September 3, 2009
My favorite “blowback” story of the week resulted from the ill-advised decisions by people at The New York Times and the Financial Times to trumpet talking points apparently “Fed” (pun intended) to them by the Federal Reserve. Both publications asserted that the TARP program has already returned profits for the Untied States government. The Financial Times claimed the profit so far has been $14 billion. The New York Times, reporting the amount as $18 billion, claimed that “taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again.” So where is my check? Anyone with a reasonable degree of intelligence, who bothered to completely read through either of these articles, could quickly recognize yet another rendition of The Big Lie. The blowback against these articles was swift and harsh. Matt Taibbi’s critique was short and sweet:
This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry.
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The other reason for that is that it’s only a tiny sliver of the whole bailout picture. The real burden carried by the government and the Fed comes from the various anonymous bailout facilities — the TALF, the PPIP, the Maiden Lanes, and so on. . . .
And there are untold trillions more the Fed has loaned out in the last 18 months and which we are not likely to find out much about, unless the recent court ruling green-lighting Bloomberg’s FOIA request for those records actually goes through.
Over at The Business Insider, John Carney also quoted Matt Taibbi’s piece, adding that:
We simply don’t know how to value the mortgage backed securities the Fed bought. We don’t know how much the government will wind up paying on the backstops of Citi and Bear Stearns assets. And we don’t know how much more money might have to be pumped into the system to keep it afloat.
At another centrist website called The Moderate Voice, Michael Silverstein pointed out that any news reporter with a conscience ought to feel a bit of shame for participating in such a propaganda effort:
I’ve been an economics and financial writer for 30 years. I used to enjoy my work. I used to take pride in it. The markets were kinky, sure, but that made the writing more fun.
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That’s not true anymore. Reportage about the economy and the markets — at least in most mainstream media — now largely consists of parroting press releases from experts of various stripes or government spokespeople. And the result is not just infuriating for a long-term professional in this field, but outright embarrassing.
A perfect example was yesterday’s “good news” supposedly showing that our economic masters were every bit as smart as they think they are. A few banks have repaid their TARP loans, part of the $4 trillion that government has sunk into our black hole banking system.
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The $74 billion the government has been repaid is less than two percent of the $4 trillion the government has borrowed or printed to keep incompetent lenders from going down. Less than two percent! Even this piddling sum was generated by a manipulated stock market rally that allowed banks shares to soar, bringing a lot of money into bank coffers, almost all of which they added to reserves before paying back a few billion to the government.
Rolfe Winkler at Reuters joined the chorus criticizing the sycophantic cheerleading for these claims of TARP profitability:
A very dangerous misconception is taking root in the press, that in addition to saving the world financial system, the bank bailout is making taxpayers money.
“As big banks repay bailout, U.S.sees profit” read the headline in the New York Times on Monday. The story was parroted on evening newscasts.
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Taxpayers should keep that in mind whenever they see misguided reports that they are making money from bailouts. The truth is that the biggest banks are still insolvent and, ultimately, their losses are likely to be absorbed by taxpayers.
As the above-quoted sources have reported, the ugly truth goes beyond the fact that the Treasury and the Federal Reserve have been manipulating the stock markets by pumping them to the stratosphere — there is also a coordinated “happy talk” propaganda campaign to reinforce the “bull market” fantasy. Despite the efforts of many news outlets to enable this cause, it’s nice to know that there are some honest sources willing to speak the truth. The unpleasant reality is exposed regularly and ignored constantly. Tragically, there just aren’t enough mainstream media outlets willing to pass along the type of wisdom we can find from Chris Whalen and company at The Institutional Risk Analyst:
Plain fact is that the Fed and Treasury spent all the available liquidity propping up Wall Street’s toxic asset waste pile and the banks that created it, so now Main Street employers and private investors, and the relatively smaller banks that support them both, must go begging for capital and liquidity in a market where government is the only player left. The notion that the Fed can even contemplate reversing the massive bailout for the OTC markets, this to restore normalcy to the monetary models that supposedly inform the central bank’s deliberations, is ridiculous in view of the capital shortfall in the banking sector and the private sector economy more generally.
Somebody ought to write that on a cake and send it over to Ben Bernanke, while he celebrates his nomination to a second term as Federal Reserve chairman.
Just In Time For Labor Day
September 7, 2009
Friday’s report from the Bureau of Labor Statistics, concerning non-farm payrolls for the month of August, left many people squirming. The “green shoots” crowd usually has no trouble cherry-picking through the monthly BLS reports for something they can spin into happy-sounding news, utilizing the “not as bad as expected” approach. Nevertheless, the August BLS report portrayed unpleasant conditions, not only for the unemployed but for those currently working full-time in the labor force, as well.
The current unemployment level is a living nightmare for the unemployed individuals and their families. It also brings some degree of discomfort (although less significant) to those people with money to invest, who are waiting for signs of a sustainable economic upturn before heading back out from the sidelines and into the equities markets. Both groups got an unvarnished look at the latest BLS data from Dave Rosenberg, Chief Economist at Gluskin Sheff in Toronto. His September 4 economic commentary: Lunch with Dave, gave us a thorough analysis of the BLS report:
Looking at the details of the Household Survey, Rosenberg found “a rather alarming picture” of what is happening in the labor market:
The language of the BLS report itself on this subject demonstrates how the current unemployment crisis is not an “equal opportunity” phenomenon:
Dave Rosenberg added the painful reminder that the unemployment picture always lags behind the end of a recession. How far behind? Look at this:
At least Mr. Rosenberg had some constructive criticism for the current administration’s efforts at job creation. It’s one thing to just yell: “FAIL” and yet, quite another to put some thought into what needs to be done:
As for those who are still in the labor force, the situation is also deteriorating, rather than improving. A report by Carlos Torres for Bloomberg News noted that the “real number” for unemployment is 16.8 percent. Beyond that, the work week for factory employees is currently 39.8 hours. It will have to reach 41 hours before we even get a chance to see some changes:
In other words, the decline in temporary worker payrolls preceded the recession by 11 months! Worse yet, the payrolls for temporary workers must stabilize before an increase in total employment comes along “months later”.
Meanwhile, at the Financial Times, Sarah O’Connor reports that many people who have jobs must still rely on food stamps to survive:
That conclusion is exactly what the “green shoots” enthusiasts don’t seem to understand. Those who are well-off enough to pay for their groceries with real money will be focused on paying down their credit cards and saving money before they go out to buy another television or jet ski. If these people have little or no “discretionary income”, then the High Frequency Trading computers on Wall Street can talk to each other all they want — but the stock values will not go up.
Happy Labor Day!