BERNANKE: RECOVERY COULD TAKE 4-5 YEARS

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

AS USUAL OVERLY OPTIMISTIC PROJECTIONS TO PACIFY THE PUBLIC

DOES OBAMA WANT TO BE A ONE-TERM PRESIDENT?

EDITOR’S ANALYSIS: Bernanke is clearly back-peddling from the rosy predictions everyone was making earlier, thus corroborating what we have been saying on these pages for years. The recovery, if it comes at all under current policies will take decades. That’s a fact. But a different policy in which the Obama administration pursues pro-consumer policies, will change the entire outcome. The disappointing drift of the Obama administration brings us nearer to a second collapse that will be worse than the last one in 2007-2009. We almost collapsed then but he brought us back from the brink. Arguments can be made for against the bailout in 2008-2009 — but there is no credible argument for continuing the bailout now.

The simple fact is that the American economy has been driven by domestic consumption and exports. Both have dried up. 70% of our demand is endangered and reduced by the lack of money, wealth, savings, jobs, prospects, and credit. Nothing has been done by the government to materially alter the trajectory of the American economy. Any by allowing agents of a mythological securitization scheme to create two obligations or multiple obligations out of one, and then allow any one of the holders of those “obligations” to enforce by a roll of the dice, we have lost credibility in the international community which in turn is reflecting on the strength and reputation of the U.S. dollar.

To be sure, three are short-term scenarios under which the dollar might be sustained or even gain strength. But the end of this story is obvious — America becomes an unsafe partner in business, with an unsafe economic and legal structure, and an unreliable currency. The effects on all of us are chilling and we don’t want to look at the monster, which is understandable. The judicial branch is our last chance and fortunately they are turning the corner and forcing the issue — we are a nation of laws and those laws and the sanctity of the courtroom are not negotiable.

Every economist worth his salt across all ideology and political spectrums agrees the economy needs a series of major jolts from a stimulus. The last stimulus was far too small as Rubini and Krugman and Johnson pointed out multiple times with nobody listening. Doing it by printing more money is politically impossible and for good reason — it isn’t the answer and it will produce yet more problem in the short-term, mid-term, and long term.

The elephant in the living room is the gigantic stimulus that would result if black letter law was applied to the defective mortgages and foreclosures. Trillions of dollars in wealth could be returned to homeowners and investors under the right program. Yes the megabanks would suffer, and the 7,000 other banks that are not part of what is now the inner elite that meets the third Wednesday of every month, would be required to pick up the enormous burden of all those deposits. I doubt if the community banks and credit unions would actually have any problem with that.

Slow Job Growth Dims Expectation of Early Revival

By MICHAEL POWELL and SEWELL CHAN

The year 2010 ended on a disappointing note, as the economy added just 103,000 jobs in December, suggesting that economic deliverance will not arrive with a great pop in employment.

Signs still point to a long slog of a recovery, with the unemployment rate likely to remain above 8 percent — it sits at 9.4 percent after Friday’s report — at least through the rest of the president’s four-year term.

President Obama is not unaware of the political dangers posed by high unemployment. On Friday he appointed a new head of his National Economic Council, Gene Sperling, to replace the departing Lawrence H. Summers.

The latest report was also a let-down for some within the White House, as recent economic data had suggested that the recovery would gain speed going into 2011. The political stakes are high, as Democrats and Republicans wrestle over who should take credit for the progress of the jobs market, or the blame for its failure to ignite.

“We need collective patience,” said William C. Dunkelberg, chief economist for the National Federation of Independent Business. “You can’t recover quickly from a disaster like we’ve been through.”

With local governments continuing to shed some jobs, all of December’s gain came from private employers. In fact, private employment grew each month last year. The unemployment rate, which is based on a separate survey of households, fell from 9.8 percent in November, though a substantial part of that drop is caused by Americans leaving the work force.

Long-term unemployment, however, remains a malady without an easy cure. The percentage of the unemployed who have been without work 27 weeks or longer edged up last month to 44.3 percent, virtually unchanged from a year ago. Other indicators, such as the length of the workweek, remained stagnant.

The challenge, still unsolved, is how to add enough accelerant to light an employment fire. The Federal Reserve chairman, Ben S. Bernanke, said Friday that he expected economic growth to be “moderately stronger” this year.

“We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” Mr. Bernanke told the Senate Budget Committee in his first testimony to the new Congress.

He was less optimistic about employment, noting that the job market had “improved only modestly at best.” And he added a cautionary forecast: “It could take four to five more years for the job market to normalize fully.”

