Tag Archives: Recession

Living Hasn't Been Cheaper

Apparently this is bad news:

NEW YORK, Jan 7 (Reuters) – The U.S. apartment vacancy rate rose to an almost 30-year high of 8 percent in the fourth quarter, and rents dropped in the biggest one-year slump in 2009, according to real estate research company Reis Inc.

The report reflects the job market, which so far has stubbornly refused to follow positive economic indicators such as the stock market rebound and improved manufacturing demand.

But that’s only 1 way of looking at it.  Another, of course, is to report that it hasn’t been cheaper to rent in years!  I find it strange that we report falling home prices as bad, when, in fact, it results in allowing more and more people to afford a home of their own.

The world is a funny place.

Government Regulation at Work

As the Obama administration becomes more and more involved in the day-to-day business of more and more businesses, you have to wonder what his real goal is?  If it is to drive the best and brightest from the industry in question, well, then this should be seen as a sign of success:

NEW YORK (Reuters) – A top executive at American International Group Inc has resigned because of pay curbs imposed by the Obama Administration’s pay czar, the insurer said on Wednesday.

Anastasia Kelly, AIG’s vice chairman for legal, human resources, corporate affairs and corporate communications, resigned effective December 30 for “good reason” and is eligible for severance pay under the terms of the company’s executive severance plan, the insurer said.

Kelly stands to be paid about $2.8 million in severance, according to a source familiar with the matter.

Kelly’s resignation comes after Kenneth Feinberg, who is charged with monitoring pay levels at companies that received taxpayer funds, imposed pay caps for AIG’s top executives.

Earlier this month, Feinberg set the compensation structures for the 26th through 100th highest-paid employees at four firms, including AIG, limiting most cash salaries to $500,000.

And she’s not the only one.  Apparently there are other top execs ready to walk:

She was among five executives reported by The Wall Street Journal to have notified the insurer that they were prepared to resign and collect severance benefits if their pay was cut sharply by Feinberg. Chief Executive Robert Benmosche separately also had considered quitting because of the pay constraints, the Journal has reported.

And the impact to the bank:

Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said no AIG employee was irreplaceable.

“We have been duped into thinking that these AIG employees have some kind of secret code that no other employee could discover if they were hired to replace them and therefore they are able to basically hold the company ransom,” Hurley said.

Imagine if the government bailed out the Minnesota Vikings.  And then, in order to make them competitive, demanded that the team could only pay their QB $500,000.  Brett Favre walks.  The Vikes finish 3-13.  As it stands today, they are the number 2 seed and a decent bet at playing in their 5th Super Bowl.

Hope for Change.

"This One Time…..In Band Camp…"

I’m relatively new to really REALLY watching politics.  I guess, in the past, I didn’t care.  Mostly I was single, renting and didn’t make enough money to care about taxes.  The last decade has seen that ALL change.  I am no longer single, I have children, own a home, make more money and am seriously considering starting my own business.  I also spend more time at home than I used to spend before all the changes aforementioned.   Combine this with the very compelling story of last year’s election; first time in many years that a  President or Vice President wasn’t running, and you have good drama.  AND we would have the opportunity to see America’s first woman or black Presidential candidate.  All good political drama.

Back to my point.  I am really pretty new to political theater.  So, maybe as I say this, it’s really not so unusual.  Could even be par for the course.  But to me, this is absolutely stunning.  Not only in the hypocrisy of it all, but in the sheer ignorance of any semblance of economic thinking.

WASHINGTON (Reuters) – The Obama administration pledged on Thursday to back beleaguered mortgage finance giants Fannie Mae and Freddie Mac no matter how big their losses may be in the next three years.

Serious?  Banks are paying BACK their TARP funds and these guys are asking for, and getting, more money?  At least they’ll have to be smart in their use of it, right?

It also jettisoned a demand that the two companies cut the size of their mortgage-related investment portfolios next year, allowing them to provide even more support in the near term for a housing market recovering from its worst slump in decades.

Nope.  Business as usual; continue to sell money to people who can’t afford it.

So, how is it that some businesses are capped and controlled and can’t WAIT to get out from under government control while others seem unable to even WANT to get out?  Is it political or is it simply a way of life?  Is it really possible that the Obama administration is giving political favors to supporters or, perhaps, does he simply think that a fascist* banking system is the most effective method by which to establish financial systems?

The Treasury’s announcement came just hours after the companies said their chief executives would be paid up to $6 million on an annualized basis for 2009.

Fannie Mae and Freddie Mac are congressionally chartered companies that buy up mortgages from banks and other originators to keep mortgage markets liquid. Some of the debt is repackaged as securities and sold off to investors, and the government has been buying an increasing share.

Sadly, for Liberty loving people, it would seem that the answer is “Both”.  Obama is both paying political favors, $6 million to the CEOs, AND feels that economic fascism is the preferred method of financial systems.

Like I said, I am new to this.  Maybe this is business as usual.  But from the cheap seats, this is ugly.

