Links to important economic news

obama is going to have to change course. yes, some people did stupid things financially but you've convinced me that the problem goes way beyond that. i know a lot of decent, reasonable people who have been the beneficiaries of the last twenty years who are not even close to getting this. somehow there needs to be a tipping point so that these behaviors become unacceptable. still don't believe that this can be legislated. either way, the government needs to shine a light on what is really going on.

well, that was unnerving. Prehaps the house of cards will collapse and no printing press in the universe will save us. Time to convert what money you have left to rice and beans and prepare for the great barter economy.

If you carry any CC debt you are stupid.
If you carry any CC debt and pay just the minimum, you are playing with financial desaster.

Elizabeth Warren is a smart woman. A few years ago, I read her book "The Two Income Trap" in which she predicted a lot of the current problems, including subprime mortgages. And this was before the majority of Americans have ever heard of subprime loans.

If the credit markets are anything to go by, Simon Johnson says that there may be some troubling times ahead shortly for the banks.

http://optionarmageddon.ml-implode.com/2009/04/22/simon-johnson-sees-speculative-attack-on-us-banks/

I need to go get some sun. Or some wine. Maybe both.

I do have some good news (at least I think it's good news), but the cynic that refuses to lie low thinks that this is absolutely necessary to prevent the masses from taking up the pitchforks. Americans will take alot, but not being able to provide health care for loved ones on a large scale was what I've thought would be the tipping point. nonetheless, this has been needed for awhile, and with the unemployment rate being what it is and will likely become, hopefully this will prevent much future suffering.

http://krugman.blogs.nytimes.com/2009/04/25/health-care-happening/

The problem is that we're a society of greed. We overstretch and over-leverage to purchase homes, cars, and luxury items that are beyond our means (I mean, seriously--if you are scrimping on nutritious food for your child yet charging a 50" flatscreen TV and stereo system on your credit card, you are a fool).

Perhaps we can't afford the sprawling McMansion of our dreams, but that doesn't mean we cannot afford to "put a roof over our loved ones' heads". What's wrong with a purchasing more modest home, one that is sustainable within our budget?

If we'd only stayed within our means in the first place, rather than seeking complex loan products to help us greedily consume and acquire more than we could comfortably afford, perhaps we wouldn't find ourselves in our current dire predicament.

yes, but....

it did not help that the banks engaged in a massive ad campaign to promote taking out loans and spending, spending, spending. i can't remember citi's slogan that was plastered all over the city but it was something about, live now, don't wait.

here's the rub...one of the reasons that everything has come down so far and so fast is that people are now trying to live within their own means. on the one hand, we love to criticize people for spending too much; on the other hand, no one has any idea of what the economy will look like if consumption drops by 15-20%.

squid, many of the early tales of the housing downturn involved the manicurist who bought eight homes to flip, speculators, overextenders, people who clearly knew they were over their head's and lived in non-recourse states and just walked away. I am not talking about THOSE people. over 90% of Americans have seen their real incomes decline in the last 25 or so years. read a book entitled the working poor if you want a good picture of where a significant portion of America now lies.

Did you read the article on Warren?

cc presents another angle, the bubble frenzy, which didn't help. the tv is cheap relative to the one from 1970, health care, housing, education, etc. are not.

I don't know if this counts as important economic news in the way I usually view it, although it's certainly important if you're still in the rally, but the Wheel of Fortune display is hi-f'n-hilarious.

http://jessescrossroadscafe.blogspot.com/2009/04/insiders-are-selling-into-this-rally.html

"i can't remember citi's slogan"

I believe it was "Live Richly"

but that didn't work, so it had to give up sleep.

Once again, my party's doing me wrong. I had long given up on Fwank, but naively had some hope for Pelosi. Can't we mount some effort to save Elizabeth Warren?

http://www.nakedcapitalism.com/2009/04/on-pelosis-duplicity-and-apparent.html

"Despite her longevity as a California pol, house speaker Nancy Pelosi is looking like every bit as much of a dyed-in-the-wool financial services industry backer as the Congressmen on the New York-Boston corridor."

