dealing with relatively few collapses. There were no bank failures in 2005 and 2006 and just three in 2007. So where is all the money? Wasn't the FDIC just socking away fees in the last five years in preparation for such a downturn?

Continue reading "Low Fees Hurt FDIC" »

Caitlin Kenney

11:50 AM ET | 03-12-2009 | permalink

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Hey, Glass-Steagall!

We could be looking at the end of banking as we've known it -- at least since 1999. There's been a growing chorus for the repeal of the repeal of the Glass-Steagall Act, a Depression-era law that forced a split between investment and consumer banking. It was overturned in 1999.

Bloomberg News wrote on Monday that President Obama and former Fed Chairman Paul Volcker want to see more regulation for banks. Bloomberg reports that analysts suggest "it will be more costly for some of the banks to remain in the areas they were let into" if the old Glass-Steagall barrier comes back.

Federal Reserve Chairman Ben Bernanke is joining in the chorus.

Continue reading "Hey, Glass-Steagall!" »

Kathleen Brooks

10:44 AM ET | 03-10-2009 | permalink

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World Bank: We're Shrinking

The World Bank serves up the bad news: The global economy is about to shrink for the first time since World War II. The BBC runs the numbers:

"By the middle of 2009, industrial output could be as much as 15% lower than 2008, while trade may record the biggest decline in 80 years, it said."

World Bank economists say the export-heavy economies of East Asia could take the biggest hit.

Laura Conaway

2:09 PM ET | 03- 9-2009 | permalink

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Unemployment: Men More Discouraged

I went looking through the February job loss report from the U.S. Bureau of Labor and Statistics today, which says 31.7 million men and 49.4 million women "not in the labor force" in February for various reasons.

The government doesn't include these sidelined workers in the national unemployment rate. But that doesn't mean many of them wouldn't like a job. In one table, a significant and growing number say they stopped searching for work because of "discouragement over job prospects."

That category includes 281,000 women compared to 450,000 men, everyone who "thinks no work is available, could not find work, [or] lacks schooling or training." It also includes those who reported as "employer thinks too young or old, and other types of discrimination."

Devin Dwyer

4:09 PM ET | 03- 6-2009 | permalink

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Fed Refuses To Name Names

State and federal regulators appeared on Capitol Hill today to answer questions about the federal government's bailout of AIG. Things got heated when Banking Committee Chairman Senator Chris Dodd asked Federal Reserve Vice Chairman Donald Kohn to reveal which companies may have benefited from the government's bailout of the insurance giant. Kohn refused:

I would be very concerned that if we started revealing lists of names of people who did transactions with companies who later came in under government protection, got capital that sort of thing, that people just wouldn't want to do transactions with companies.

Watch the full exchange after the jump.

Continue reading "Fed Refuses To Name Names " »

Caitlin Kenney

5:54 PM ET | 03- 5-2009 | permalink

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Citigroup Goes Low

Click to enlarge. Bloomberg.com

 

Citigroup took the big ride down today, with its shares falling below $1 just before noon Eastern. The lowest so far this Thursday has been 97 cents. A year ago today, Citigroup shares were going for closer to $21.

The trouble with falling below a buck, and staying there, is that the New York Stock Exchange then gets to delist you. On Feb. 26, the NYSE announced it was suspending the rule until June 30 because more than 50 companies had fallen below the $1 mark.

UPDATE, after nudge from: @StreetsofM:
Citigroup's turn at "breaking the buck" is a whole different matter from what happened when money markets did it in September 2008.

Continue reading "Citigroup Goes Low" »

Laura Conaway

12:50 PM ET | 03- 5-2009 | permalink

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GM Eyes Bankruptcy Anyhow

Just this Tuesday GM was blogging against bankruptcy, writing on its FastLane that " 'clearing the decks' sounds refreshing, the reality would be anything but....The deck in question turns out to be one that millions of ordinary Americans stand on."

Well, well, well. General Motors Corp today says its auditors have raised "substantial doubt" about whether the automaker can avoid bankruptcy. The company needs to stop losing money and stop burning so much cash.

GM has borrowed $13 billion from the federal government and seeks a total of $30 billion.