Mr. Bernanke noted that housing, an enormous potential driver of middle- and working-class jobs, continued to edge downward. The Fed, he emphasized, plans to proceed with its plans to buy $600 billion worth of government bonds, in hopes of stirring more growth.

President Obama, in a speech at a factory in Landover, Md., accentuated the positive, which was a year of private sector job growth. “That’s the first time that’s been true since 2006,” he said. “The economy added 1.3 million jobs last year.”

Left unsaid, however, was the fact that job growth was not enough to absorb people entering the work force in the United States, much less to shrink the unemployment rolls.

R. Glenn Hubbard, dean of Columbia University’s business school and former chairman of the council of economic advisers for President Bush, remains a guarded optimist. He sees signs of the economy gaining speed.

“We could run as high as 200,000 per month this year, but keep in mind that might only bring the unemployment rate down to 9 percent,” Mr. Hubbard said. “That does very little for the person who is long-term unemployed.”

The so-called real unemployment rate, which includes those workers who are discouraged or have given up looking for work, stands at 16.7 percent.

Daniel Alpert, managing partner at Westwood Capital, pointed to a disturbing fact in Friday’s report. “We are seeing what appears to be evidence of structural unemployment,” he said, “among those in the prime, higher-earning 35- to 44-year-old demographic, where unemployment actually increased in December.”

The president’s advisers dispute this. Austan Goolsbee, the chairman of the council of economic advisers, agrees that long-term employment poses a great challenge, but he says there are few signs of European-style structural unemployment, in which job seekers essentially surrender hope.

“We are not cutting them off and dumping them out the door,” he says. “The biggest help for them is to drive down the overall employment rate.”

In the days leading up to the Friday report, economists pointed to hopeful signs. Consumer spending was on the rise, businesses were spending more, car sales nosed upward. And private surveys pointed to the possibility of a sharp, even explosive increase in hiring by small and midsize businesses.

Mr. Dunkelberg, however, noted that surveys of his membership showed no strong trend toward such hiring. Fifty percent reported they had no need to seek bank loans, as they had little intention of hiring.

“The consumer still has way too much debt and our members are very cautious,” he said. “Their only capital spending going on is to fix a leaking roof.”

Employment growth decelerated a bit toward the end of the year, with the biggest increases coming in October — the Bureau of Labor Statistics revised that number upward by 38,000 jobs on Friday.

Adam Hersh, an economist with the liberal-leaning Center for American Progress, recently ran a calculation to see when, at the current pace, the nation would regain the number of jobs lost during the great recession. The answer was 2037.

“Look, we have a huge employment crisis,” Mr. Hersh said.

Much of the growth last month came in the hospitality sector, which added 47,000 jobs. Such jobs, however, tend to provide lower wages and uncertain prospects for long-term employment.

Manufacturing, a source of encouragement earlier this year, added 10,000 jobs. And health services added 36,000, continuing a year-long rise in that area, fed in part by the aging of the American population.

Local governments shed 10,000 workers, fewer than in some past months, and state employment held more or less steady.

For the longer term, economists see hopeful signs. Some take the view that, in retrospect, the recovery of early last year was a false spring, reflecting only the bounce-back from the deep gloom of 2009. Real signs of recovery, including a pickup in shipping and manufacturing, took hold this autumn, they say.

“It’s pretty clear the economy went into a swoon last summer,” said Steve Blitz, senior economist for ITG Investment Research. “Now the real recovery is beginning, and I expect to see improvement.”

But, he acknowledged, he could as easily point to a glass still half empty. American corporations, sitting atop nearly $2 trillion of cash, are not doing much hiring, even as the president and Congress add the carrots of tax cuts and investment incentives. “The most disturbing fact is that you’re not seeing any breadth in the hiring,” Mr. Blitz said. “It’s looking to be a slow climb.”

Christine Hauser contributed reporting.

16 Responses

  1. Wake up, America! The media is lying to you all the time, too. Bernanke is full of s%$t. Bernanke is head of the biggest criminal operation in the world–the Federal Reserve. The Federal Reserve must go. Printing invisible money is absurd and extremely dangerous. http://www.challenginforeclosure.com sirak@challengingforeclosure.com

  2. To B Davies, Excellent work

  3. @ r j koenig, you wrote:

    “Most us, when confronted by trouble, herd to the center of the group.” And you gave multiple examples of this tendancy.

    Exactly not what an astute observer of herd mentality would advise, or what a futures trader would recommend, or…I could go on and on.

    The truth of the matter, surviver’s think completely the opposite. When in a camp of 30 boy scouts who are suddenly set upon by a grizzly bear, the prudent trader….uh…camper, will slowly but surely put on his sneakers, or adjust his market stops…whichever story within a story you’re following.

