Wall Street Gets Richer; Americans Still Losing Jobs

RECOVERY WON'T RESONATE UNTIL AMERICANS ARE WORKING AGAIN
Way too many journalists are jumping on the economic recovery bandwagon especially when the Dow's 25 percent rise the past month does little to make life easier for you and me.

While some point to Wells Fargo's surprisingly healthy first quarter (Noriel Roubini said Wells Fargo was one of the weaker banks last month in Time. What happened?) as proof the recession has bottomed out, unemployment is still 8.5 percent and likely rising at the same clip. A chipper AP story reports the first week of April had the lowest amount of new jobless claims in months. I'm not sure how much an indicator one good week in the middle of 40 does for the unemployed. This New York Times piece speculates how the strong Dow could be covering up significant problems in the overall economy.

The underlining message in nearly every story, except a very cautiously optimistic article in the Boston Globe today, is that the financial sector is doing well and depending on your politics, the benefits will never "trickle down" to the pocket books of struggling Americans. It's true that short and long-term interest rates are unbelievably low, but how will it translate into more construction of homes? The inventory of already built new homes is high and recently foreclosed homes are even higher. This may be where Wells Fargo's announced $190 billion in new loan applications are emanating. Once the glut of inventory begins to deplete in relation to low interest rates where will this segment of the economy look like?

The job of Wall Street is to keep things positive; to eradicated jitters and to keep the wheels of finance rolling. It really has nothing to do with the problems Americans are dealing with everyday, at least, in the short term. It's likely over a half million more workers will get a pink slip this month. Add to this the previous 5 million and you have quite a segment of the population scrimping and saving and not purchasing goods and services. Don't tell Americans the economy is picking up while they sit and wait for a new job.

It's Time To Impound GM

OBAMA NEEDS TO BEGIN MAKING THE UNPOPULAR, TOUGH DECISIONS
If you view a laid-off employee as the top of their very own food chain, as the Los Angeles Times posits today, then their activities, or lack thereof, would ripple down to the butcher, the baker and the candlestick maker.

In a story today, the Times used the example of a Southern California man whose software deal fell through, which then forced him to lay off his employees. In other sections of the article lay-offs meant consumers put off haircuts and skimped here and there to stretch their budgets.

Of course, there's an unquestioned rationale to this phenomenon, but isn't this the case General Motors and the United Auto Workers are trying to pass as reason for the government to keep it afloat? The GM question is indicative of many of the financial dilemmas facing the Obama administration. How can a company and, by extension, an industry so steeped in the American culture like the automotive business be allowed to flounder? Yet, when does continually propping up GM as a practical long-term policy become a lost cause?

CBS News today wondered what bankruptcy would likely mean to workers. The decision would likely trickle down to the closing of part makers and the shuddering of car dealerships around the country. That means, thousands of factory workers, mechanics and car salesmen added to the unemployment rolls. On the other hand is it wise to give another $15 billion or so to GM just to keep the lights on when it is likely another $20-$30 billion may be needed a few months from now.

President Obama ran on a platform preparing Americans to tighten their belts and begin making the tough decisions. He has yet to make those decisions. Although, maybe we should give him some time since according to a well-researched article in the New York Review of Books that chronicles his first month in office, Obama has spent an inordinate amount of time simply turning back many of President Bush's horrendous policies. Yet, on the economy, the Treasury Department has done little to force the banks and the entire financial system to concede one point similar to the circumstances around GM.

Instead of holding these auto-related industries in place while they lie precariously on the edge to oblivion, how about pulling the plug on them while there is time for the government to restructure the work force in an orderly manner. The New York Times ran a chilling front page article last Friday that reinforced this notion that the workforce is in many cases, obsolete. A chief economist at Wachovia Bank said, "These jobs aren’t coming back.” Isn't that what the foreman in the Bruce Springsteen song "My Hometown" said?

"Foreman says these jobs are going boys and they ain't coming back to your hometown," sang The Boss. Ironically, those lyrics were written during the equally disastrous 1981-82 recession.

There would be repercussion other than in employment. Sure, innovation would suffer. Plans for the vaunted Chevy Volt would gather dust, but who would be able to afford a $35,000 green car without a job or reliable financing available. We can take the hit now and hope for the recovery to not just get us back on our collective feet, but in far better position to dominate the marketplace for the next 30 years.

San Francisco Mayor Gavin Newsom said last week, the voters showed that the last 30 years of conservatism was a failure, yet the decisions this president is making on behalf of liberalism will define the next 30 years either positively or negatively for another generation of American political thought. Now is not the time for short-term thinking.

Friedman Says The Unmentionable

NYT COLUMNIST SEES A ROCKY FIRST-TERM FOR OBAMA
It seems like people don't want to face the truth. Some people have been calling this era of economic downturn as not a Great Depression in the making, but, instead the "Great Repression".

It has been said here many times the presence of Treasury Secretary Tim Geithner and Larry Summers in tandem with the hovering spirit of Robert Rubin would portend for more of the same faulty economic decisions that got us into this fiscal turmoil. Nobody wants to say the banks are insolvent even as Citigroup flirted with sub-one dollar stock prices yesterday. And nobody would dare say the early-goings of the nascent Obama administration might flail in response to this crisis until Thomas Friedman wrote it yesterday in The New York Times and others quickly sought to skewer him. For instance, Vanity Fair's political blog.

"But do you know what I fear? I fear that his whole first term could be eaten by Citigroup, A.I.G., Bank of America, Merrill Lynch, and the whole housing/subprime credit bubble we inflated these past 20 years," said Friedman before illustrating how big this banking beast really is and how nobody has a clue how to solve it.

I hope my fears are exaggerated. But ask yourself this: Why couldn’t former Treasury Secretary Hank Paulson solve this problem? And why does it seem as though his successor, Tim Geithner, won’t even look us in the eye and spell out his strategy? Is it because they don’t get it? No. It is because they know — like Roy Scheider in the movie “Jaws,” when he first saw the great white shark — that “we’re gonna need a bigger boat,” and they’re too afraid to tell us just how big.

Instead, the administration seems to be relying on the American people to become inured to the price tags zooming by them. $700 billion there. $350 billion there. $14 billion there and $2 billion in aid to some far-flung despotic third-world country. After time, what's a few billion here or there. Most of us cannot grasp what a billion looks like anyway. Republicans like Sen. John McCain, on the other hand, are appalled at a mere $1.7 million earmarked to study the foul smell of pigs.

In the meantime, things are continuing to get worse. Jobless claims again rose to 651,000 spearing any hope that the we have hit the bottom. In reality, we may have reached that point, but the bottom is just becoming wider and will only persist until the administration confronts the banks in earnest.

I heard an interesting fact last week on Real Time with Bill Maher. The Chinese character for crisis is the same for the word opportunity. An interesting notion that Obama's pledge of change is not wholly grasping.