In my continuing love fest for Elizabeth Warren, I recommend the following, "the coming collapse of the middle class":

http://economistsview.typepad.com/economistsview/2008/04/the-coming-coll.html

People who have studied the downfall of the Ancien Regime might be concerned. But we Americans don't seem to have the same sense of rights entitlements (in general, I'm well aware of the unions) that the Europeans have.

Squid:

The problem is that we're a society of greed. We overstretch and over-leverage to purchase homes, cars, and luxury items that are beyond our means (I mean, seriously--if you are scrimping on nutritious food for your child yet charging a 50" flatscreen TV and stereo system on your credit card, you are a fool).

Perhaps we can't afford the sprawling McMansion of our dreams, but that doesn't mean we cannot afford to "put a roof over our loved ones' heads". What's wrong with a purchasing more modest home, one that is sustainable within our budget?

If we'd only stayed within our means in the first place, rather than seeking complex loan products to help us greedily consume and acquire more than we could comfortably afford, perhaps we wouldn't find ourselves in our current dire predicament.
_____________________

Personally, I think that over-leveraged theme has a special meaning with NY realestate. As more people start looking to buy "within their means" (which for convenience I will call buying property at a much smaller multiple of annual rent) watch this market shrivel more. I think in the past, too many buyers had been motivated by appreciation of the investment instead of affordable shelter. This is a wild card that may change this market big time.

On this general theme of bailout nation: if the nations problems ultimately are founded on collectively spending beyond our means, can anyone explain to me how the solution is spending even MORE over the budget? It sounds like enabling a ponzi scheme instead of taking the lumps early and limiting the fallout. Or treating a crack addict with cheaper, stronger crack.

Lastly, there was a thread on these boards that faded some months back on the fall of Rome and other empires. Someone made a comparison of those empires to the current time. It makes you wonder.

i don't think we are a society of greed. i think there are greedy people but i don't think they come close to even being a significant minority numerically. on the other hand, they have gained a tremendous amount of power which they have used to justify their behavior. i don't think the issue is people buying flat screen tvs instead of food. yes, there are abusers and they make the news because we all seem to enjoy seeing and hearing about them.

but if you think about the median income in the us and what that doesn't buy you, its a different story. $15 an hr translates to $31,200 per year pre tax. how can you afford transportation to and from your job, housing and food? add a couple of kids and then what?

There's a great analysis on angry bear about who should have children. They concluded that a family at the median income may be able to afford the luxury, but not without a fair amount of sacrifice and risk (inability to save, as Warren points out).

The other half should just forget about rearing children.

Lecker, I would add a couple of other perspectives on your living "within their means" idea. Being willing to pay a smaller multiple of rent is one part of the story, reflecting reduced pricing for any given apartment. There is also living within ones means by occupying a smaller apartment (i.e., consuming less housing) that would rent and sell for less in the first place. If this happens, the aggregate demand for housing falls, presumably more to the detriment of the high end of the market and cushioning the low end to some extent.

I also think that in the recent past people tended to define "within their means" as anticipated means, not current means. One way to chase more investment appreciation, while also consuming more housing, was to stretch to buy the larger apartment, the new development, the hot building or neighborhood, etc., all of which were viewed as sure thing investments. Stretching involved buying the last dollar of apartment that you could get today (constrained by mortgage, down payment or coop board approval), based on the assumption that you would grow into the financial burden with inevitably rising income and wealth accumulation in a couple or a few years. Oops.

sidelinesitter, while i agree with you generally in terms of the Manhattan market, warren points out that much of the expansion and upward movement actually only occurred for about 20% of the buyers. The median buyer purchased a house that had 6.1 rooms, compared to the 5.8 purchased in 1971. They also purchased, at the median, older homes with greater repair issues. The inflation-adjusted price for a 3 bedroom/1 bath (the median purchase, which I did not know, and clearly does not reflect the McMansion) rose 76% from 1970 to 2001. Must compare apples with apples.

