Another wonderful jobs report this morning. About six and a half years after the beginning of the Great Recession, we are wandering out of the doldrums.
We have created 142,000 new jobs, the VAST majority of them in all of the lowest paid job sectors of the economy. Added to that, the unemployment rate has been slashed to 6.1% and the labor participation rate has crept down to 62.8%. We have large numbers of part time employees who really need full time work, which is good because that will keep a lid on wages.
It is the best of times, it is the worst of times.
Monetary policy can cure anything and everything such as our post war recessions, but monetary policy has not cured our current economic ‘downturn’. The current policy seems designed to undo savers by a death of a thousand cuts while protecting the bankers at whatever cost. I want the US Supreme Court to rule that I am a bank corporation, personhood is overrated.
Fiscal policy can resurrect the economy such as the Great Depression in 1933-1936 (NOT!) but fiscal policy has not cured our current Great Recession 2008-2014. Last night just before I nodded off I whispered ‘Dear Lord, please save the Export-Import Bank’. Global Free Trade will save us, we just haven’t tried enough of it and half hearted belief is not good enough.
We have thrown all our economic experts’ accumulated knowledge and wisdom at our meandering recovery. Time for another approach. Let’s throw a virgin into a volcano once a month! Trust me, at some point this is going to work.
This morning’s jobs report has put the Work Force Participation Rate at the lowest level since 1978.
In today’s WSJ there is an article that states that fully 34% of the workforce does not have a full time job. The WSJ describes them as: independent contractors, temps, and moonlighters,
Put these two together and what do you get? It means that 53m ‘workers’ aren’t working in a way that was assumed. It’s safe to assume that a fair bit of those independent contractors, temps and moonlighters aren’t paying taxes.
Is the 36 year record low in Work Force Participation a temporary factor? Will it reverse, to a healthier level, in the next 3 years? Or will it fall further?
If it will not reverse direction, then what are the long-term macro implications?
This is one of those things that support the conclusion of Secular Stagnation. It also supports Eddie L’s belief that CBO/SSA do not have a ‘correct’ path of what ‘Potential Growth’ is today and what it could be in the future.
First: Participation Rate has been at that level during 2014 before. March, April, May, June, besides August at 62.8 and last year also. This is hardly a news bulletin.
Second: We already know many people are working temporary jobs and under the table to make ends meet.
Third: What you do not mention are the Republicans and the Tea-baggers have blocked every fiscal action in Congress after 2010 and continue to do so.
Forth: As Sandwichman has pointed out in his analysis, there are actions which can be taken to alleviate much of the issues with U3 if Congress had an eye towards progressive actions to grow the economy rather than austerity to contract it.
Fifth: SS/Medicare will not be the core economic issues if the civilian Labor Force does not grow as they are side issue to the economy and hamstringing them will not solve the prime economic issue of putting people back to work.
Sixth: The Millennial generation is a cohort larger than baby boomers and they are the ones who can not find work.
Seventh: The Millennials do not like banks and would rather do without you and Wall Street.
Eighth: Bruce, you need to solve the core problem rather than fixate on Social Security, Medicare, PPACA, Medicaid, etc. Without a solution, you will be out of business.
Run, You didn’t read my bio. I’m pushing 65 – soon to be getting SS and Medicare. I left Wall Street 19 years ago. I have had no involvement of any kind in financial services since. I’ve been ‘retired’ for years. So when you say, “you and Wall Street”, and “you will be out of business”, you are way off the mark.
The Wall Street of today bears no resemblance to what I left in 1995.
You point to Congress and say that things could be done. I suspect that you’re right about that. But I asked the question ‘if things could be turned around in the next three years’.
Do you really expect that progressive legislation is going to happen in that period? I don’t. The risk is that the Senate goes to the Republicans this fall. Obama would have to veto things.
In 2017 things could be different. But I did specify the 3 year window.
I am almost 66. The VA finally took me in this year after 5 years of asking. I suffered no external wounds and I have two rolls of ribbons which I would gladly give back to have my friends with me again. In the late sixties and seventies I was poisoned by the water at Camp Lejeune which was tainted. At 33 my platelets dropped to 5000 which means I was a bleeder due to poisoning. We did not know what hit me and the gov was not telling us.
The Senate will not go to the Repubs if you read Sam Wang. Princeton Election Consortium The Dems will control it as we need them to shut down Jimmy Cricket McConnell and Boehner. Michigan will go Dem for the Senate with Peters. Kansas will go Independent with Orman. Statistical analysis like the 538 Blog was in 2012. I need to post on this. This just changed as of recent and previously it was 50-50.