    The moral of the story is that in truth, when attacked by a grizzly bear in a campground full of pimple faced kids, you only need to outrun the slowest kid. True as well with the dumbest daytrader.

    I could go on and on. But I won’t.

  4. If by the bailout, you mean when Sec of Treasury Paulson threatened congress with martial law unless they coughed up 700 billion to buy toxic paper (and later changed his mind and bailed out banks instead), I believe it would have been better to let the banks go under like 90% of the experts advised.

    Iceland told the banks to go soak their heads and is now recovering from their recession.

  5. Economists for the FL Legislature stated 6-9 months ago that we would not have a return to pre-crisis employment levels until 2018 and even that may be rosey. Asia has 200 million people entering the workforce between now and 2015 and they are going to do everything they can to find work for those people or face instability. They will work at lower rates than any Americans. What do you think is going to happen? Do you think work is coming back to this country? NOT!

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  7. WE (& I MEAN US) COULD RECOVER IN 11/2- 2 YEARS, BUT WE WOULD HAVE TO DISMANTLE THE GOVERNMENT SO WE COULD RESTRUCTURE IT. UNLESS WE GO THAT ROUTE, THERE WILL BE NO RECOVERY. THINK ABOUT IT, THIS IS BERNANKE AND HE’S SAYING 4-5 YEARS (THAT MEANS IT’S REALLLLLY BAD). THIS IS THE GUY WHO WAS AT THE WHEEL WHEN THE “TARP” WAS PULLED OVER OUR HEAD, WHEN WE PULLED IT OFF $700 BILLION TURNED INTO 27 TRILLION. SO IF THIS IS THE LIE HE’S SELLING US WHAT SHOULD WE REALLY EXPECT?

    Sign the Petitions
    “A Declaration of Rescission of All Foreclosures & Mortgage Transactions to Restore 2001 Title Conditions of All Real Property”
    http://www.ipetitions.com/petition/status-quo-ante/

    http://www.ipetitions.com/petition/alter-and-abolish/

    The only People that can Help us is each other.

  8. to kick start this faux economy would so simple if investors and borrowers were given a real chance to work out their issues together.

    But we as a country, a new 21 century banana republic, will allow the elite to grind us to the ground. We as a people have forgotten how powerful we are,we have gotten fat and lazy, going to vote is to much trouble.

    I totally dislike the fact that we will not wake up of our overdose.

    very sad indeed

  9. r j koenig,
    I’m sorry about your troubles (that really sucks).
    It’s not your fault. We’re all to blame. When we act so passively instead of demanding with judges it becomes so easy for them to walk all over us.

  10. US Corporations are hiring — just that it is overseas — not in the US.

  11. I’ll bet you one Amero that the 2nd time around won’t be a “bailout,” it will be a “settlement,” like B of A did.

    I’ll also bet that Congress is counting on the new Iraqi economy to bail out the world. in fact, I’ll bet it was planned. Obama’s admin. would come out smelling like a rose and Bush will be the new hero.
    The deeper we go down, the better they end up smelling when they pull us out.

    Your statement is what I’ve been saying all along:

    “Trillions of dollars in wealth could be returned to homeowners and investors under the right program.”

    That would and should be the RIGHT thing to do, return the “wealth” to the people. (which is really the peoples’ money, anyway). We are ALL footing the bill in some form or another, whether the goody-two-shoes fail to see it or not.

    Then everything else will become “IRRELEPHANT.”

  12. http://www.scribd.com/doc/46520748/Order-Denying-Motion-for-Releif-From-Stay-ONEWEST-BANK-AS-MOVANT-AND-ONEWEST-BANK-AS-AGENT-FOR-DEUTSCHE-BANK

    MOTION FOR RELIEF FROM AUTOMATIC STAY DENIED. ONEWEST BANK AND ONEWEST BANK AS SERVICING AGENT FOR DEUTSCHE BANK DENIED. LACK OF STANDING. DECLARATION LACKS CREDIBILITY

