Economic Wrap-Up

The last few days have brought a wave of economic news — a half-million more jobs lost, a government order for top banks to add $75 billion in reserves. But that's good news.

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GUY RAZ, Host:

This is ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.

Half a million jobs cut, a spike in the unemployment rate, the highest since 1983, 10 of the biggest banks ordered to raise $75 billion in capital just to stay afloat, and that was the good news in the past few days.

NPR's Planet Money man, Adam Davidson, is here to help us make sense of the economic week. Adam, let's start with unemployment. Just how good can the news be if 539,000 people lost their jobs just last month?

ADAM DAVIDSON: Well, we've been having a lot worse job loss for the last six months. So, we hope that next month will be even fewer and that eventually we reach a point where there's actually job growth in the economy. But you know, it's the obvious thing. You need to freefall to slow down before it can stop.

RAZ: Now, explain something to us. We got this news on Friday, the day after the Federal Reserve released the results of these stress tests on the banks. The verdict for Bank of America, the Fed said it needed $34 billion more as a cushion, and then the stock goes up.

DAVIDSON: Well, I think the stock market has been pricing in a lot of confusion. Remember, on the table seemed to be everything from the government's going to take over Bank of America and own it, and that basically means all of the stockholders lose all of their money, to the government's going to give a real sweetheart deal, and that's going to make Bank of America's stock shoot through the roof and Bank of America just do great.

And so, there's been a lot of wondering and teeth-gnashing and tooth-biting over what is the government going to do, and now we know what they're going to do. And so, the stock went up. It didn't hurdle up. It went up a little bit.

RAZ: So, how do those banks raise that kind of money? I mean, how does Bank of America come up with $34 billion like that?

DAVIDSON: There's a few things they can do. I mean, one thing they can do is get smaller, and then they don't have to raise as much money, which is what I think all these troubled banks are trying to do, selling off divisions, selling off some of their assets to make them smaller.

The other thing is they can issue new stock, which hurts current stockholders but does get some cash in the door. And what the treasury has always said is, you know, there's not a lot of that TARP money left, but there is a little, and they stand by ready to invest again or give money again to these banks.

RAZ: So Adam, are we moving in the right direction? Is the crisis coming to an end?

DAVIDSON: Look, we have to keep in mind that for six or seven months now, the entire U.S. financial system, basically much of the U.S. economy, is on life support from the federal government. It would collapse without the government spending billions and trillions of dollars to keep it afloat.

What we can say is that at least for now, it seems the speed of worsening has slowed, and that is a necessary precondition to the crisis ending.

RAZ: NPR's Adam Davidson. You can get his Planet Money podcasts on our Web site, npr.org. Thanks, Adam.

DAVIDSON: Thank you, Guy.

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