Things will not turn around in three years unless the baby-boomers rise up and do it for now. The Millennial generation are the lever which will bring change as TBTF and the Investment bankers such as GS are gonna have to kiss their butts. So far from what I read, the Millennial generation will not accept them as the norm.
OK…so the Cleveland Fed has an article that says that the Beveridge curve hasn’t shifted like some people thought it might have earlier in the recession. But they say that the Beveridge curve is “an empirical relationship between job openings and unemployment that is viewed as a measure of the efficiency with which the labor market is matching unemployed workers to the available openings.”.
Am I the only one that looks at that definition and thinks that given the numbers of people who are underemployed in terms of the match of their skills to the job they hold the curve just might have shifted in ways these analysts are ignoring?
Run – I agree – The Senate is likely to go 50-50. So Joey Biden will have the deciding vote. This is not an outcome that will bring any change; quite the opposite.
And I don’t see Boomers ‘rising up’. Why would they? Boomers want to see things unchanged for their age group.
I understand your anger with TBTF, but this is a much smaller issue today than it was 6 years ago. For sure the TBTFs had a hand in the blow up of 2008, but the Government Enterprises (Fannie and Freddie) were as much a part of the problem as the private sector financial institutions.
What is the most Progressive factor in the US today? That would have to be the Federal Reserve. It has taken extraordinary measures the past 6 years in an effort to increase employment. What has been the outcome of that effort? The answer is that small savers have gotten killed while the 10% has made an absolute killing in the stock market. Wealth inequality has never been higher than today – thank the Fed for that.
I think the millennials all want to work for the TBTFs. GS pays its secretaries a 6 figure salary.
Look at what Obama did yesterday, he put off action on immigration – Why? Because to do so would have hurt Dems in the Bi Elections. Both Reds and Blues are doing things for politics that are not in the country’s best interests.
“The three-year study from Scratch, an in-house unit of Viacom that consults with brands, found that a third of millennials believed they’ll be able to live a bank-free existence in the future. In the age of Simple, Square, and Bitcoin, these millennials, defined as those born between 1981 and 2000, overwhelmingly believed that the way they access money and pay for things will be completely different in five years.”
“As consumers, millennials have been slow to accumulate wealth. They have huge debt. They’re facing unprecedented underemployment. They’ve been relatively unaddressed as a generation by banks. All of a sudden, you see purchasing power by millennials growing to over $1.3 trillion,” Scratch executive vice president Ross Martin told Fast Company.
As a result, this digital-savvy cohort is looking to the tech sector to provide banking solutions. Half of respondents said they were counting on startups to overhaul how banks work, and three-quarters said they would be more excited in financial services provided by Google, Amazon, Apple, PayPal, or Square than from their own banks.
I do not believe the Millennials want to even get close to TBTF. As to the Fed correcting TBTF and Investment Firms, why is GS and other firms still banks borrowing low interest rate loans which we are subsidizing? Time for them to come off of our teat. There is a whole story behind Fannie and Feddie
I really do not want to talk Fannie and Freddie as this is a completely different topic and there is much out there to dispute your viewpoint. Fannie and Freddie were not the major issue the same as minorities and the CRA were not the issue. Both are distractors to the prime issue. Once they had access to Wall Street, TBTF threw away the lessons learned from the Depression. Lehmans, GS, AIG, etc. were writing checks which had no reserve in case of default. TBTF and investment firms are still as much an issue today as they were then and even more so as the Gov backs them to keep them from failing. It is time to separate Banking from Wall Street again and limit what can be spent of gross profits. Greenspan’s opening the door to investment by banks with the expansion of Section 20 GS was a great mistake in 87.
If you look at Sam Wang’s statistical analysis (like 538 used to do),
there is a 95% chance the DEMS will control the Senate plus with two independents.
The Power Of Your Vote
State Margin Power
AR Pryor +1.5% 100.0
NH Shaheen +3.0% 85.6
IA Tied 74.4
AK Begich +6.0% 64.1
LA Cassidy +1.0% 38.8
CO Udall +2.0% 35.9
NC Hagan +2.0% 20.5
GA Perdue +2.5% 13.4
KS Orman +10.0% 5.3
KY McConnell +4.0% 1.9
MI Peters +6.0% 1.3
SD Rounds +10.0% 1.0
OR Merkley +13.0% 0.1
As I mentioned earlier, Peters will take Michigan and has a 6% lead over Repub opponent Land. Kansas will go to Independent Orman with a 10% lead once the Dem drops out completely. I think you can figure out the rest.
I was not disagreeing with your election results, just that even with the Congress in neutral, there is still a big deal about a 50-50 Senate.