  13. Neil Garfield’s extraordinary capacity for empathy flows (I suspect) from troubles and travails in his own history.
    Men divide along many lines: but there is one self-destructive tendency against which Neil cautions us.
    Most us, when confronted by trouble, herd to the center of the group.
    The Washington Post’s Michael Rosenwald wrote about this in 2008.
    “Why We Buy Into the Herd, Even When It’s Not Good for Us”
    “When a group of frogs senses they are about to be visited by the dreaded snake, they do not hop in separate directions. They bunch up together. And they fight to get in the middle, taking comfort in being further from being eaten by the bad guy. Sheep do it. Minnows do it. It turns out that humans do, too, particularly in financial crashes. “The safest thing is to run toward the middle,” said Elke Weber, a Columbia University business professor who has studied judgment and decision-making. Her correlating four-legged example: gazelles running from lions. “In the middle, surrounded by everyone else, that is where you take comfort. To hide in a crowd is very evolutionary. When you are fearful, you take comfort in herds.”
    Neil Garfield instinctively understands that every bank, evidently every judge, and almost all the lawyers are herding us towards the center and inevitable doom.
    Neil Garfield understands that the figurative gas chamber awaits us if we allow ourselves to be herded – almost shepherded to the center, if you will – by judges who are conflicted by fear of the loss of their own ill-gotten wealth.
    Some number of years ago, my family and I were in front New York State Supreme Court judge Carol Huff in a very very simple matter where an insurer, USAA, had cavalierly denied my family’s insurance claim on form HO-84 after we were obliged to spend $25,000 to return our cooperative apartment to its original condition after the landlord’s steam pipes exploded.
    The case was one of those ABCDE matters.
    Landlord’s steam pipes explode; tenant repairs all damage regardless of landlord’s fault; insurer indemnifies tenant who is USAA policyholder; USAA owns the exclusive right to subrogate the claim to landlord’s insurer; and USAA is then reimbursed by landlord’s insurer.
    When Robert F. McDermott who was our attorney in fact at USAA learned that the cooperative apartment landlord had no insurance against which McDermott could pursue a subrogation, he then cheated my family out of our insurance settlement.
    In other words – if McDermott at USAA couldn’t get paid – well then he wasn’t going to pay us. That is a street-level hustle used by minor debtors who claim they can’t pay their bookie.
    This whole process of screwing my family was elegantly presided over by Judge Carol Huff – over a period of 10 years.
    Since Carol Huff and her Judge husband certainly lived in a cooperative apartment themselves – this corrupt judge certainly knew the drill: which in our case was that USAA pay.
    There were no triable facts: NYS Insurance Form HO-84 governed. And that was that.
    But Judge Huff was conflicted – and if one understands the NYS system by which Judges are appointed: Judge Huff had been bribed by USAA to screw us so many years before our case even arrived in front of her that she had forgotten that she had been bribed.
    She and her husband were probably USAA members as well.
    But in a sense I am to blame: because I allowed the corrupt Judge Carol Huff and the equally criminal USAA lawyer Robert Spadaro to herd me and my family to the center – where my wife and 3 children and I were slaughtered.
    Neil Garfield is right: don’t let yourself be herded to the center where you can be gassed and slaughtered by the banks, the insurers, and their lawyers and the conflicted corrupt Judges like Carol Huff.
    btw: since the matter before Judge Carol Huff’s court contained no triable facts, there was only one thing for Judge Carol Huff and her sexually-conflicted law clerk to do: and that was produce a “directed verdict” that USAA pay the claim and (if Robert F. McDermott wanted to be made whole) sue the landlord for the exploded steam pipes. McDermott’s corrupt position was that my family didn’t own the damaged property even though McDermott had been paid to insure it. That fraud by Robert F. McDermott was thoroughly rejected by NYC Housing Judge Jerald R. Klein who ordered that we did of course own the damaged property. Judge Klein was the judge sold on eBay: Klein and his own law clerk were also real pieces of work.
    Truth is often stranger than fiction.

  14. Another judge who “gets it”.

    “In the largest bank failure in U.S. history, the FDIC seized Seattle-based Washington Mutual Bank and sold its assets to JPMorgan for $1.9 billion in September 2008, after a run on the bank in the midst of the economic meltdown. The company filed for Chapter 11 bankruptcy protection the next day.

    But in her 109-page decision, Walrath rejected WaMu’s overall reorganization plan because of the wide-ranging protection it sought to give directors, officers and other professionals. She wrote that language used to release them from claims was “much too broad” and “inappropriate” and must be limited to a specific list.

    She also noted that WaMu was attempting to shield the executives from any responsibility for “willful misconduct and gross negligence,” which she said was too extensive.”

    http://www.sacbee.com/2011/01/07/3308043/bankruptcy-judge-rejects-wamu.html#

  15. I wish I had something snappy to say, other than that he (Bernanke) is just a liar.

  16. The Real Armagedon is gonna hit this year. Budget Cuts in California means State Municipal employees out of a job or salaries cut. Checking Pensions in California and pension cuts means less money to spend on Mortgage and goodies. MORE FORECLOSURES ON HOUSES CARS ETC.. IN MORE ESTABLISHED NEIGBORHOODS.

    ARMAGEDON.

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