Does history repeat itself? It does if you don’t learn from it, and obviously little was learned from the savings and loan debacle of the late 1980s. The current mortgage crisis has many of the same roots, and the consequences are also looking remarkably similar. Except they could be worse. The roots lay in deregulation. After the Great Depression, the banking and savings and loan industries were highly regulated, with a number of new agencies, such as the Federal Deposit Insurance Corp. and Federal Home Loan Bank system, created to protect consumers. S&Ls could only use depositors’ money for home mortages with 30-year fixed rates. How stodgy! In the early 1980s the lending industry got Congress to eliminate interest-rate caps and loosen mortgage controls, and the S&Ls and conventional banks started gobbling each other up and making risky real-estate loans for shopping malls, condo projects, etc. with little financial backing. The result was the collapse of many of these institutions by decade’s end, and a huge federal bailout. Ironically, that bailout, by shielding everyone from the real consequences of speculation, may have contributed to the subprime fiasco. And the lack of controls over the giant financial services industry — consisting of banks, insurance companies, credit card firms and mortgage brokers — surely did. It’s enough to give regulation a good name. For the sake of homeownership and our economy, we need to go back to it.
WASHINGTON -- The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, cut a key interest rate by three-quarters of a percentage point on Tuesday, the biggest one-day move by the central bank in recent memory. The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent.
The Fed action was the most dramatic signal it can send that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory.
The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world's largest economy, could be headed into a recession.
In a brief statement, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth."
The central bank said that the strains in short-term funding markets have eased a bit, but "broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
The move caught financial markets by surprise. Many had expected the central bank would wait until its meeting next week to make any move in interest rates. The Fed made the move before markets had opened in the United States, hoping that the bold move would limit the decline in U.S. stocks.
Before Tuesday's move, the Fed had cut interest rates three times, beginning in September, the month after a severe credit crunch had roiled Wall Street and global financial markets. The Fed cut the funds rate by a half-point in September and then by smaller quarter-point moves in October and December.
The roots lay in deregulation. After the Great Depression, the banking and savings and loan industries were highly regulated, with a number of new agencies, such as the Federal Deposit Insurance Corp. and Federal Home Loan Bank system, created to protect consumers.
But the government cant teach the folks about using credit beyond their means and they cant make corporations do all their business in the states and they cant change all the intricate wording of all the laws and the fact that there isn't a law against something doesn't mean that it is okay either.....
We are sold out to the world and how do we get that back???? We subsidize farmers so a gallon of milk and a gallon of orange juice cost more than my gallon of gasoline...unless I want the 'cut down' high fructose corn syrup version(not healthy, not to mention ethanol pushers)
Protect consumers--- ,,,I wonder if their 401k/pension is in a coffee can????
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
Fed slashes rates again Bush, Congress pledge urgent economic action BY TERENCE HUNT The Associated Press
WASHINGTON — Jolted by global recession fears, the Federal Reserve slashed interest rates Tuesday, and President Bush and leaders of Congress joined in a rare show of cooperation in promising urgent action to pump up the economy with upward of $150 billion in tax cuts and government spending. Market meltdowns overnight around the globe and growing anxiety at home stirred lawmakers and the administration toward swift action, possibly within a few weeks. Wall Street plummeted as the day began, following Asian stocks, then warily eased its sell-off after the Fed ordered the biggest cut on record in a key interest rate. The Dow Jones industrials, down 465 points at one point, closed the day off 128. The Fed, announcing its action after an emergency video conference Monday night, indicated further rate reductions were likely, aimed at encouraging people and companies to