Laura Conaway

11:03 AM ET | 03- 5-2009 | permalink

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A Nation Of Mechanics

February sales figures are out from Ford and Toyota, and the numbers don't look good. Ford is reporting a 48% drop in sales compared to the same time last year, and Toyota reports a 37% drop.

These numbers are bad enough, but take a look at Ford's production plans. The company says it plans to produce just 425,000 vehicles in the second quarter of 2009, compared to 685,000 vehicles in 2008 and 770,000 vehicles in 2007.

There is some bright news in the automotive world, however.

Continue reading "A Nation Of Mechanics" »

Caitlin Kenney

3:27 PM ET | 03- 3-2009 | permalink

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GM Blogs Against Bankruptcy

A GM "news relations" director blogs today against taking bankruptcy:

[W]hile "clearing the decks" sounds refreshing, the reality would be anything but. The bankruptcy process would bring financial hardship to millions who rely on GM -- and upon whom GM relies.

The link comes from another GM flack, which serves to make it all seem that much more circular.

Continue reading "GM Blogs Against Bankruptcy" »

Laura Conaway

12:37 PM ET | 03- 3-2009 | permalink

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Forecast: Sunny?

Yesterday we blogged about the economic scenarios the government will be using to "stress test" the banks. Simon Johnson of Baseline Scenario says he finds the government's baseline scenario of 2.1% growth in gross domestic product next year optimistic.

Today the Wall Street Journal considers another scenario, from the Congressional Budget Office. The Journal calls it "rosy." The CBO forecasts that GDP will drop just 2.2% in 2009, followed by 1.5% growth in 2010. By the time 2011 rolls around, the CBO expects major improvement -- 4.2% GDP growth.

In terms of unemployment, the CBO's projection and the stress test's baseline are roughly in line, with each predicting joblessness to rise to more than 8% in 2009 and nearly up to 9% in 2010.

Continue reading "Forecast: Sunny? " »

Caitlin Kenney

4:00 PM ET | 02-26-2009 | permalink

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Spansion Cuts Jobs, Pays Execs

Joe sends this news, "Spansion ends executive pay cuts as it lays off workers."

The maker of flash memory chips is putting the ax to 3,000 positions. It has dialed back executive pay by 10 percent in October. In a statement, the company said:

"The remaining members of Spansion's management team are more critical than ever to leading the company through a difficult period so that we can preserve the value of the enterprise and create new jobs in the future."

Laura Conaway

1:16 PM ET | 02-25-2009 | permalink

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Sign Of The Apocalypse

Our friend Ian Chillag sent this bit about tanking stock prices. You can now buy a share of the New York Times for less than it costs to pick up the Sunday edition.

Back in the day, shares went for $24.27.

Laura Conaway

11:32 AM ET | 02-25-2009 | permalink

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'Creeping Nationalism, Right?'

The good stuff starts at about 3:32.

Federal Reserve chairman Ben Bernanke testified on Capitol Hill today, and afterwards faced some sticky questions from members of the Senate Banking Committee, like this one from Republican Senator Bob Corker of Tennessee:

It seems to me that this has been creating this sort of "dead man walking," sort of zombie-like banking scenario, and while I have been not using these words out around, it seems to me that what you have explained is a creeping nationalism of our banks. I mean, in essence many of them don't have appropriate capital. You are going to stress test them, which means make them reserve up properly, which they should do, and I applaud that. And then you are going to provide the public funding to meet that capital requirement. So I don't like saying things like this, and squirmed a little bit when I was asked about Chairman Dodd's comments about nationalization but in essence this is a form of creeping nationalism, right?

Bernanke's response, after the jump.

Continue reading "'Creeping Nationalism, Right?'" »

Caitlin Kenney

4:50 PM ET | 02-24-2009 | permalink

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Consumer Confidence. Ugh.

A fall in the personal satisfaction index. Riley Raker

 

The newest Consumer Confidence Index is in. Guess which way it went?

Down, of course. With 100 as the top of the scale, we're now at an all-time low of 25. That's a drop from 37.4 in January.

The Wall Street Journal says Fed Chairman Bernanke is telling Congress today that the recession could end this year.

Continue reading "Consumer Confidence. Ugh." »

Laura Conaway

10:28 AM ET | 02-24-2009 | permalink

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'A Voting Stake'

"In Latest Plan for Banks, U.S. Could Demand a Voting Stake," reports the New York Times. Key quote:

The Obama administration put the nation's biggest banks on notice Monday that the government could become their biggest shareholder if regulators decide they are not strong enough to weather a deeper-than-expected downturn in the economy.