Sorry, 1971-2005, I believe her charts reflected.

sidelinesitter:

these are good points regarding these leveraging effects on the mix of apartments.

as to the second point: "oops" is right. To reinforce a theme that Stevejhx makes repeatedly on these threads: when the cost of an apartment is so out of whack with the fundamentals, and the only substantial metric to justify the relative high cost of shoebox sized apartments is because people in the recent past have been paying those premium prices; people currently (but maybe not "right now"....) pay premium prices; so of course people in the future will pay premium prices (also known as the "greater fool" metric), I can see a correction where prices fall 50% just to have the values make sense. And there is always the possibility they over-correct at first...

For those of you who would like an easier Elizabeth Warren piece:

http://www.ritholtz.com/blog/2009/04/elizabeth-warren-on-the-daily-show/

Apologies if I've already posted it, but I don't think I have.

I'm having a bit of trouble following what aggregate national data on single family homes has to do with the Manhattan apartment market, but ignoring those apples and oranges for the moment, I guess I wouldn't be too surprised if the run-up in Manhattan showed a skew to the high end with a similar pattern to the expansion and price run-up of that national top 20%. I think it's clear that the greatest excesses of the Manhattan bubble were at the high end. The zombie condos and shadow inventory priced at or near 2,000 psf are reminders of yesterday's high end market that are going to be with us for a while. Not to mention the air coming out of the pre-war 6/7/8 room market on RSD, WEA and in Carnegie Hill.

"...$15 an hr translates to $31,200 per year pre tax. how can you afford transportation to and from your job, housing and food? add a couple of kids and then what?.."

-- And then you ask your cleaning lady how on earth her family is able to survive in NYC.

"...$15 an hr translates to $31,200 per year pre tax. how can you afford transportation to and from your job, housing and food? add a couple of kids and then what?.."

-- And then you ask your cleaning lady how on earth her family is able to survive in NYC.

My link was to a piece on general spending patterns nationally. I have no problems discussing the Manhattan market, I was just pointing out a rebuttal to the "all americans are shiftless overspending" meme. Essentially the 20% came largely due to new construction, so that would make some sense here.

sidelinesitter I agree entirely with your stretching theory, btw. i just think that many people started to stretch to get what under normal circumstances wouldn't necessarily be excessive.

Take my situation, for example. My husband in 2006 was a non-equity partner at a large international law firm. Fairly secure position. I could not reasonably (by my calculations) afford an apartment better than the one I was renting. I could not afford a 2/2 with a small dining alcove (unless I went to Harlem, which I considered but felt was too risky). I resisted, but I could see many people saying "I really ought to be able to afford this." Wrong-headed thinking, but not necessarily profligate.

sidelinesitter, I posted this anecdote a couple of years ago on SE, but I think it warrants repeating.

I was at an open house in Harlem, summer 2007. A group was discussing their circumstances with a Corcoran broker. One man was expressing his concern at the price, saying it was a bit rich for him. The broker responded that he needed to "stretch." When he replied that he felt stretched a bit thin already, she replied "stretch harder." She also spewed some BS about that's how one makes money in this market.

Now compare that to my broker, who told me he wouldn't take me to see an apartment because he wouldn't sell me something so close to the edge of my limit. I told him I just wanted to see it for comparison purposes, to decide if we should wait until we might be able to afford something larger. He said fine, I'll take you.

but...of course, musical chairs is a fun game until you can't get to a chair.

Great story. Have you considered naming the brokers - to out the Corcoran charlatan and precipitate a stampede of new business to your guy.

I've been horribly reluctant to do so, for a number of reason (the Corcoran realtor). I've already outed my broker, he's Ed Hardesty at Elliman and an absolutely fabulous individual. I've worked with him for years.

Here goes. I absolutely stand by my story, and my recall for details is rather formidable, so I'm willing. Vie Wilson.

My only caveat is that she might not have been talking about the unit of the open house. I only heard the man say the price is too much, and they were all sitting around in a model unit so I assume they were talking about that unit, but it could have been somewhere else and she wasn't actually hawking that unit.

Nice. Who was it who said that sunshine is the best disinfectant? BTW, I'm not sure it matters whether she was trying to bankrupt him on that specific unit or another one.

"...If you carry any CC debt you are stupid."

--- Yep, how about those who can't aford not to borrow. Many families in America borow to cover their bare minimum (food, health and housing).

