U.S. Economic/Financial News
Obama's Stimulus Hasn't, and Won't, Reduce Unemployment
Feb. 18 (EIRNS)On the one-year anniversary of President Obama's signing of the American Recovery and Reinvestment Act of 2009the "stimulus"it's an official failure. The Washington Post's lead story is headlined, "Growth hasn't hit payrolls a year into the stimulus effort." And, the Federal Reserve projects that unemployment will stay at January's high 9.7% level throughout 2010.
The $862 billion stimulus has gone into tax breaks for employers hiring workersan area prone to fictional reports; tax breaks to individuals who work; money to state governments, to keep state workers employed (hardly a towering success to date); and funding multiply extended unemployment benefits. As Sen. Evan Bayh (D-Ind.) put it in announcing his retirement, "The stimulus has not created one new job."
For example, a $5 billion Federal weatherization program intended to save energy and create jobs, has done little of either, according to ABC News: Only 9,100 homes had been weatherized as of Dec. 31. Obama claimed that the stimulus would fund the weatherization of 593,000 homes.
A recent poll shows that only 6% of Americans believe that the stimulus created jobs, while at least 7% believe Elvis is still alive.
Until January, NerObama was oblivious to demands for more job creation, but now that unemployment has become an explosive political issue, he wants to throw another $100 billion at "jobs." The House passed a $154 billion jobs bill in December. However, Senate Leader Reid so far lacks the votes to bring even a $15 billion jobs bill to the floor.
Bank Failures Continue Apace in 2010
Feb. 20 (EIRNS)The FDIC closed four banks on Feb. 19, bringing to 21 the total number of failures so far in 2010, a rate comparable to 2009 when about 140 banks failed for the year. The largest of the four failures, yesterday, was La Jolla FSB in La Jolla, Calif., with $3.6 billion in assets and $2.8 billion in deposits. La Jolla was sold to OneWest FSB of Pasadena, Calif. According to Bloomberg, OneWest was created out of the wreckage of IndyMac Bank, one of the earliest victims of the mortgage blowout, by an investor group led by former Goldman Sachs banker Steven Munchin and including a number of giant hedge fund managers, among them George Soros. The La Jolla failure will still cost the deposit insurance fund some $882 million.
The other failures on Feb. 19 included George Washington Savings Bank of Orland Park, Ill., with $412 million in assets and $397 million in total deposits; La Coste National bank of La Coste, Texas, with $54 million in assets and $49 million in deposits; and Marco Community Bank of Marco Island, Fla., with $120 million in assets and $117 million in deposits.
One Way or Another, 2 Million More U.S. Homes Will Be Lost
Feb. 17 (EIRNS)The Financial Times reported today how mortgage-lending banks in the U.S. have moved to abandon the 2009 charade of President Obama's thoroughly failed plan to "modify" millions of mortgages (the "year of mortgage modification," 2009, is over). Instead, the banks have decided that 2010 will be the "year of the short sale." This is how they will deal with the immense wave of 4.5 million more homes expected to enter or re-enter some stage of foreclosure in 2010after American households' outright loss of 2.3 million mortgaged homes in 2008-09. Some 109,000 homes were lost in January 2010, alone, starting 2010 with a 30% increase over the disastrous rate of home loss one year earlier.
In short sales, mortgage lenders graciously allow households whose homes' sale prices have fallen well below their outstanding mortgage debt, to sell the home at a substantial loss. The household loses both the home and its equity investment, if any; and often continues to be in debt for the "second mortgage," "top-off mortgage," "home equity loan," etc. The bank takes part of the loan asset as a loss. But the banks reap fees, early repayment penalties, etc. from the defeated would-be homeowners.
Big mortgage-servicing banks like Wells Fargo, Bank of America, and Citibank are hiring lots of short-sale specialists, holding seminars for brokers on how legally to arrange short sales, and approving short sales in under a month (previously, it took a year if the household got the approval at all). But from the households' standpoint, while they avoid the foreclosure eviction, repossession, and ruination of their credit, a bank short sale is still a way to lose your home and be unable to own another. The number who lose their homes this year, by all competent forecasts, is heading towards 2 million, almost as many as the past two terrible years combined.