U.S. Economic/Financial News
Federal Reserve Plans To Bail Out Eurodebt
Sept. 17 (EIRNS)A former U.S. government economics official said this week that the Federal Reserve is preparing to open up new facilities to bail out collapsing European bank debt, in association with Treasury Secretary Geithner's trips to European financial meetings this week.
The European debt crisis will continue to worsen, is more dangerous than 2008, and will cause contagion in the U.S. banking system, the official added. In addition, the U.S. housing market will continue to worsen because there is no loss recognitiona continuing refusal to mark mortgage-backed securities to market, by banks or even by Fannie Mae and Freddie Mac.
The Federal Reserve has in fact announced new "swap agreements" set to begin Oct. 14, which will make large dollar credit lines available to the European Central Bank (as well as the Swiss, British, and Japanese central banks), to be used in providing emergency loans to European megabanks full of distressed debt. This was how the Federal Reserve initiated the bank bailouts in August 2008, with the start of such swap lines and large "discount window" lending facilities. Banks in the United States and Europe then immediately started tapping hundreds of millions, then billions at a time in loans, using large amounts of collateral securities rated far below the required Triple-A.
New Report Shows 30 Million Really Unemployed
Sept. 17 (EIRNS)The reality of 30 million Americans who are unemployed today, is shown in a report published on line by Forbes, which shows the shocking effect of the "no future" Bush/Obama presidencies to date. The report, in effect, extends the EIR study of the July 2000-July 2009 period, up to now, August 2011, and back to January 200012 years in total.
The number of Americans normally eligible for employment (age 16-65, civilians, not incarcerated or hospitalized) has grown by 28.5 million in that timeand 19 million of those new eligibles are now in their 20s. But the net growth of actual employment, of any kind, full or part-time, in the same 12 years has been just 3 million, of which 2.7 million are low-wage farm jobs.
Some 65% of the new eligibles in 2000-201118.5 million of themare not in the work force today. The teenage employment ratio has reached an all-time low, 25%, even in the Summer.
The new Census report on poverty for 2010, besides documenting U.S. median household income falling nearly 8% since 2000, also documented an increase of 2 million in Americans between 25-34 years of age, living as "additional persons" in the homes of parents or other relatives. The poverty rate for those individuals, if it were based only on their own income, would be 45%.
U.S. Layoffs and Wage Loss Accelerating
Sept. 17 (EIRNS)U.S. Unemployment claims continued to climb, to 428,000, in the week ended Sept. 9, with the four-week average is now just under 420,000/week, having resumed "recession" levels for the past four months. More surprising, the total number of Americans receiving either state, or Federally funded extended unemployment benefits, which has been falling steadily due to long-term unemployed exhausting their eligibility, jumped by about 100,000, because of a big increase in state recipients. This shows a large number of relatively newly unemployed, from ongoing layoffs.
At the same time the Bureau of Labor Statistics also reported that the ongoing drop in U.S. real wages, shown in many reports, accelerated in August. There was an 0.6% drop in the hourly average wage just during that month, and an 0.8% drop in the weekly average wage.
12% of Mortgaged Homes Lost in Crisis
Sept. 17 (EIRNS)Default notices from banks, which start the home foreclosure process, jumped by 33% from July to August, hitting 78,880 homes, according to a RealtyTrac report of Sept. 14. Foreclosure actions at all stages rose 7% to 228,098, back up to a pace of 3 million a year. There were actual bank seizures of about 65,000 properties.
By the end of this year, some 6 million American households' homes will have been lost to foreclosure since 2007about 12% of all the mortgaged homes in the United States that yearand another 2.5 million will be in some stage of foreclosure. Lyndon LaRouche's proposed Homeowners and Bank Protection Act, in August 2007, could have prevented this mass loss of homes and ruination of neighborhoods.
Foreclosures dropped dramatically starting in November 2010 because the banks' foreclosure-fraud practices had suddenly been exposed. The banks may have suddenly hit the foreclosure accelerator again in August 2011 because the Obama Administration has not come out with the mass mortgage-modification program involving new Fannie Mae and Freddie Mac bailout money, which the banks expected.
Or, the banks may simply be showing desperation to force mortgage-delinquent homes onto the market and cut their losses on them, particularly since investor lawsuits and state criminal investigations are multiplying against their fraud in securitizing those mortgages.
Further acceleration in foreclosures will trigger another drop in home prices nationally.