start spending again. “The urgency that we feel at home is now even more urgent as we see the impact of our markets on others,” House Speaker Nancy Pelosi said after both Democratic and Republican lawmakers met with Bush at the White House. Senate Majority Leader Harry Reid said the goal was to get a deal through Congress and on Bush’s desk within roughly three weeks — lightning speed compared with the usual snail’s pace on Capitol Hill. His Republican counterpart, Mitch McConnell of Kentucky, agreed the aim was action in the next few weeks and said, “That, by the standards in Congress, is pretty fast.” Bush expressed confidence that he and the Democratic-led Congress could put aside bitter differences that have marked his presidency. “I believe we can find common ground to get something done that’s big enough, effective enough so that an economy that is inherently strong gets a boost — to make sure that this uncertainty doesn’t translate into more economic woes for our workers and small business people,” Bush said in the Cabinet Room. Later, announcing the creation of a panel to educate people about their finances, Bush said he thought there would be an agreement “in relatively short order.” The White House meeting was intended to show the world that Bush and his Democratic adversaries recognize the gravity of the economic slowdown and are serious about protecting consumers and investors who have watched their holdings shrink. Wall Street and global markets fear the stimulus package outlined by Bush is not enough to avert a recession. The Dow Jones industrial average is down nearly 10 percent since the beginning of the year — its worst first 14 trading days ever. Official Washington was accentuating the positive. “I really feel good that we have an opportunity to do something together,” Reid said, standing in the White House driveway with Pelosi after talking with Bush. Reid said the size of a deal suggested by Bush was “a good number.” Administration officials are focusing on rebates of $800 to $1,600 for individuals and couples and socalled bonus depreciation to allow companies to deduct 50 percent of business investments made this year. Democrats say the package also should include boosts in unemployment benefits, food stamp payments and the Medicaid health care program for the poor and disabled. Talks between Pelosi and Minority Leader John Boehner, R-Ohio, have focused on smaller tax rebates of perhaps $500 for individuals. Like Bush, lawmakers would not discuss what a compromise plan would look like, stressing cooperation rather than potential differences over details. “This is about one thing in this package: Is it a stimulus?” Pelosi said. “So whatever it is that we are considering, it must meet that one criterion: Does it stimulate the economy? Does it put money into the hands of those who will spend it?” When the Democratic leaders were asked if they agreed with Bush’s statement that the economy is inherently strong, Pelosi said, “I certainly hope so.” Reid said the House would pass a package first and send it to the Senate. Pelosi, Boehner and Treasury Secretary Henry Paulson planned to talk over breakfast today. Paulson went to Capitol Hill for talks on the ingredients of the economic package. “Time is of the essence, and the president stands ready to work on a bipartisan basis to enact economic growth legislation as soon as possible,” he said earlier in a speech at the U.S. Chamber of Commerce. Many analysts say the United States is already in a recession — a notion rejected by the White House. “We are not forecasting a recession,” spokeswoman Dana Perino said. “Clearly there is a slowdown.” Leaving open the possibility of a bigger stimulus package, she said, “I’m not going to close the door, but I’m not suggesting that anyone believes it has to be bigger” than the roughly $150 billion figure already discussed. Later, she said the White House has not “seen higher numbers floated by members of Congress” and that Bush believes the package he has outlined is “the right amount.”
“This is about one thing in this package: Is it a stimulus?” Pelosi said. “So whatever it is that we are considering, it must meet that one criterion: Does it stimulate the economy? Does it put money into the hands of those who will spend it?”
And what does she think 'those' will do with it?....well,,,,, advance on the credit of course......it's like leaning over a rock ledge to get a better look at the bottom only to find yourself so drawn to look that you fall to the bottom....
those chickens are looking much better---atleast we can eat them.....
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
If I get a so called 'stimulus check' I will put it in savings and NOT spend it.