In an unexpectedly assertive joint statement, the Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might end up demanding a direct ownership stake in major banks after they undergo a tough evaluation of their strength, which is to begin shortly.

Laura Conaway

1:57 PM ET | 02-23-2009 | permalink

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Handwriting On Wall Illegible

A pair of headlines today:

Bloomberg: "Dodd Says Short-Term Bank Nationalization Might Be Necessary." And Wall Street Journal: "White House Says Banks Shouldn't Be Nationalized"

The stock market is in a tizz over the mixed signals. Washington Post reports:

Some investors are starting to think that maybe the market won't recover until some big financial institutions have been nationalized, said Nigel Galt, chief U.S. Economist at IHS Global Insight. "Clearly you don't want to be holding those stocks if you think those firms are going to get nationalized and the shareholders are going to get wiped out."

Laura Conaway

3:06 PM ET | 02-20-2009 | permalink

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Another One Bites The Dust

Latvia's government has become the latest to collapse in the wake of the world economic crisis. From the Associated Press:

Latvia's center-right coalition government resigned Friday after weeks of instability brought on by the country's economic collapse.

President Valdis Zatlers said he accepted the resignation of Prime Minister Ivars Godmanis and his administration, which had been in power since December 2007. Zatlers said he would begin talks with party leaders Monday to find a new candidate for prime minister.

Continue reading "Another One Bites The Dust " »

Caitlin Kenney

11:05 AM ET | 02-20-2009 | permalink

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UBS Meets IRS

Papers filed in the U.S. case against UBS contain one particular item that caught the eye of NPR's Avie Schneider. The Swiss bank has agreed to pay $780 million to the U.S. over allegations that it helped American customers skip out on taxes.

Schneider noticed that Exhibit D, a letter telling alleged tax-dodging customers how to close their accounts, urges customers to get straight with the IRS:

Continue reading "UBS Meets IRS" »

Laura Conaway

1:50 PM ET | 02-19-2009 | permalink

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What About The Cramdown?

In unveiling his plan to stop foreclosures, President Barack Obama said he'd continue to "support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value -- as long as borrowers pay their debts under a court-ordered plan."

Bankers have a word for the idea of letting judges cut the principal homeowners owe: a cramdown. They hate it, because banks have to eat the loss -- they lend $1 million, say, but will get back only what a judge says the house is now worth.

When I asked bank lobbyist Scott Talbott about the cramdown yesterday, he noted that Congress would first have to change the bankruptcy laws to allow for it. Then he said that the political and economic climate make exactly that change all but inevitable.

Barron's has a different take: "Banks win reprieve on bankruptcy cramdowns."

Laura Conaway

11:55 AM ET | 02-19-2009 | permalink

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The Dow Of Getting Through

Save a buck in New York City. Shae Smith

 

We don't watch the stock market all the time, but today it's worth noting: The Dow's approaching its lowest level in a decade.

The New York Times report is a series of punches to the gut -- anxiety over the Treasury's plan to save the banks, plunging global trade, speculation that the IMF will have offer a new round of loans to Hungary and Ukraine. The only Dow stock on the plus side today is Wal-Mart.

Continue reading "The Dow Of Getting Through" »

Laura Conaway

3:18 PM ET | 02-17-2009 | permalink

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Too Good To Be True?

The Securities and Exchange Commission has filed a civil complaint against Robert Allen Stanford, head of the Standford Financial Group. The S.E.C. has accused Stanford International Bank Ltd. and its affiliates of "massive and ongoing fraud," alleging that it promised "improbable, if not impossible" returns on certificates of deposits. The New York Times reports:

The S.E.C. accused the bank and its affiliates of falsely stating in marketing materials that client funds were placed in liquid financial instruments, when in fact they were invested in private equity funds and real estate. On Nov. 28, Stanford International Bank quoted a rate of 5.375 percent on a $100,000 three-year CD, compared with rates of less than 3.2 percent at American banks. The bank recently has offered rates of more than 10 percent on five-year CDs, the filing stated.