BTW, your FICO score... You would think it's a government agency (since all your life depend on it), yet you are wrong. It is a private corporation that makes profit of selling your credit score even to you (up until a year ago or so, when legislation passed that they have to give it to you for free once a year).

what they talk about in this clip...is that legal?
http://www.youtube.com/watch?v=dHEh3UsHP0A&feature=related

555, I doubt it is illegal, but I'm certain it is unethical. I think there is a great deal of "cooperative" work done regarding the FICO issue.

btw, the clip 555 linked to is from "maxed out." unlike my more voluminously contented linkes, it is about a minute and makes a very interesting point about how politically connected individuals have "groomed" FICO scores.

and yes, 555, that is Warren's point, that people's expenditures for the big three, housing, education and health care, have so exploded that they don't have enough for the basics. if you spend $900 on a flat screen TV, but you rely on it for every minute of your entertainment, curtailing just about everything else, are you wasteful? And btw, that TV, adjusted for inflation, costs much less than the black and white Sylvania in the mahogany console box that your parents had. Food by the way is actually less expensive also, but it is obviously an essential.

555, give up the income tax approach. there's nothing wrong with income taxes per se, there will always be a way to divert from those who sort of have or don't have to those who'd want more and have the power to obtain it through means fair and foul. it's not necessarily the system, it's the system as it's being currently implemented.

aboutready,
I want to thank you for posting this link "The Coming Collapse of the Middle Class"
http://www.youtube.com/watch?v=akVL7QY0S8A

555, it's a real slog at the beginning, but she really is a brilliant lecturer when she finds her comfort zone (and gently and wryly funny as well).

To those of you who lost interest early, turn it on and open another screen to do something else in. Try to listen a bit and pull it up when you hear something that intrigues you. BTW nyc10023, I think you'd love the last 10 minutes or so, and I'd love to hear your take on how this might apply to the Manhattan situation.

It looks like it is more sociological problem: people are too ashamed of word "bankruptcy” or of not having enough money to cover those fixed expenses that are out of proportion to start with (And BTW it’s not people’s fault that housing, healthcare, education and other necessities are out of control). Society makes them think that it’s shameful not to have enough money. So they rather discuss what movie star had for dinner then state of their needs and real issues that affects their lives on a day to day basis.

555, your comment is quite accurate, people try to push down bad news for as long as possible. It's hard to tell your kids that you should really be homeless at this point, as you serve up some food.

but it's not just sociological. it's psychological, anthropological, economic, and historic.

just watched the warren lecture end to end. spectacular. i didn't find it a slog at any point, to be honest.

As of FICO scores and FRS - we have separation of church and state we should have separation of business and state. period.

1/2 through the warren lecture (taking a break to cook); i would heartily second comment above. what the hell is going on in washington? how long can the admin ignore her?

i didn't mean it was a slog in general. with the introduction, and her intro, it takes about 8 minutes to get into it and sadly, the first time even i looked at it I minimized it and forgot it for a few days. i'm just trying to encourage those who might not want to sit and listen to a lovely wonkish lady explain such important things.

no need to apologize. starting to feel like i should be paying you tuition.

Maybe my approach is not so good? Ok, everybody, this is one of the best researched, best presented, economic analysis ever done. And it is presented by a charming, witty, compassionate Harvard Law School professor who teaches commercial law, and was asked by the Clinton administration to explain why bankruptcies were increasing at the same time income was escalating. She is a delightful geek, who found great joy in discovering that the government kept extremely detailed records on what we bought and how much we spent, over the past so many years, although she focuses on 1971-2003ish.

what the hell is going on in washington?

-- this is what is going on in Washington (23.25)
http://www.youtube.com/watch?v=S1Uk-DwUvJw&feature=related

I didn't think the NYTs would be a source for me, to be honest. I found this through a www.nakedcapitalism.com discussion of the article, which is also highly interesting. we should be grateful to this administration if only because the news may actually have the chance to become the news again (although that begs the question of why Bush was given so many free passes. maybe there could be a book in that topic. I'll have to think about it). The following discusses Geithner's connections with the finance industry.

http://www.nytimes.com/2009/04/27/business/27geithner.html?_r=1&pagewanted=7&hp

The Economist interviews Robert Reich:

DIA: In America, there's a lot of anger aimed at corporate executives, especially in the finance industry. But by buying houses they couldn't afford, weren't American consumers complicit in fomenting this crisis?

