A steady fade in the job
market has renewed concern for recession -- as usual, perversely good news
for mortgages, again crossing below 6%.
Payrolls in March contracted by 80,000 jobs, and prior-months' revisions
clipped another 54,000. New claims for unemployment insurance spiked by
38,000 to 407,000, the worst week since Katrina. The purchasing managers'
surveys showed general business activity neither shrinking nor growing in
March, and on a par with February.
The economic decline is slow, but clear. The optimists (found now only on
stock-touting CNBC and Fox) have switched from a "no problem" forecast to
a short and shallow downturn, and worst-is-over in credit losses. Maybe
so, but we continue to believe that a government effort to re-capitalize
the financial system will be necessary.
The Crunch chokes on: Oppenheimer says that global debt underwriting has
fallen 55% since July (a $2 trillion strangle). In the 1st quarter, global
bond and stock underwriting combined fell 45%, issuance of mortgage-backed
securities by 82%, and non-rated "junk" bonds by 88%. For those who still
buy the Wall Street line that this is all about housing, note that new
issuance of state and local student-loan securities, a $330 billion
market, in the 1st quarter fell all the way. Zero.
PREVIOUS ISSUE
2008 ISSUES
2007 ISSUES
RETURN HOME
|
For public-policy junkies,
great theater last week. Genuine American heroes appeared before Congress
to be flayed.
Since Crunch onset in August
it has been hard to evaluate our economic leadership. Perfesser Bernanke
has taken action from the beginning, but late, inadequate, and appeared to
be detached. That judgment may have been fair through January, but has
been mistaken since then. Our apologies: his speech last week (must read,
short: www.federalreserve.gov), his opening of the Fed's floodgates in new
and essentially infinite amount, his distance from Secretary Paulson in
testimony, his refusal this time to guide Congress on fiscal giveaway
("That is your purview..."), his blunt warning of recession, and
extraordinary leadership in snuffing the Bear Stearns panic -- together
easily the most courageous performance by a Fed Chair since Volcker in
'79. Given the lack of public support by the Administration, maybe
best-ever.
Timothy Geithner, NY Fed Prez, same deal. Christopher Cox, Security and
Exchange Commission Chair, took heat even from Fed colleagues, but he is
trapped in an ineffective regulatory structure (one definition of Hell:
great responsibility without authority) and showed another form of
courage: no illusions, no excuses.
© 2008 - Economic Notes is published weekly by the Economics Department of
Universal Lending Corporation. |
Senators Menendez (D, NJ),
Bunning (R, KY), and others, joined by Rep. Ron Paul, the American
Ahmadinejad of finance, variously raked, hectored, and needled the heroes
for failure to protect the American taxpayer. Of course, they had done
exactly that. The heroes' bitterness at the critique -- the lack of
gratitude, the willful misunderstanding, the deceitful and cynical
grandstanding -- was thinly disguised. A lesser man than Perfesser
Bernanke might have left Congress thinking, "The next time I've got 24
hours to stop a meltdown, maybe I should just let it happen. When the
markets shut down, visit Congress to ask what I am allowed to do."
The absence of Mr. Paulson (on "previously scheduled" junket to China) was
disgraceful, and makes plain who is in pursuit of imaginary market
solutions and who is aware of danger and prepared to act. Before his
departure, he announced a new plan of market regulation which
transparently fails the only test: sufficient power to prevent a replay of
this credit disaster. The Street being the Street, a fox guarding the
henhouse would be okay; Mr. Paulson is a hen guarding the henhouse.
In a time like this it is the duty of the Chief Executive to explain to
the people, to relieve national economic confusion and fear, to mediate
collective sacrifice among both parties, and to protect the likes of
Bernanke and Geithner, securing adequate authority for them to do their
jobs. The President's failure to fly top cover for these men, instead to
give priority to another annoying descent upon European allies...
unspeakable.
|