The S.E.C. says the Stanford operation suffered an estimated $400,000 in losses from investments associated with Bernie Madoff, despite promising investors it had no "direct or indirect" exposure to the alleged Ponzi scheme.

Caitlin Kenney

1:02 PM ET | 02-17-2009 | permalink

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Not A Nation Of Quitters

One of my favorite statistics pinged in today, courtesy of the Bureau of Labor Statistics. The BLS released the latest Job Openings and Labor Turnover Survey for December, including the quits rate. "Quits" account for people who leave a job for any reason other than retiring, being fired or dying. Essentially, it measures how willing or able people are to change jobs.

Back in December 2006, quits made up 61 percent of all changes in job status. The BLS says it's goodbye to that: "Quits dropped to only 40 percent of total separations in December 2008, a new series low, as layoffs and discharges increased substantially."

Continue reading "Not A Nation Of Quitters" »

Laura Conaway

1:24 PM ET | 02-10-2009 | permalink

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The Geithner Plan

U.S. Treasury Secretary Tim Geithner revealed his strategy for fixing the nation's financial institutions. In a speech today, Geithner listed initiatives designed to ease this essential pair of problems:

Instead of catalyzing recovery, the financial system is working against recovery. And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it.

The Geithner plan includes a so-called bad bank (though he didn't call it that himself), a $500 billion to $1 trillion public-private partnership that would buy up toxic assets from banks and work to sell them off; up to $1 trillion for an increased flow of credit for consumers and businesses through the TALF; and a $50 billion program to ward off foreclosures, details to come.

A pair of reactions, after the jump.

Continue reading "The Geithner Plan" »

Laura Conaway

11:50 AM ET | 02-10-2009 | permalink

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CBO: Stimulus Shrinks Economy

The Congressional Budget Office director's blog posted a surprising bit on its blog last week. The CBO writes that the economic stimulus plan now in Congress would actually shrink the economy -- come 2019, the office says, "by 0.1 percent to 0.3 percent on net." Why?

The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth in the form of government bonds rather than in a form that can be used to finance private investment, the increased government debt would tend to "crowd out" private investment--thus reducing the stock of private capital and the long-term potential output of the economy.

The negative effect of crowding out could be offset somewhat by a positive long-term effect on the economy of some provsions--such as funding for infrastructure spending, education programs, and investment incentives, which might increase economic output in the long run. CBO estimated that such provisions account for roughly one-quarter of the legislation's budgetary cost. Including the effects of both crowding out of private investment (which would reduce output in the long run) and possibly productive government investment (which could increase output) . . .

The CBO says the stimulus will help in the short run -- big quote after the jump. I'm hoping to look at this more over the next couple of days. Simon Johnson talked us through some of this on Friday. (Thanks to listener Waciuma Wanjohi and NPR's Maria Godoy for the link._

Continue reading "CBO: Stimulus Shrinks Economy" »

Laura Conaway

1:04 PM ET | 02- 9-2009 | permalink

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Where The Big Layoffs Are

Bloomberg's Rodney Yap runs the layoff numbers for big companies, including by industry and state. My adopted homestate of New York leads with 205,920.

Laura Conaway

12:19 PM ET | 02- 6-2009 | permalink

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Unemployment Offices Under Water

The Washington Post reports that area unemployment offices are having a hard time keeping up with the growing the number of claims. According to the Post, unemployment insurance claims increased nearly 84 percent statewide from December 2007 to December 2008.

"We know what this means for people. They are out here waiting for their money," said Joseph P. Walsh, acting director of the District's Employment Services Department. "But when you have the kind of unprecedented increases in unemployment insurance claims, your compliance numbers will turn on a dime."

The Washington area isn't the only place having problems. Both Seattle and Michigan recently expanded the hours of their unemployment call centers to meet increased demand. Have you had a problem filing for unemployment lately? Hit the comments please.

Caitlin Kenney

12:24 PM ET | 02- 5-2009 | permalink

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Indicator: Empty Shelves

Empty shelves in Madison, Wisc.

Susan Strasser

 

Susan Strasser sends this picture from the final days at Cub Foods in Madison, Wisconsin. Earlier this year, the supermarket chain's parent company told the Green Bay Press-Gazette it was closing almost 50 of its underpreforming stores nationwide.