Mr Reich: Yes. But the important question to ask, in terms of avoiding a repeat of this fiasco in the future, is which of these parties -- financial executives and mortgage lenders, or american consumers who took out over-sized loans -- were in the best position to know the risks involved and to avoid them. Many consumers had no idea what they were getting into. Mortgage lenders and the financial industry behind them had every reason to know.

http://www.economist.com/blogs/democracyinamerica/2009/04/five_questions_for_robert_reic.cfm

Kwak is discussing the limitations in Summers' bank-centric financial model:

http://baselinescenario.com/2009/04/27/larry-summers-new-model/

I've been critical of the She-Bair in the past, but Bloomberg is reporting that she is looking for the power to break up non-functioning banks, with the shareholders and the bondholders absorbing the costs rather than the taxpayers. There seems to be a seismic shifting beginning.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aeH.c5sqMplw&refer=home

> Mortgage lenders and the financial industry behind them had every reason to know.

But they didn't either. Idiots on both sides didn't think RE could go down.

Both were wrong.

10022, no. They did know. Underwriting 101.

The mortgage lenders only requirement was that the loan remain performing for 90 days. I'll try to find the links for you.

some of this defies any common sense. i would have thought that it goes without saying that the lender should by the nature of the transaction be more concerned about repayment than the borrower. the lender is buying an obligation to be paid back, not selling it. let the seller beware?

cc, the loan was sliced and diced, securitized. it was a pile of steaming shit, presented as a triple-A risk. some mortgage books have done well, for a lesson on how not to do it do a search on Mish's site for the WaMu Alt-A mortgage lines.

I can't find the link regarding the mortgages. I would have thought it would have been calculated risk. But I did find this regarding BofA finally discontinuing risky mortgages in 04/08. The risky mortgages took almost no time to default, particularly in the latter years, so they had to be aware that they were making bad loans.

http://www.calculatedriskblog.com/2008/04/bofa-countrywide-to-curtail-risky.html

> 10022, no. They did know. Underwriting 101.

Nope... underwriting 101 doesn't tell you about the value of houses.

Never in the history of the US have prices declined in a year. The assumption that this would continue killed them.

nyc10022, believe me, they knew. you don't give people mortgages that are 5 times their incomes. you ask for income verification. you don't give 90% or even 100% ltv. you don't let people HELOC at closing so they don't have to qualify for mortgage insurance. you don't accept absurdly low FICO scores.

they didn't know the extent to which things could crater. they did know that they were making low-quality, high-risk loans. this is the turd in the party punchbowl, the thing that never gets mentioned. everybody want to say, "mistakes were made," that lovely use of the passive voice. nobody wants to discuss the fact that people were taking obsessive risks solely to get a larger paycheck and anyone with an iota of sense knew that the fall out could be huge. remember 10022, it now looks as though 2006 loan originations may be the worst (possibly 2007). Problems had already shown up in bubble areas then, and they were still making the loans.

I meant excessive risks, not obsessive. Hmm.

This is kind of frightening, the Fed is leveraging its capital at 48 to 1.

http://www.ritholtz.com/blog/2009/04/our-next-troubled-bank-the-fed/

No wonder the banks are doing better, the Fed and the GSEs are loading up on their crap.

so...help me out here---fed is carrying these assets as collateral for loans? any way to understand at what value relative to initial value?

it's tough to keep track, but the number that seems to be floating to the brain is at this point 66%, but i think that's only for a subset of the assets, TARP maybe. it's obviously a moving target, and as of now it's going the wrong direction. if anyone has the correct number, i know i may be wrong.

not all of them are as collateral. some have been direct purchases by the Fed, i believe.

what fannie and freddie have been forced to take on is even uglier.

ok...so lets assume your 66% is correct...lets assume (based on the merrill sale last year) real value is 22%...so a 2/3rds write off. do they just print the money? do they borrow from the treasury?

i don't know. this is clearly being done so that Treasury doesn't have to go to Congress and ask for more. I think that's kind of Ritholtz's point. The Fed is the ultimate "too big to fail." they'll have to turn on the printing press sometime, but i think Treasury wants to sell as much government debt as possible before the Fed lets her rip.

