The Congressional Budget Office on Tuesday estimated that a government plan to stabilize mortgage giants Fannie Mae and Freddie Mac could cost government coffers an average of $25 billion.
CBO's $25 billion cost estimate is an average based on "the path of housing prices in the next several months." They considered three scenarios: prices stabilize, grow modestly or decline steeply.
The CBO report came out a day or two before the House is expected to debate and vote on a rescue plan proposed by Treasury Secretary Henry Paulson last week. Paulson asked Congress to give the Treasury broad, but temporary powers intended to provide a liquidity and capital "backstop" for the two government-sponsored enterprises (GSEs).
Paulson requested that the Treasury be allowed to offer Fannie and Freddie an unlimited line of credit for 18 months and be given authority to buy stock in the companies if necessary.
Where is the credit line for the average taxpayer who can't make ends meet? Where is the ability to file bankrupcy and start over. Oh thats right those laws were changed to benefit the credit card companies.
Why is it that some companies are deemed too large to fail? Why aren't those companies deemed too large to fail held to a higher standard if they may be coming to the government for a bailout? These companies know that they can do almost anything even skirt legal standards and NOTHING will ever happen to them. You and I will be forced to open our wallets and bail them out while those at the top of those companies are allowed to keep there excessive bonuses.
It is time that government bailouts come at a price for these companies. We must demand the bailout be a loan at prevailing interest rates and we must demand that those at the top help finance the bailout with lower profits. The goverment should become a major stockholder and should share in any future profits.
The Labor Department reported that soaring costs for gasoline and food pushed inflation at the wholesale level up by a bigger-than-expected 1.8% in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.
Over the past 12 months, wholesale prices are up 9.2%, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.
Phil Gramm doesn't understand the suffering of the average American and he is Mccain's chief economic advisor. He is also responsible for a great deal of legislation that did away with oversight. Imagine him as the Treasury Secretary under McCain. That should send chills down the spine of all middle and lower class Americans.
These people do not have your best interests at heart. They are there solely to facilitate the destruction of the middle class. The understand that without a middle class it is much easier for a ruling class to take and hold power. It has been the middle class that has kept our democracy strong. Kill the middle class and you will kill the democracy but hey that's exactly what they want.
Consumers boosted their borrowing in May, mostly reflecting heavy credit card use to finance their purchases.
The Federal Reserve reported Tuesday that consumer credit increased at an annual rate of 3.6% in May, roughly the same pace as logged in the prior month.
The pickup pushed total consumer debt up by $7.8 billion to $2.57 trillion. That was a bit more brisk than the $7 billion over-the-month increase economists were expecting.
The increase was led by much stronger demand for a category called revolving credit, which is primarily credit cards. Use of revolving credit rose at a 7.1% pace in May, a month where a flow of tax rebates helped to energize consumer spending. In April, consumers cut back on such credit at a 0.5% pace.
What this reports tell us is that the middle and lower classes are depending on high interest credit cards to meet the ever rising cost of living. Most consumers are at or close to maxing out on their credit and do not have the ability to pay more than the minimum payment. The credit cards companies will see ever greater profits while the middle and lower classes will be choked by high interest payments on this debt. This cycle can only mean that a recovery from this economic mess is nowhere in sight.
So we have a housing market in the toilet, a stock market in bear territory and a worsening job market that will be in turmoil until 2009. Can things get any worse?
Economists are forecasting that the unemployment rate retreated slightly in June after May's big spike. But few believe that is a sign that the battered labor market is at or even near the bottom.
When the Labor Department releases its June employment report Thursday, economists expect the unemployment rate to fall to 5.4% from 5.5% last month.
But job losses are also expected to continue. Economists are predicting that employers cut 60,000 positions from U.S. payrolls in June, up from the 49,000 job loss reported in May.
This would be the sixth consecutive month of job losses.
One reason for the expected decline in unemployment at the same time that overall job losses are increasing is that the unemployment reading jumped in May due to a large number of teenagers looking for summer jobs.
Many of those teens likely gave up job search efforts in June, which will reduce the number of people counted as unemployed. It's also worth pointing out that even if the unemployment rate dips to 5.4%, that's still up from 5% in April.
And some economists even think the unemployment rate increased in June, due to the flooding in much of the Midwest.
Rich Yamarone, chief economist at Argus Research, said he believes unemployment could inch up to 5.6% in the month.
But putting aside the monthly blips in the unemployment rate, there is no denying that the job market is weak. Several economists see more job losses ahead as employers pull back on hiring plans due to soft demand for their products.
The job market has been weak for some time. Finding high paying middle class jobs is becoming harder and harder. Is there anyone that works for a large company that is not dealing with processing or accounting done in Mumbai or other areas outside the United States? How do our lawmakers pay them back for shipping our jobs overseas? They give them tax incentives to do it.
When will the middle class wake up and realize that it is their political ineptitude that allows this corrupt system to flourish? When will they stand up and say enough is enough? When will they realize that paying a larger share of taxes on a higher income is better than a lower rate on lower income? In the end there will still be more money for everyday needs and a federal deficit that will not kill the economic future of the next generation. Will we again let these politicians use fear and loathing to get us to vote against our own best interests?