Twitter pal @olevia sends news of eminent demise of Frisbee's Market, a Kittery landmark and family business dating back to 1828. The store's owners were forced into Chapter 7 bankruptcy this week, but say they're still hoping "Batman flies in to the rescue," that or a wealthy investor.

Caitlin Kenney

10:31 AM ET | 02- 5-2009 | permalink

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Madoff Whistleblower Testifies

Markopolos Says He Will Turn In A Mini-Madoff from AlleyInsider on Vimeo.

Madoff whistleblower Harry Markopolos testified to a House Financial Services Committee panel today about the alleged fraud he says he uncovered. Markopolos told the committee he tried for nine years to get the Securities and Exchange Commission to investigate Madoff. After calling the SEC "3,500 chickens" Markopolos took one parting shot:

"If you flew the entire S.E.C. staff to Fenway Park, they wouldn't be able to find first base."

Markopolos also said he plans on turning in a $1 billion "mini-Madoff" to the SEC tomorrow, and this time he hopes they'll listen.

Caitlin Kenney

12:48 PM ET | 02- 4-2009 | permalink

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Quite The Quit Memo

If you haven't read mortgage broker Christopher Jared Warren's quit memo, start now.

Warren was the managing broker of Triadunanum Financial. He sounds sorry about the catastrophe. But he's also looking for his next gig, which he gets to after seven pages of analyzing what went wrong. Verbatim:

I am the man for the job, Chris Warren, have the management experience, the banking experience, and could assist in the oversight of the most major transformation of mortgage regulation without changing one guideline and still completely eliminate mortgage fraud and restore confidence in the American dream and the securities that that very dream provides for investors.

Laura Conaway

12:40 PM ET | 02- 4-2009 | permalink

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The End Of Quitting

You can find a lot of cool tidbits from the Bureau of Labor Statistics, but my favorite lately has been the "quits" rate. It tracks exactly what you'd think -- the rate at which workers quit their jobs for any reason besides retirement or death. (Yes, death.)

As of November, the last time they did the tally, the quits rate was at its lowest since the survey began, in 2000. It's now at 1.4 percent.

Which shows what Career Builder is up against in trying to persuade people that it's possible to change. I'm looking for folks who can talk about quitting jobs, either staffers who'd like to or human resources people who've noticed the shift. Hit the comments, please, or get in touch. And thank you kindly.

Laura Conaway

2:05 PM ET | 02- 3-2009 | permalink

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IBM: There's Always India

Big Blue is offering its recent layoffs a chance to work in India.

Earlier: Been 'Resource-Actioned' Lately?

Laura Conaway

11:56 AM ET | 02- 3-2009 | permalink

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A Salt And Batteries

The movement to build greener cars hits a roadblock:

In the rush to build the next generation of hybrid or electric cars, a sobering fact confronts both automakers and governments seeking to lower their reliance on foreign oil: almost half of the world's lithium, the mineral needed to power the vehicles, is found here in Bolivia -- a country that may not be willing to surrender it so easily.

The New York Times story is worth it for the pictures alone.

Laura Conaway

2:00 PM ET | 02- 2-2009 | permalink

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Does A Nobel Prize Help?

Steve Chu, the physicist and Nobel laureate who will be running the Department of Energy has some tough economic challenges ahead, finding a way to make renewable energy affordable among them.

I've talked to him a couple times over the years and Chu seems wisely skeptical of miracle cures.

When researches claimed a while back that they had made a laser pulse move faster than the speed of light, I called him up. Chu was quick to testify that this was a silly parlor trick:

"OK, it's surprising for a little while, but after the dust settles, you have to ask, 'Did we learn any new science?' or, 'Is it going to be good for anything?' And I can answer at least the first part. We did not learn any new science."

That story is here. Chu recently told NPR there is no hiding from global warming.

David Kestenbaum

12:25 PM ET | 01-30-2009 | permalink

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Fight Stimulus With... Stimulus

 

The libertarians at CATO took out a full page advertisement in the Times, Post and other papers yesterday opposing the stimulus package.

It ran the same day as this story in the Times about declining newspaper ad revenue. Which I suppose makes their point.

Though they're going to have to take out a lot of ads to save the newspaper business. I just got word that where I live, the Baltimore Examiner will be closing, though there's no notice on their website as I post this.

