U.S. Economic/Financial News
Greenspan's White House Rendez-Vous
Shortly after President Bill Clinton left office, Federal Reserve Board chairman Alan Greenspan started to hold policy meetings with top operatives in the Bush Administration, notably Vice President Dick Cheney, Defense Secretary Donald Rumsfeld, and National Security Advisor Condoleeza Rice, not only showing that he knew where the real power lay, but revealing where his loyalties were, according to the Washington Post May 27.
Kenneth Thomas, a lecturer in finance at the Wharton School of Economics at the University of Pennsylvania, obtained records of Greenspan's appointments since 1996, through the Freedom of Information Act. The Fed records show that Greenspan has called on the leaders and staff of the White House Council of Economic Advisers about as often during President George W. Bush's years as he did in four years of President Clinton's second term. However, the number of appointments with other White House officials jumped sharply with the new administration, from an average of only three per year from 1996 through 2000, to 44 per year in 2001 through 2003. Greenspan has made 12 such visits in the first three months of this year, the latest available data show.
According to the Thomas's findings:
"The chairman has met with Vice President Cheney at least 17 times since early January 2001; Defense Secretary Donald H. Rumsfeld, 11 times; Rice, 12 times; [White Houe Chief of Staff] Andrew Card six times; ... Deputy Defense Secretary Paul D. Wolfowitz, twice, and Cheney's chief of staff, I. Lewis Libby, once, according to the Fed's copies of Greenspan's schedule."
Greenspan Was in on War Planning
Approximately one week after the photos of abuse and torture at Abu Ghraib prison began circulating in the media, on April 30, Defense Secretary Rumsfeld held a "small dinner at [his] Washington home," the May 13 New York Times reported. Among the select guest list were President George Bush and First Lady Laura Bush, neo-Confederate Sen. Jeff Sessions (R-Ala), and Fed chairman Alan Greenspan.
It turns out that Greenspan has been very close to Cheney and Rumsfeld for a quarter of a century. Bob Woodward reports in his book, "Maestro: Greenspan's Fed and the American Boom," that shortly after Saddam Hussein invaded Kuwait on Aug. 2, 1990, Greenspan "consulted with his longtime friend Secretary of Defense Dick Cheney." Cheney gave Greenspan "essentially ... a top-secret" briefing. Greenspan then convened a meeting of the Federal Reserve's Federal Open Market Committee on Aug. 21. Months before a U.S. invasion of Iraq was announced to the world, Greenspan told the FOMC meeting, based on Cheney's briefing, according to Woodward, that "The odds of an actual war in the Middle East are 50-50. We are bringing in fairly significant tactical weapons." He told the FOMC members, that "We are in ... economic-political policy turmoil. In that type of environment, it is crucial that there be some stable anchor in the economy system. It's clearly not going to be on the budget side; it has to be the central bank."
Woodward reports that "on January 16, [1991], the day before the air strikes on Iraq were to begin, Cheney gave Greenspan [another] top secret briefing." "On February 1, two weeks into the air war, Greenspan decided to lower rates by 1/2 percent." Greenspan would accommodate the war policy.
Sales of Single-Family Homes Fall in April
U.S. sales of new single-family homes in April fell to 1.093 million units (on an annualized basis), an 11.8% fall from March levels; this is the largest monthly decline since January 1994. According to Freddie Mac, the average rate on a 30-year fixed mortgage has increased to 6.30%, more than a percentage point above the level that prevailed at the same time last year.
The fall in new homes sales is being outstrippedand was precededby the fall in mortgage lending activity. The Mortgage Bankers Association reports that its index of loan applicationscalled the Market Composite Indexreached 632 for the week ending May 21, down 43.4% from the level of 1,117 for the week ending March 12. This index represents the application for all types of loans, whether they be for new homes or for refinancing of existing homes. More specifically, the MBA's index for just mortgage refinancings reached 1,695 for the week ending May 21, which is down 66.0% from the level of 4,984 for the week ending March 12.
This initial phase of collapse in the U.S. housing bubble, which has $13 trillion of housing paper attached to it, is remarkable for the fact, that the Federal Reserve Board of Governors has not yet officially raised interest rates. That increase would set off further effects. In addition, this is occurring within the same geometry as rising oil prices.