This election could be the start of the rebirth of the greatest country on earth or it could be the final nail in the coffin of what was the envy of the world. The choices are clear, the policies of the two Presidential candidates are so different that a decision should be easy. If you let them scare you with terrorism or play to your prejudices then we will all lose and the future of this nation will be one of militarism and poverty for the masses. That is not what our founding fathers had in mind.
U.S. home prices posted record declines in April, extending a painful losing streak for U.S. home prices.
The S&P/Case-Shiller 20-city Home Price Index fell to a record low of 15.3% on a year-over-year basis, and was down 1.4% from March. The 10-city index was down 16.3% year-over-year and 1.6% for the month.
The 20-city index is based on data going back 19 years, while the 10-city index is 21 years old.
There is one sliver of hope. Although every city surveyed posted year-over-year price drops, the month-to-month pace of declines did slow in many cities. And eight metro areas actually posted gains from March to April.
Bright spots Hard-hit Cleveland was the biggest winner, with prices up 2.9%. Charlotte, N.C. posted a slight gain of 0.2%, up for the second straight month, while Dallas prices were up 1.1% in April, also up for the second month in a row.
"There might be some regional pockets of improvement, but on an annual basis the overall numbers continue to decline," said David Blitzer, Chairman of the Index Committee at Standard & Poor's.
Indeed, there are anecdotal reports that investors have begun to snap up distressed Cleveland properties at very low prices, according to Dean Baker, Co-Director of the Center for Economic and Policy Research, a Washington-based think tank.
"The data suggests that Cleveland has found a bottom," he said, "although it's just one month's data and I wouldn't make too much of it."
Also on Tuesday, the Office of Federal Housing Enterprise Oversight (OFHEO) reported that its monthly house price purchase index was down 4.6% year-over-year in April.
While the closely-watched Case-Shiller index tracks the sale prices of the same homes over the years, OFHEO's index only tracks sales of homes with mortgages insured by Freddie Mac and Fannie Mae. These loans were for $417,000 or less, until Fannie and Freddie's loan limits were raised in early March.
The overall price declines reported by Case-Shiller have been remarkably consistent over the past two years. Prices on the 20-city index have dropped for 21 straight months, since July 2006. The 10-city index has fallen every month since June 2006.
Declines accelerating What's more, recent drops have been particularly steep. The 20-city index fell 2.2% in March, 2.6% in February and 2.3% in January, and is now it down another 1.4%.
"In the bubble markets, we continue to see very rapid rates of price declines," said Baker. "If anything, it may be accelerating."
Las Vegas prices plunged 26.8% compared with April of 2007, the worst drop among the 20 cities Case-Shiller covers. Prices there fell 2% in April.
Other hard hit cities include Miami (down 26.7% year-over-year and 4.1% in April), Phoenix (25% and 3.4%) and Los Angeles (23.1% and 2.2%).
"Bubble markets are now trapped in a vicious negative cycle," said Mark Zandi, chief economist for Moody's Economy.com, "with foreclosures driving prices down, which leads to more foreclosures."
Foreclosures account for a much larger proportion of sales than they did a year ago, he said, and that pulls down the numbers. "But just because the average home in your market is down 25%," he said, "doesn't mean that your house is down 25%."
Still, plummeting prices could derail some of the foreclosure prevention efforts underway across the nation. As home prices fall, that wipes out home equity, often leaving homeowners underwater, with mortgages worth more than their homes.
Some 10 million homeowners are now underwater, according to Economy.com, and that number will continue to grow as home prices plummet.
Underwater borrowers have higher rates of foreclosure than those with some home equity, since they can't tap their homes for cash in case of an emergency. And some owners are simply walking away from homes that have lost so much value rather than continuing to make expensive payments every month.
The flood of foreclosures may be darkening an already bleak picture, said Zandi, "but the market is very bad right now."
If you feel poorer lately its not just a feeling it is a reality. We are facing an economic perfect storm that has the ability to wreak havoc for the next few years as we try to dig our way out of the mess left behind by the awful policies of this administration.
They allowed the financial industry to regulate itself and as usual the American people are left holding the bag while those at the helm of these financial firms walked away with millions. Once again the little guy gets screwed while the rich laugh all the way to the bank after robbing the middle and lower classes.
President George W. Bush urged Congress on Wednesday to end a ban on offshore oil drilling, responding to consumer anxiety over soaring gasoline prices with a plan sure to anger environmentalists.
Bush said opening federal lands off the U.S. coast -- where oil drilling has been banned by both a presidential executive order and a congressional moratorium -- could yield about 18 billion barrels of oil.
That would meet current U.S. consumption for about 2-1/2 years, but it would likely take a decade or more to find the oil and produce it.
Still want to drill and destroy the only environment that we have to get a short term fix a decade from now or do you want to develop alternate sources of energy that could replace oil? That will never happen as long as oil men and their flunkies roam the halls of Congress and get installed as President of the United States.
This is really brilliant. Now we need to ask does he just not remember what he is saying or is he lying? Either way he should never enter the White House.