And boy, strange times when a newspaper ad for the general public can begin with a reference to the Keynesian school of economic thought.

David Kestenbaum

10:37 AM ET | 01-29-2009 | permalink

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Union: IBM Cuts 1,200 More

IBM let another 1,200 people go today, union organizer Lee Conrad says, bringing the total layoffs at the company in the last week to about 4,000.

IBM has mostly declined to comment on the layoffs, except to acknowledge that they're happening. Several major corporations have announced job cuts this week totaling some 60,000 in the U.S., but IBM has reduced its workforce quietly.

Continue reading "Union: IBM Cuts 1,200 More" »

Laura Conaway

3:53 PM ET | 01-27-2009 | permalink

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Jargon Watch: Say What?

Layoffs are continuing at IBM this week, says Lee Conrad, union organizer with Alliance@IBM. The job cuts started quietly on Wednesday, the day after IBM posted a 12 percent quarterly rise in profits and the CEO sent a companywide letter promising bonuses and raises.

Conrad says nearly 3,000 people have been sent packing so far.

Along the way, workers are wending through jungle of corporate jargon. Most of the laid-off workers have been Resource-Actioned. Conrad expects further cuts this year by Management-Initiated Separations (translation: You're fired.). "Believe me, you need a dictionary," Conrad says. After the jump, more IBM-ese.

Continue reading "Jargon Watch: Say What?" »

Laura Conaway

3:52 PM ET | 01-26-2009 | permalink

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Thain Repays $1.2M

We started the day wondering whether John Thain has any sense of this historic moment. The former CEO of Merrill Lynch has become something of a villain in the financial crisis, with his rush to pay bonuses as the investment firm tanked and his $1.2 million office renovation.

Now comes the news that Thain has decided to reimburse Bank of America, which now owns Merrill Lynch, for the cost of revamping his executive suite. Among its contents: A trash can that reportedly cost $1,405. (Which puts a whole new spin on the 62,000 slated to get canned in corporate layoffs announced today.)

Laura Conaway

3:14 PM ET | 01-26-2009 | permalink

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'Resource Actioned' Lately?

U.S. companies today announced 43,000 layoffs in the works today. President Barack Obama used the news to pitch a quick economic stimulus package again.

It's definitely starting to feel like Layoff Land out there, with e-mails from newly canned folks piling up. I'll drop one from an IBM family after the jump. Note: IBM calls its layoffs a "Resource Action."

Continue reading "'Resource Actioned' Lately?" »

Laura Conaway

1:37 PM ET | 01-26-2009 | permalink

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White House Pay Freeze

The Washington Post ran the numbers on how much Obama's freeze on White House salaries over $100,000 actually adds up to. Answer: $443,000 next year.

Here's a list of some salaries from last year. Josh Bolton (Chief of Staff) was making $172,000. Staff assistants were making $34,000.

The LegiStorm website lists Congressional salaries, though it seems to be having technical problems as I post this.

David Kestenbaum

10:03 AM ET | 01-23-2009 | permalink

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China, Seen From The 100th Floor

Empty office elevators are one symptom of China's real estate problems. NPR's Louisa Lim reports on the deceptively beautiful view from the world's highest observation deck in Shanghai.

"Behind these gleaming glass facades, all is not well. Shanghai's real estate market is slumping."

You can also hear her report on why China is not happy with 6.8% growth last quarter.

David Kestenbaum

9:47 AM ET | 01-23-2009 | permalink

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A Microsoft Layoff Checks In

New York City, 1929

Hulton Archive/Getty Images

In other news from the unemployment line, Microsoft says it will cut 5,000 jobs over the next 18 months (Next Web has Steve Ballmer's letter). One of those 5,000 people happens to be a friend of mine. He just got the news.

I don't know about your e-mail, but my inbox is becoming a nest for messages like his.

Continue reading "A Microsoft Layoff Checks In" »

Laura Conaway

2:13 PM ET | 01-22-2009 | permalink

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IBM CEO: Raises, Bonuses Ahead

As layoffs continue at IBM, a Planet Money listener and IBM worker forwards this letter sent by CEO Sam Palmisano on Tuesday. An IBM spokesperson confirms that it's from Palmisano. Full text after the jump. The letter reads, in part:

I am pleased to announce that we will not only be paying bonuses to IBMers worldwide, based on individual performance, but that they'll be funded from a pool of money nearly the same size as last year's. That's significant in this economy -- and especially so, given the size of the 2007 pool. Further, our salary increase plan will continue, covering about 60 percent of our workforce. As always, increases will go to our highest performers and contributors. We should all feel good about the company's ability to invest in people in these very concrete ways.