*   From wiki:  Fascists promoted their ideology as a “Third Position” between capitalism and communism.  Italian Fascism involved corporatism, a political system in which the economy is collectively managed by employers, workers and state officials by formal mechanisms at national level.  Fascists advocated a new national class-based economic system, variously termed “national corporatism”, “national socialism” or “national syndicalism”.  The common aim of all fascist movements was elimination of the autonomy or, in some cases, the existence of large-scale capitalism.

Fascist governments exercised control over private property but did not nationalise it. They pursued economic policies to strengthen state power and spread ideology, such as consolidating trade unions to be state or party-controlled.

The {gravel} Road to Perdition

I don’t know what this means.  I’m not sure it means anything at all.  Then again, it may mean everything:

The high price of pavement and the sour economy have driven municipalities in states such as Michigan, Pennsylvania, Indiana and Vermont to roll up the asphalt — a mile here, a few miles there, mostly on back roads — rather than repave.

Now look, I grew up in a county FULL of gravel roads.  I used to drive gravel roads to visit my friends and to get to work.  Heck, when I was teaching the directions I gave to family was “turn left at the gravel road”.  I am FINE with gravel.

Question is: I this a sign of fiscal responsibility or a harbinger of bad times ahead?

Government Preventing Entire Class of People From Buying a Home

The State of North Carolina claims that it is serving the people.  It claims that by relieving my money from, well, from me, they are helping other people in need.  Never mind for a second that I already help people in need through my various charity giving and other activities.  Or that the people I help are people that I think need help.  Or that, in any case, this decision on what to do with my money should be mine to make.  The State is helping an entire class of citizens, or so they claim:

Raleigh, N.C. — A program launched a year ago has helped more than 2,500 North Carolina homeowners avoid foreclosure, officials said Monday.

Birdsong will now receive mortgage assistance, including payments for property taxes and homeowner’s insurance for at least the next nine months and could benefit for as long as two years.

That’s one way of looking at it.  The other way, of course, is to look at it this way:

Raleigh, N.C. — A program launched a year ago has prevented more than 2,500 potential North Carolina homeowners from attaining affordable housing, officials said Monday.

Their goal of home ownership has been prevented because select citizens will now receive mortgage assistance, including payments for property taxes and homeowner’s insurance for at least the next nine months and could benefit for as long as two years.

But serious.  I’m sure that all the people who are in danger of losing their homes are good, hard-working people who almost certainly bought a home that was within their means and needs.  Right?  No?

She said she’s most relieved that her three children will be able to spend the holidays at home.

“Each one of them has their own room. They’re like, ‘It’s mine,'” said Birdsong, a widow. “I wouldn’t want to take that from them. They’ve had enough problems already.”

So, a single mother with one revenue stream over reaches, buys a FOUR BEDROOM HOME surprisingly finds herself in a financial pinch.  And because of that, the government takes my money, thereby preventing me from giving to who I think is deserving, props up this family and keeps what would otherwise become a more affordable home from falling into the hands of more responsible home owners?  Unbelievable.

For the record, I grew up in a house that had TWO bedrooms.  Sure, after a bit we added a bedroom, but that was when my family grew from 3 to 6.  That’s 2 rooms for 4 kids.  If only I could have had my own room.

Merry Christmas.

More of the Same

Wanna know why we are in the trouble we’re in right now?  People spent too much money.  Many times, money they didn’t even have.  They either bought a house they had no business buying or they refinanced that house and spent the money somewhere else.

Either way, we simply spent too much money.

And the only way that we are going to be able to get better is to let this thing play out.  The over spending, and the bubble that it created,  has GOT to play out, and get out, of the system.  Pure and simple.

Which makes me shake my head when I read this:

Under the program, eligible borrowers who are behind or at risk of default can have their mortgage interest rate reduced to as low as 2 percent for five years. They are given temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a hardship letter.

See, the Government has set up a program that allows folks who are in trouble with their mortgage to get help.  Ignore, for a second if you can, the fact that the government has no business stepping and helping these people.  Focus instead on if the program works or not:

Only one in three homeowners who have signed up for the Obama administration’s mortgage relief plan have sent back the necessary paperwork, highlighting continuing problems for the government’s effort to stem the foreclosure crisis.

It doesn’t.  And how could it?

Lenders, however, say the majority of borrowers either don’t complete the paperwork or don’t make the payments. At Bank of America, for example, only a quarter of the 65,000 borrowers in trial modifications have sent back their paperwork.

The bank blamed “ineffective communications with customers, shortcomings in document maintenance, misunderstandings about program requirements, and the inability to comply by some borrowers,” according to written remarks from Jack Schakett, Bank of America’s credit loss mitigation strategies executive.

I mean seriously.  Can you imagine going to the DMV for help on your mortgage?  Can you imagine the confusion that must reign at these offices?