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
Agreement closer on economy rescue Lawmakers, White House negotiate on tax cuts, benefit increases The Associated Press
WASHINGTON — Pushing defi - cit concerns aside, Democratic and Republican leaders moved closer to agreement with the White House Wednesday night on emergency tax cuts and benefit increases to jolt the economy out of its slump, including opening new financing windows for some home loans. Congressional leaders were to negotiate into the evening with Treasury Secretary Henry Paulson, underscoring the urgency of the effort. Lawmakers learned during the day that the government’s deficit already would swell to $250 billion this year because of falling corporate tax revenues — then they signaled they were willing to balloon it higher by more than $100 billion with a stimulus package. As they met behind closed doors, Wall Street defined volatility, dropping again for most of the day before soaring to a big gain just before closing. The Dow Jones industrials ended the day up just under 300 points. The federal deficit, which has been dropping in recent years, could reach $379 billion for 2008 — more than twice last year’s red ink — once the costs of the economic rescue measures are factored in, said House Budget Committee Chairman John Spratt Jr., D-S.C. “We should act, and act now, to strengthen the economy … mindful, however, of the long-term budget challenges, the structural defi cits that we face unless we act and act seriously,” Spratt said. President Bush said the package must be “robust enough to affect the economy, simple enough for people to understand it and efficient enough to have an impact.” “I’m confident that we can get something done,” Bush said in brief comments to reporters. “There’s a spirit that says we need to take a fundamentally strong economy and help it.” The economic growth measure would add about $116 billion to the deficit for the budget year ending Oct. 1, according to back-of-the-envelope calculations by Spratt. Worries about the ailing economy trumped concern over the defi cit as top House leaders and Paulson met three times during the day tallying up the cost of various proposals for tax rebates, business tax cuts and benefi t increases, including unemployment compensation and food stamps. House Speaker Nancy Pelosi, DCalif., pressed to make sure tax relief would find its way into the hands of lower-income earners while Minority Leader John Boehner, R-Ohio, pushed to include upper middle-class couples with incomes of up to $130,000 or so, according to congressional aides. “All of our discussions have been productive and have taken us in a forward direction,” Pelosi said as she left an afternoon session with Paulson and Boehner. “Until there’s agreement on the entire package, we have nothing,” Boehner cautioned, but he also called the discussions productive. The rebates are the most costly portion of an emerging $145 billion economic stimulus measure. One option floated by Democrats, said two Democratic congressional aides, includes rebates of $400 for individuals and $800 for couples distributed to a wide spectrum of workers, including those in lower-income brackets. Bush backs larger rebates of $800 to $1,600, but his plan would miss 30 million working households who earn paychecks but owe no income tax, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. Rep. Barney Frank, D-Mass., said negotiators were near an agreement on including an overhaul of the Federal Housing Administration that would make it easier for thousands of homeowners with ballooning interest rates to refinance into federally insured loans. Both sides also support taking temporary action to allow Fannie Mae and Freddie Mac — government-sponsored companies that are the two biggest U.S. financers and guarantors of home loans — to buy loans much larger than the current $417,000 cap. He said that lending cap might reach as high as $700,000 in areas with the highest home prices. Frank said Democrats were still pressing for expanding unemployment benefits as well as for more money for food stamps, home heating subsidies and aid to states for their Medicaid programs. Some lawmakers expressed alarm about the stimulus package more than doubling last year’s defi cit of $163 billion. “I am concerned that, in our rush to help, we will talk ourselves into a quick, feel-good hit today that will leave us with a bigger budgetary hangover tomorrow,” said Rep. Paul Ryan of Wisconsin, top Republican on the budget panel. In the Senate, Democratic and Republican Leaders Harry Reed of Nevada and Mitch McConnell of Kentucky have agreed to stand back and let the House take the lead in the talks with the administration. The aim is to have legislation ready for Bush to sign in just a few weeks, lightning speed for tax and spending measures that can take months or even years to win approval.
Rome is gonna 'hand out' rebate checks because of the economy???? pretty cheesy if ya ask me....when the government (republican at that) starts handing out $$ there is alot more going on than meets the eye.....
they are talking $600 per household $75,000 or less and $300 per kid....big freakin' deal---we will have to claim it next year and waste my time just to write it down....very very short sighted....and short lived.....they must think it is happening too fast.....
...you are a product of your environment, your environment is a product of your priorities, your priorities are a product of you......
The replacement of morality and conscience with law produces a deadly paradox.