Dean Baker says that even if we didn't lose another job after April, unemployment would hit 9.5% by the end of the year. "10.5% unemployment is probably about as optimistic a scenario as can be believed."

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=04&year=2009&base_name=unemployment_predictions_why_r

cc, I'm not sure what I was thinking. As the article quoted by Mish notes, many consider the feds actions tantamount to printing. I was merely viewing them as a transfer of an impaired debt, not the creation of new funds, but it is more nuanced.

http://globaleconomicanalysis.blogspot.com/search?updated-max=2009-04-27T10%3A44%3A00-05%3A00&max-results=3

ok...so now (surprise, surprise) it appears that at least citi and bac will fail stress test. what happens? first salvo (of course) will be denial of validity of test. after that?

I read Wells Fargo also. They were rather quaintly listed among the "regional" banks. Converting to common is essentially nationalization at this point.

I have to wonder if they feel they have no other option at this point. TARP, TALF, PPIP, all unable to rid sufficient (with the latter two any really) bad assets from the books. People are starting to really scrutinize the Fed's actions.

The charlie rose interview with Ackman, Joseph Stiglitz and Andrew Ross Sorkin is available. I haven't watched it yet, but Noah references it today on UD.

http://www.charlierose.com/view/interview/10251

This is kind of frightening, the Fed is leveraging its capital at 48 to 1.
No wonder the banks are doing better, the Fed and the GSEs are loading up on their crap.

---How does one get an inflationary depression? how does one even get inflation if demand dies off? mainly because consumers (aka employees) are in fear of their jobs going away, and their incomes have been (and still are) collapsing. and that collapse was what drove the demand for credit. which wall street was so happy to supply, and to encourage by beating on incomes (thus making more demand for credit). what a deal!

the fed is both impairing its balance sheet by desiging lending facilities to take on assets that are not AAA rated, not that the rating meant anything anyway AND printing money.

The fed's balance sheet will only prove to deteriorate over time, and they will print more money to fill that void. They print by crediting the primary dealer's account at the NY Fed when they buy assets from them. Right now they are buying agency MBS and treasuries from primary dealers. That electronic credit, a mouse click, is modern day money printing. But this money is not being lent, it is being held in excess reserves, which the fed pays interest on since last OCT. Why hoard? Because banks will need those funds to service their own debts and to maintain capital ratios as performing assets start to deteriorate. Is not just a subprime problem, but all classes/quality of debt that was securitized. Whole loans are a mess waiting to happen because they are held in HOLD books, and only marked down when the entire book starts to non perform. So, those marks are too high.

The question is, will the fed admit that they are taking losses and their portfolio is deteriorating? Will that cause a disturbance? Will that cause a loss of faith in our dollars? Is that the gold trade? Will they just print more?

So many unanswered questions. Side effects of all this are higher taxes and higher rates. How will we be in that environment?

One thing is for sure, when demand for treasuries here collapse, who do you think will step up and buy? Thats right, the FED!

UD, that's kind of why I don't view this so much as printing(although I'm sure they are in some ways, but I suspect we haven't seen anything yet). If the fed taking the toxic crap off caused the bank to extend additional credit due to improved capital ratios and liquidity, that would be one thing.
But the banks are just getting a free toss, the way I look at it.

UD, I'm splitting hairs. They're buying toxic shit with taxpayers money and printing. The latter will only speed up as time goes on.

Creating money that does not represent the creation of value does nothing to spur economic growth, and only cheapens the money. Fiat money is only as good as the government that prints it, which in turn, is only as good as the economy it represents. The US government has effectively delegated its money creation function to the Fed, and so long as the Treasury requires payment in dollars for its taxes, has given the Fed the implicit power of taxation.

