September 2010

Government in the Securitization Business

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Thought bail outs were over?   Think again.    Last Friday the government bought $50 billion in toxic assets from three corporate credit unions.

The government’s National Credit Union Administration seized three corporate credit unions on Friday and announced a plan to separate the $50 billion of troubled assets from the industry.

What is a corporate credit union you ask? A corporate credit union is kind of a wholesale or bank to the regular credit unions which consumers use.

The NCUA press release overviews their Corporate System Resolution to deal with buying billions of worthless crap derivatives. What are they doing? Repackaging $50 billion in worthless derivatives as $35 billion in government backed derivatives. I kid you not. The government is in the securitization business.

La de da, look at the NCUA's statement on how the corporate credit unions got into trouble:

Several large corporate credit unions made large investments in private label mortgage-backed securities that are now worth much less than the amount the corporates originally paid for them. This affected corporate credit unions in two significant ways.

Sunday Morning Comics - Congressional Testimony Edition

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Brought to you by the NBER - The Recession is over because real people don't cycle enough.
Cup O' Joe

 

Good Morning! Rise and Shine! Get that Cup O' Joe...
break out the O.J....hang out with the pooch...time to check out the Funnies.

 

Broke Living Is a Serious Medical Condition...

 


Cartoonist: R.J. Matson

 

Recession Ends; Nobody Notices

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The National Bureau of Economic Research declared this week that the Great Recession ended over a year ago. Yet, for some reason, the average American isn't ready to break out the champagne.

"Every single one of the individuals who wrote the report needs a serious reality check," said Bob Johnson of the Queens borough of New York, who is 46, had worked in communications and has been looking for a job for more than three years.

The American working class is hurting. The unemployment rate is only marginally down from the peak and the economy has been losing jobs over the last three months. Households were $1.5 Trillion poorer last quarter, and $12.3 Trillion poorer than three years ago. Most of this is reflected in the crushed dreams of retirement. The poverty rate is at a 15-year high.

poverty.jpg

Nevertheless, the economy is improving, right? That depends on who you ask.

Layoffs August 2010

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If you can believe this and I know you can, layoffs are still going on. In August 2010, 150,192 people were fired in 1546 mass layoffs. This is not just generic firing (labeled nicer terms to avoid the fact you're being fired), these are announced layoffs of 50 or more people at a time.

In manufacturing alone, there were 46,540 people who lost their job, from 403 mass layoffs.

Initial weekly unemployment claims for September 18, 2010

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I hate initial weekly unemployment claims as an economic metric. It is a volatile number, subject to revisions, and has much statistical noise. That said, every single week, over and over, we are simply not seeing initial unemployment claims really drop. One has to wonder where all these people are coming from and has every single American at this point been fired from a job?

Existing Home Sales - up 7.6% for August 2010

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The National Association of Realtors reports existing home sales increased 7.6% in August 2010.
Supply is now at 11.6 months, down -7.2% from last month's 12.6 month supply. The median home price dropped to 178,600, down from last month's median home price of 182,100.

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 4.13 million in August from an upwardly revised 3.84 million in July, but remain 19.0 percent below the 5.10 million-unit pace in August 2009.

Mortgages are at record lows:

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.43 percent in August from 4.56 percent in July; the rate was 5.19 percent in August 2009.

Over a third, of 34% of existing home sales were distressed sales. In other words, foreclosures, short sales.

A parallel NAR practitioner survey shows first-time buyers purchased 31 percent of homes in August, down from 38 percent in July. Investors rose to a 21 percent market share in August from 19 percent in July; the balance of purchases were by repeat buyers. All-cash sales slipped to 28 percent in August from 30 percent in July.

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