STOP BEING GOOD DEMOCRATS---STOP BEING GOOD REPUBLICANS--START BEING GOOD AMERICANS
Sales of existing single-family homes drop in 2007 by largest amount in 25 years By MARTIN CRUTSINGER AP Economics Writer
WASHINGTON (AP) -- Sales of existing homes fell in December, closing out a horrible year for housing in which sales of single-family homes plunged by the largest amount in 25 years. The median home price dropped for the entire year, the first time that has occurred in four decades. The National Association of Realtors reported that sales of single-family homes and condominiums dropped by 2.2 percent in December to a seasonally adjusted annual rate of 4.89 million units. For the year, sales of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982. The median price for a single-family home dropped 1.8 percent to $217,000. That was the first annual price decline on records going back to 1968. Lawrence Yun, the Realtors' chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s. The new figures underscored the severity of the slump in housing, which has been battered for the past two years after enjoying a boom in which sales set records for five consecutive years. The housing bust has sent shock waves through the entire economy as defaults have risen, resulting in multibillion-dollar loses for big financial firms whose investments in subprime mortgages have gone sour. There is a concern that the housing and credit troubles could be enough to push the country into a full-blown recession. After global stock markets experienced a sharp sell-off earlier this week, the Federal Reserve announced a bold three-quarter point cut in a key interest rate and held out the promise of more rate cuts to follow. The Bush administration and congressional leaders are trying to quickly wrap up negotiations on a stimulus package in an effort to boost consumer and business confidence. For December, sales were down in all regions of the country. Sales fell by 4.6 percent in the Northeast, 1.7 percent in the Midwest, 1 percent in the South and 2.1 percent in the West. The inventory of unsold homes dropped by 7.4 percent, raising hopes that backlogs that had hit record levels were starting to be reduced, a key factor necessary to prompt a rebound in the market. While Yun said he expected sales to start to rebound this spring, other analysts said housing is likely to remain in the doldrums throughout most of 2008, reflecting in part the credit crunch, which has caused lenders to tighten their standards, making it harder for prospective buyers to qualify for loans. In other economic news, the Labor Department said Thursday that the number of laid off workers filing claims for unemployment benefits fell for a fourth straight week, dropping by 1,000 to 301,000. Many economists cautioned that they still expected layoffs to start rising in coming weeks, reflecting the sharp economic slowdown that has taken place. The economy, after racing ahead at an annual rate of 4.9 percent in the July-September quarter, probably slowed to a weak 1 percent rate in the final three months of 2007 and may even fall into negative territory in the current January-March quarter. A recession is often defined as two consecutive quarters of falling economic output. Many economists believe the risks of a full-blown downturn are roughly 50-50. The growing worries about the economy in an election year have captured the attention of President Bush and congressional leaders who are working to put together a $150 billion economic stimulus package that will include tax relief for households and businesses in an effort to bolster economic activity. The drop in unemployment applications to 301,000 for the week ending Jan. 19 left total claims at the lowest level since 300,000 were recorded during the week of Sept. 22. For the week of Jan. 19, 36 states and territories had increases in claims while 17 had declines. The biggest increase occurred in California, up 27,194, an upsurge blamed on higher layoffs in construction and service industries, and Florida, with an increase in layoffs of 8,496, which was attributed in part to higher layoffs in construction. California and Florida have been particularly hard hit by the housing slump.
Recession debate is based on myths of economics BY KEVIN A. HASSETT Special to The Washington Post
When Scottish historian Thomas Carlyle branded economics the “dismal science” in 1849, he gave it a name that would stick. (Some theorize that he picked on economists since, like most Scots back then, Carlyle had never visited a dentist.) Fortunately for economists, 1849 was a pretty good year. If Carlyle had seen how economists behave during recessions, he probably would have dubbed their subject something far worse. Economists have the same occupational hazard as baseball managers and football coaches: Every person on the street knows their job better than they do. And if you listened to the economic stimulus package talk last week from the White House and Capitol Hill, not to mention Federal Reserve Board Chairman Ben Bernanke, you could be forgiven for thinking that the recession is just around the corner. But the main result of all this chatter is that far too many myths about recessions have made their way into popular culture. TOP FIVE Here are the top five myths: 1. We’re already in a recession. The truth is, nobody knows. The responsibility for declaring the stages of the business cycle is informally held by that most dreaded of concepts — a committee of economists. The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) uses a number of economic indicators, including personal income, unemployment, industrial production and sales and manufacturing volume, to determine the health of the economy. It’s not true that they declare a recession if economic growth is negative for two quarters in a row. If it were that simple, we wouldn’t need a committee. If you want to know about the state of the economy in real time, you can’t rely on the NBER. If the NBER did the D.C. weather forecast, here’s how it would work. The bureau would gather precipitation data from every neighborhood, then interview residents