Continue reading "IBM CEO: Raises, Bonuses Ahead" »

Laura Conaway

12:52 PM ET | 01-22-2009 | permalink

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BlackBerry Execs Fined $100M

Corporate scandals involving back-dating stock options just keep living on.

Word is two top executives of Research In Motion Ltd., the Canadian maker of the ubiquitous BlackBerry, may pay dearly for their role in a stock option accounting controversy dating back over a decade.

The Ontario Securities Commission is seeking a record penalty -- one that reportedly could be as high as $100-million -- from the top two executives for their role in backdating more than 40 percent of stock options granted to employees since 1996.

Daniel Costello

11:58 AM ET | 01-22-2009 | permalink

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Layoffs, Stimulus At IBM

Workers at IBM say the technology company launched a round of layoffs Wednesday. The company has so far been mum, but you can find reports on blogs and on a union website.

IBM posted news Tuesday that its fourth-quarter 2008 profits were up 12 percent over the same period in 2007. If you're calculating in shares, analysts say that's $9.20 per.

An IBM worker and listener wrote in to point out that the company stands to gain from President Barack Obama's stimulus package, and that CEO Sam Palmisano advised the Obama transition team.

UPDATE: The Wall Street Journal reports.

Laura Conaway

11:34 AM ET | 01-22-2009 | permalink

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Geithner Confirmation Hearing

I just watched the last three hours of Timothy Geithner's confirmation hearing (whew) and it seems pretty clear he's going to sail through. There were some fun highlights, including some tense admonishments of Geithner from Sens. Wyden and Bunning. Here's a story I just wrote for NPR's website. We'll update it if anything else interesting happens as the hearing wraps up.

Daniel Costello

1:01 PM ET | 01-21-2009 | permalink

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Too Old To Lay Off

Business Week has an article out this morning about age and layoffs. The article suggests that when it comes time to make hard decisions, companies may be thinking about more than "first-in, last-out" union rules:

Jean Jackson, vice-president for workforce planning for Baystate Health, a 10,000-employee health-care system in western Massachusetts, points to seasoned nurses who can mentor younger recruits in the operating room. When Baystate laid off 55 staffers last November, only 20 were 55 or older (and the system has since hired back nearly half of all those it let go, finding new spots for them). Says Jackson: "Our ability to keep seasoned, longtime employees for longer periods of time will be critical for us."

Is it really a "bad time to be young?" Floyd Norris of the New York Times seems to think so.

Caitlin Kenney

11:19 AM ET | 01-21-2009 | permalink

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Chart: Inauguration Days

The steepest Inauguration Day bounce was FDR's: Click to enlarge.

Alan Cordova/NPR

 

Anyone expected a stock market bounce from the inaguration of President Barack Obama -- and many apparently did -- instead got the shock of the largest Inauguration Day drop ever. The market fell more than 4 percent yesterday.

But spikes or drops in the market on Inauguration Day are quite rare: only in 1933, when FDR delivered one of the most famous addresses in American history, did the Dow Jones Industrial Average register a significant change.

Continue reading "Chart: Inauguration Days" »

Alan Cordova

10:32 AM ET | 01-21-2009 | permalink

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Why The Sinking Dow?

An Obama voter, @kittydew tweets: "What's happening with the DOW with all this hope and change?"

Continue reading "Why The Sinking Dow?" »

Laura Conaway

1:26 PM ET | 01-20-2009 | permalink

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Breakfast With Keynes

Adam Davidson talked to Morning Edition this morning about John Maynard Keynes. It's fairly fabulous.

Laura Conaway

10:55 AM ET | 01-16-2009 | permalink

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Don't Believe What We Say

How's this for chutzpah?

A division of Countrywide Financial Corp., once the the nation's largest mortgage lender before it was sold to Bank of America at a bargain-basement price last year, faces scores of lawsuits over its subprime lending practices.

Considering that, what Countrywide's lawyers have been saying in a New Hampshire court is pretty interesting.