Government.  Sheesh

They Say This With a Straight Face

Turns out about 22.1% of households in the 10 county Bay area are struggling to make ends meet:

Whereas the federal poverty level would be $17,170 a year for a family fitting that description – no matter where they lived in the United States – the self-sufficiency standard estimates that it would take $54,590 for such a family to live comfortably but without frills in San Francisco County, $49,823 in Contra Costa County and $63,871 in San Mateo County.

Are you kuckin’ fidding me!?!

Now granted, this is for a family of two parents with an infant child.  BUT STILL!  We are talking about an income north of 63 large.  $63,000!  And they are struggling to make ends meet?  I read the article twice.  I regret to inform you, gentle reader, that these people are DEAD serious.

Okay, okay.  So…so what?  So, like, what is the conclusion?

“This report raises important questions about how we can better serve the thousands of low-wage workers and families who were already struggling before the recession, whose situations are undoubtedly more precarious now,” said Anne Wilson, chief executive of the United Way of the Bay Area.

How we can better serve people who make about 55k?  Un-be-liev-able!

Check this out:

Annual Salary to be Considered Below Standard

Two things:

  1. Anyone making about $55,000 has the ability to move.
  2. Anyone else think these numbers are just made up so that about 20% of the population will fit?

No wonder California is broke.

Could This Turn Out Any Other Way?

Look, there are over paid people in this world.  Athletes.  Movie stars.  Middle managers at large corporations.  Sure.  I get it.  And to a l ot of people, people who really work and work physically, the money that some of the people make is gross.  That being said, the market adjusts pretty well and compensates those people fairly well.

Is shoveling horse manure more physically demanding than running a large Fortune 50 account?  Yup.  Are more people suited to shoveling manure than managing said account?  Just as sure.  Hence, the value of the skill is different and the compensation changes.

Which just makes this news predictable:

Anastasia Kelly, general counsel of AIG , Rodney Martin, head of one of AIG’s international life insurance businesses; William Dooley, who runs the financial-services division including AIG Financial Products; Nicholas Walsh, vice chairman and head of the international property and casualty unit; and John Doyle, who runs the U.S. property and casualty division, said in written notices Dec. 1 that they’re willing to leave by the end of 2009…

In October, Feinberg cut 2009 compensation for AIG’s top 13 employees by 57%, including limiting most base salaries to no more than $500,000. Another 12 top employees had already left before the review began, according to the WSJ.

Now, you can argue that execs are overpaid.  And you might even be able to convince some people of that fact.  But what you CAN’T prove is that THESE execs are overpaid in relation to their peers.  These people, in theory, are among the best in the world at what they do.  There might be only a few hundred who have the ability to rise to the positions these people have.  And that is among billions of people.  They SHOULD be paid well.

Now they will, just not at AIG.

Seriously Confused

This time, it’s me I am accusing.  Not Obama.

I have been reading the reports of the unemployment situation today and two things have stood out. The first, from the BLS:

The unemployment rate edged down to 10.0 percent in November, and nonfarm payroll employment was essentially unchanged (-11,000)

And the second from MarketWatch:

The report was much better than expected by economists surveyed by MarketWatch, who were looking for 100,000 fewer jobs…

Okay, let’s start with #2 first.  I have seen several reports that show November was expected to lose 100,000 to 130,000 jobs.  And we came in losing only 11,000.  No one, not ONE single person O have seen has stopped and said, “Huh”?  This is off by just a little bit folks.  These guys were off by a FACTOR OF TEN!  No one is THAT wrong and gets away with it.  Unless of course, you are Al Gore.

So, okay, experts were wrong.  And by a lot.  But that gets us to point #1.  We still lost jobs.

In October, unemployment stood at 10.2%.  We lost jobs.  Even if it was only 1, we lost net jobs.  The rate HAS to stay the same or get worse.  Right?  Wrong.  We lost job AND the unemployment rate got better.

Weird.

Unrelated news.  Houston is expecting 2 inches of snow.  Silly polar bears need migrate!

Note to Obama

Obama is having his jobs summit today; in fact it may already be over.  In the spirit of wondering how to create more jobs, I noticed that Krugman has a solution:

Meanwhile, the federal government could provide jobs by … providing jobs. It’s time for at least a small-scale version of the New Deal’s Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment. There would be accusations that the government was creating make-work jobs, but the W.P.A. left many solid achievements in its wake. And the key point is that direct public employment can create a lot of jobs at relatively low cost. In a proposal to be released today, the Economic Policy Institute, a progressive think tank, argues that spending $40 billion a year for three years on public-service employment would create a million jobs, which sounds about right.

That got me to thinking.  There are currently about 15.7 million unemployed people in America.  Almost all are receiving some form of unemployment benefits.  How about instead of spending $40 billion a year for 3 years like Krugman says, we just make these people do the work he is suggesting and call ’em jobs?  Why would we create a program to offer “relatively low-paying” jobs for people to work when we already have a program that offers “relatively low-paying” jobs where people have to do–NOTHING!?

Krugman.  Sheesh.

Hat tip:  Forbes