It matters tremendously how leveraged is the US central bank. It can fail like any other (i.e., being unable to fill its capital holes with profits), but when it goes, there is no calvary to ride to its rescue. It is the calvary, and its horse is the dollar. When they go down, they will go down together.

Scary stuff, and frightening times. This doesn't have much to do with the above conversation, but I thought it was a plausible explanation on why there seems to be such a tremendous disconnect between the political approach to solving these problems (ie, Geithner) and the populist reaction.

http://baselinescenario.com/2009/04/27/geithner-wall-street/

evnyc, most of this thread has little to do with anything more than four or five posts above. i haven't gotten to baselinescenario yet today. I think it's a great site.

Here's a great piece from Waldman at Interfluidity:

http://interfluidity.powerblogs.com/

It's entitled Value for Value, and is similar to Krugman's rant in the Times the other day. But it is a bit more rational face on the populist demand.

evnyc, interesting perspective by Kwak. I'd always thought that the cultural capital in the US was garnered through educational achievements. Great piece years ago in the New Republic about class in the US. But I guess Wall Street managed to carve out their own "special, special" niche. How insular, but I guess the hours and the environment could promote that (not to mention the power conferred by so much wealth).

If you look at the numbers closely, it appears as though there has been a significant shift in attitudes toward spending. How long this will last is unclear, but I found interesting the graph which shows the percentage of people who would, in a knee-jerk fashion, label themselves spenders v. savers, and the direction that has taken over the past eight years, particularly recently.

http://www.gallup.com/poll/118003/Say-Spending-Less-New-Normal.aspx

Although people may feel more confident things will change six months down the road, I'm not sure they're going to Abercrombie or Prada to celebrate.

The following is a very well-written piece written by Barry Eichengreen on why risk management failed, or indeed, even ceased to exist on some levels. He talks about it from many perspectives, including academia, and he doesn't absolve anyone but does shed light on how it happened. Interesting.

http://www.nationalinterest.org/Article.aspx?id=21274

here is interesting data for each conty in US:
Dynamic Maps of Bank Card and Mortgage Delinquencies in the United States
http://data.newyorkfed.org/creditconditionsmap/

elena
(broker)

elena, meredith whitney had some interesting things to say about the credit card situation. i'll have to spend some time looking at those maps. i wonder what will happen to consumer confidence when the credit card companies start chopping credit card lines.

http://www.forbes.com/2009/04/03/meredith-whitney-recession-intelligent-investing-credit-cards.html

Does anyone out there know if credit card usage in a given month is included in disposable personal income figures? obviously it would show up in PCE, but on the other side as well? I'm trying to get a handle on how PCE could have gone up, along with savings and DPI, when sales tax revenues and income tax revenues took such a hit. I know that tax refunds played a part, but essentially the amount that they represent largely went to pay down debt (increasing savings). I've read that the increase was due to an increase in amounts spent on services, but health was basically flat the first quarter, and what services are being used more frequently or are getting more expensive? Any thoughts?

I found some of the answer myself. Those GDP PCE numbers may have to be revised down. From the Econoday PCE report, Bloomberg:

Personal income in March fell further as consumer spending retreated from recent gains. Yesterday's GDP report apparently gave a misleading picture of relatively healthy consumer spending. Meanwhile PCE inflation came in mixed. Personal income fell 0.3 percent, following a 0.2 percent dip in February. The March decrease was worse than the market forecast for a 0.2 percent decline. Within personal income, the wages and salaries component fell a sharp 0.5 percent, after dropping 0.4 percent in February. Consumer spending turned negative again with a 0.2 percent decrease after gaining 0.4 percent in February. March spending was below than the market projection for no change.

PCE inflation was mixed as the headline PCE price index was unchanged, coming off a 0.3 percent jump in February. Meanwhile, the core PCE price index posted another 0.2 percent increase in March – the same as for the prior two months – and matched market expectations.

Year on year, personal income growth fell to 0.3 percent from 1.0 percent in February. Headline PCE inflation dipped to 0.6 percent from 0.9 percent the previous month. However, core PCE inflation held steady at 1.8 percent.