One effect already seen is that the stock prices of homebuilding companies, such as Pulte Homes, collapsed from a level of 650.5 on March 5, to 515.5 on May 23, a 21% fall.
Dallas Fed Prez: Books Were Cooked After 9/11
Dallas Fed president Robert McTeer has admitted that the Federal Reserve broke the law by engaging in fraudulent accounting after 9/11 to save the system, according to John Crudele writing in the New York Post May 27. McTeer acknowledged, in a speech May 20 at the World Affairs Council in Houston, that the Federal Reserve "cooked the books" in the immediate aftermath of the Sept. 11, 2001 attacks in New York and Washington D.C., thereby pumping massive liquidity into the financial system which otherwise would have crashed into oblivion.
"We just flooded the market with liquidity because of all the damage in New York," McTeer is quoted as saying.
"You know, all these New York banks and investment banks, they're receiving billions in payments every day and they're making billions in payments," he continued. "Just a hitch or two in that system can bring the thing down."
Even though the Fed couldn't collect the checks deposited with the central bank (because air traffic was halted), McTeer explained, "we pretended we were collecting the checks and we gave credit for those checks." This "created enormous amount of floatwhich by law we're supposed to treat as a real cost to us."
Are they still doing it? The Fed learned a lesson from 9/11, he claims, by using this tactic.
Bankruptcy Filings Near All-Time Record Levels
Personal bankruptcies in the U.S. rose 2.8% in the year ending March 31, to a whopping 1.618 million, while business and personal bankruptcy filings during January-March climbed to 407,572 from 393,348 in the previous quarter, the Administrative Office of the U.S. Courts said on May 21. Overall, a staggering 1.65 million bankruptcies were filed in the 12 months ending March 31, up from 1.61 million bankruptcies in the year ending March 2003, and only slightly lower than the annual all-time record of 1.66 million during the year ending Sept. 30, 2003. In addition to personal bankruptcy filings, business filings slid to 36,785 from 37,548.
Manufacturing Hardest Hit in Mass Layoffs
U.S. employers reported 1,458 mass layoff events in April, as 157,314 workers lost their jobs, the Bureau of Labor Statistics reported May 26. In the four months from January through April, employers have taken 5,747 mass layoff actions, involving 573,523 workers, the BLS said. Each mass layoff is defined as affecting at least 50 workers from a single employer, as measured by new filings for unemployment benefits.
The manufacturing sector was hardest hit in April, as before, with 24% of all mass layoff events and 23% of all initial unemployment claims filed.
Among states, California recorded the highest number of workers affected in mass layoffs, followed by New York, Pennsylvania, Wisconsin, and Illinois. These five states accounted for 55% of all mass lay-off events and 57% of workers.
Detroit's Infrastructure Collapse Menaces Public Health
A recently released study done by a George Washington University Medical Center researcher of 10 communities in America found that Detroit's health safety net for the 280,000-plus uninsured area residents is so "fragile" that it "could not sustain the closure of any Detroit Medical Center hospitals," the Detroit News reported May 19. As it is now, DMC has been able to keep two of its hospitals open only with the use of $50 million in emergency government funds. The study also found that the uninsureds' access to medical specialists is spotty, with many patients not getting treatment for complicated illnesses at all.
"You have hundreds of thousands of people in your community who have given up any notion that they can get health care," Marsha Regenstein, one of the researchers on the study, told the Detroit News. "Detroit stands out as a community with much fewer resources than other[s]."
Adding to Detroit's woes, its infrastructure took another hit, when a 30-year-old water main broke, leaving over 50,000 residents in three communities in the Metro Detroit area without water for a day. The break caused the closure of 20 schools, as well as numerous restaurants and other businesses. A "boil alert" was issued, because, when the water pressure drops drastically as it did, bacteria can infiltrate the water line.
This water main has blown open four times in four years, but is "only" 30 years old, so it is considered to be in its "mid-life" and thus is not scheduled for replacement in Detroit's master plan for at least another 10 years.
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