to make sure that the data are accurate. After much deliberation, it would tell us whether it had rained last month. Same with recessions: The NBER’s pronouncements historically come long after recessions have begun, a whopping seven months on average. By the time the bureau announced the recession of 1991, it had already ended. Right now, we only have enough data to assess the economy accurately through last November. The best available real-time indicator of recession, a model developed by economist Marcelle Chauvet of the University of California at Riverside that has correctly called every postwar recession without ever giving a false signal, clearly indicates that the economy was not in recession in November. Things certainly have deteriorated since then, but it is an open question whether they have deteriorated enough. A recession may have started. Or it may not have. 2. The stock market tanks during recessions. Not so. With the economy heading south during recessions, the conventional wisdom is that stock prices drop as well. Stocks usually drop before a recession, something that may be happening now. However, the market tends to look ahead and starts to respond favorably to the expected end of a recession long before it occurs. Influential economist Donald Luskin of Trend Macrolytics recently ran the numbers and found that stocks have produced an average return of 12.1 percent in post-World War II recessions. This is only slightly below the average return outside recessions. 3. Recessions used to be a lot worse. Lunchroom economic conversations are inevitably graced with at least one statement from an oldtimer along the lines of: “In my day, we walked 10 miles in the snow just to get to the recession.” In fact, the nature of recessions hasn’t changed much over the years. Early economic studies seemed to confirm the view that the economy has become less volatile over time, with some estimates implying that the severity of recessions declined by 75 percent roughly around the end of World War II. However, a prominent study by University of California at Berkeley economist Christina D. Romer demonstrated that the problem really was that prewar data collectors had not advanced to the exalted level of datageekdom of today’s professionals. When important changes in datacollection methods and inconsistencies in the historical definition of the business cycle were accounted for, it emerged that recessions before World War I and since World War II have been just about equally severe. While the past three recessions may have seen slightly smaller drops in economic growth on average, there is no guarantee that the next one — when it arrives — will be mild. The superstitious might even say that we are due for a whopper. Recessions probably have become less frequent. In terms of duration, the average recession since World War II has lasted about a year. The past three recessions — in 1981-82, 1990-91 and 2001 — lasted about a year as well. One factor that has clearly not helped is government discretionary fiscal policy, like the economic stimulus packages currently being considered on Capitol Hill. You might think that the brilliant postwar discoveries of economists would have provided tax medicine to stop recessions in their tracks. In an exhaustive study, however, Romer and her husband, David, found that fiscal measures such as temporary tax rebates and government spending increases have failed to push the economy out of recession because they have been too small or too late, or both. HEALTH FACTOR 4. Recessions are bad for your health. David Mamet once told an interviewer that he got the inspiration for his 1984 Pulitzer Prize-winning play “Glengarry Glen Ross” from an account of a salesman’s fatal heart attack, caused by a recession “so vicious the competition was for jobs and sales, especially among older men.” For most Americans, however, the story is quite the opposite. Americans get healthier as the economy gets worse. Unemployment tends to increase during recessions, but economist Christopher J. Ruhm of the University of North Carolina at Greensboro has found that a temporary one percentage point increase in the unemployment rate leads to a 0.5 to 0.6 percent reduction in the mortality rate, or about 14,000 fewer deaths per year. Why the health benefits? With more free time and less money on their hands, people tend to consume less tobacco, exercise more, prepare healthier meals and lose weight. In addition, they are much less likely to have car and other accidents, and to catch communicable and sometimes fatal diseases such as influenza. Among the top 10 causes of death in the United States, only suicide rates show a substantial unemployment-driven increase. Even deaths caused by heart disease fall substantially. 5. There is a regular business cycle. In a pair of articles in the Quarterly Journal of Economics published in 1920 and 1921, Columbia University economist H.L. Moore hypothesized that the primary cause of economic cycles was the regular eight-year cycle of the modes of the planet Venus. This type of thinking, along with 19th-century English economist William Stanley Jevons’ theory that the 10-year sunspot cycle causes economic fluctuations, perhaps accounts for the widespread notion that there is a regular business cycle. Don’t count on it. The term “business cycle” is imprecise. Economic fluctuations affect everyone, not just businesses, and they are, unlike astral cycles, anything but regular. In the nine recessions since 1949, the shortest time between two recessions has been three quarters (the recessions of 1980 and 1981-82), while the longest has been just short of 10 years (the recessions of 1991 and 2001). When the next recession ends, a good guess will be that the expansion that follows will be somewhere between one year and 10 years in length. A better analogy might be to think of our economic future as being a road trip in a 1971 Ford Pinto. Our car might burst into flames in the next instant, there might be a truck in our lane around the bend, or we just might make it all the way to California.
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