The March personal income report is more pessimistic about the consumer sector than yesterday's first quarter GDP report in which spending was up for the quarter. Now, the more current personal income report shows consumers having less income to work with and a pullback in outlays at the end of the quarter. This indicates possible erosion of the consumer sector in second quarter GDP.

Today's report should be negative for equities and should ease bond yields. Another record high for continuing jobless claims should have the same impact.

Aboutready, thank you for the links. It's taking me some time (which today I don't have) to read through them, but your analysis is very insightful.

I really like the wide-ranging topics I find on these boards.

evnyc, thanks!! i have the time and inclination, and am doing research as well, to review a large body of economic news, some of which I find quite interesting and which at least tangentially is relevant to the NYC real estate market. rather than clutter up the board I just stick them here and if people aren't interested they can ignore them. but a few people have indicated that they enjoy the links, so as I also enjoy it, I will continue. It's nice to hear, though, that other people do also find them interesting.

"nyc10022, believe me, they knew. you don't give people mortgages that are 5 times their incomes."

Leaving aside the hyperbole, if you believe that housing won't decline... sure you do.

"they didn't know the extent to which things could crater."

exactly. they didn't know better.

nyc10022, i never said that i felt they knew the destruction they would cause. i said they knew that they were making shitty loans, risky ones.

how do we excuse/ rationalize the NINJA loans?

or the bad loans that continued to be made in California, Florida and elsewhere after the downturn was evident, right through to spring of 2008. they knew. s&p or moody's had two different models running, in the same f'ng building.

They may not have known, but they SHOULD have known and had the information available. There was too much money to be made by ignoring the information. They knew they were making very risky loans, they just figured some other sucker would be left holding the bag. Guess who that turned out to be?

Yup. The taxpayer. That would be all of us.

Recently checked my "Vantage Score" (new matrix invented by Experian to rival FICO) and found it was lowered by my 1) having paid off my mortgage and 2) not having enough open lines of credit (though I have in excess of 35K available to me in revolving debt and a zero balance on all my cards). I have never been late on a single bill, paid of my student loans, etc., but I rated a "B" credit risk because I failed to accrue enough debt. I can't help feeling this reflects the basic brokenness of the consumer credit model.

Familyguy, that is just insane. A close relative of mine refuses to use credit cards and has a similar problem. Liz Pulliam Weston writes extensively about the credit card industry and how their tactics screw consumers. Some of her articles might be worth taking a look at.

Credit score is there so CC company can pinpoint who they can deal with (they score your ability to handle debt). Banks have to mesure risk and credit score is a way to put price tag on risk.
If a person doesn't maintain certain score it actually cost him/her more to live (loans - interest).

elena
(broker)

Yep. Interestingly, having a mortgage improves your credit, but having paid off a mortgage lowers it. The report refers to this as having no history of real estate loans with a "valid balance", a zero balance being considered invalid. Totally weird. I sold my coop in 2006 because I was on the board and started seeing all these applicants with insane financing packages (1 year adj, etc) on mediocre credit and poor assets (we turned them down, but not without a fight).

MSCI set for best month since 1989...

http://www.bloomberg.com/apps/news?pid=20601080&sid=apQ60JgnILWc&refer=asia

Market signals that the economy is NOT collapsing

http://seekingalpha.com/article/134332-market-signals-that-the-economy-is-not-collapsing

Hi jsmith, I guess i could repeat all the other comments that I had recently. Welcome to the thread.

btw, that piece on seekingalpha, check out the author. lmao. no independent thought there. jsmith, i hesitate to even quote Krugman, because he seems partisan. you're quoting a quack.

Outlook for restaurant industry improving...

http://www.calculatedriskblog.com/2009/04/restaurant-performance-index-increases.html

Housing is "shouting distance" from bottom...

http://www.bloomberg.com/apps/news?pid=20601103&sid=a1UJ49yccKoY

Architecture billings index increases in March

http://www.calculatedriskblog.com/2009/04/architecture-billings-index-increases.html

Note: Any reading below 100 shows contraction. So the improvement in the index to 97.7 means the business is still contracting, but contracting at a slower pace. restaurants