I wonder why you mentioned the GSEs then? At least you have forgotten that. But your list misses the investment banks. It was them. Totally. No question. Even the ratings companies were bit(important) players. And they would not have done it with the investment banks paying them off.
BTW, Krasting, here’s the evidence that Fannie and Freddie were not to blame. Please falsify each of the items in this article and then provide affirmative evidence that they were to blame.
Joel – You point to an Atlantic article and the FCIC? The FCIC said that F/F were marginal players in the mortgage meltdown. Marginal??
From Forbes:
This set off a frenzy of subprime and Alt-A mortgage origination, in which–as incredible as it seems–Fannie and Freddie were competing with Wall Street and one another for low-quality loans. Even when they were not the purchasers, the GSEs were Wall Street’s biggest customers, often buying the AAA tranches of subprime and Alt-A pools that Wall Street put together. By 2007 they held $227 billion (one in six loans) in these nonprime pools, and approximately $1.6 trillion in low-quality loans altogether.
From 2005 through 2007, the GSEs purchased over $1 trillion in subprime and Alt-A loans, driving up the housing bubble and driving down mortgage quality.
As usual, there’s two sides to the story. Barny Frank and the GSEs do not have clean hands in this.
Uh, Bruce, you apparently didn’t read the article, since you pointed me to a Wallison article, and the more recent Atlantic article (and the comment thread) pretty thoroughly fisked Wallison.
I asked for a point by point rebuttal. So you’ve got nothing. Thought so.
i probably agree with your politics, but you don’t help things a bit by blaming straight old white men. This is absolutely no different than blaming “the jews” or “the blacks” or the commies under the bed.
Try to overcome your racist habits of thinking… and yes, it’s racism even if the people you hate are white. or straight. or old. or men.
Then see if you can come to grips with the real problems. or one of them.
In 2006 Fannie and Freddie lent $1.5B to a very leveraged RE deal. The borrower was Tishman, a big NYC developer. The money was used to buy Stuyvesant Town.
The deal went bust in 2010. It’s still in court and F/F still have the loans outstanding. The NYT has this quote re the Stuy Town deal:
“It’s the poster child for the entire housing bubble,” said Daniel Alpert, managing partner of Westwood Capital. “There’ll be some other spectacular blowups, but this will be at the top of the pecking order.”
What was F/F doing back then? They provided the key financing for a $5.4B leveraged RE deal? Is this what the GSEs were supposed to be doing?
In terms of your “key financing” of this deal, you are 100% totally wrong. From your link:
” Fannie Mae and Freddie Mac may be in the best position of anyone involved in the deal’s financing. They acquired over $2 billion in securities backed, in part, by the $3 billion Stuyvesant Town mortgages. Fannie and Freddi Mac have to be paid before any other debtholders, but they are not parties to the negotiations over the property.”
I am shocked, shocked I tell you, that the GSEs had mortgages on some of these properties.
Here’s the thing I find most amusing about RWDWs and their GSE infatuation.
There was actually GSE behavior during the crisis that was abhorrent. The problem for RWDWs is that the behavior was not due to government influence and/or requirements, but the same behavior of the CEOs, Mudd and Syron, that the CEOs of the investment banks engaged. Short term profits were the entire focus.
Faced with an incredible decline in market share during the bubble(something the Wallisons of the world ignore), the GSEs went into a market they had no reason to go into, other than the salaries of their execs.
But that real malfeasance never seems to show up when these ideologues attack the GSEs.
Obviously it is a waste of breath to try to convince you that the purpose of my old white guy meme is to point out the hypocrisy of the rwdws blaming gays and blacks for the financial crisis.
F/F took 1.5B of senior notes in the deal. There was another 1.5B of senior paper that was Parri Passu with F/F. The other Senior paper was picked up by Wells. So to get F/F its money back there would have to be an offer of $3.5B for Stuytown. So far that money has not stepped up, so F/F are not out of this deal yet.
When F/F spoke for the 1.5b they created an ‘anchor’ where the rest of the capital structure could be built. Wells came in because they were ‘protected’ as they were side-by-side of F/F. So I would say (again) that F/F were a critical component in getting the deal done.
Me? I think this was a stinker from the get-go. This deal was about greed. What was Tishman’s plan? To get the rent stabilized apts, get rid of the tenants and then sell condos. That’s a business plan that F/F should be backing?
For what it’s worth, Maxine Waters and Barney Frank made a stink in 2006. They were trying to protect the middle class renters at Stuytown. But they folded as F/F had most of Congress in their pockets.
F/F got paid $200m in fees for backing the deal. Most of that went into the bonus pool for the fat cats.
I can’t think of a good thing to say about the Stuytown deal and the role F/F played. EMichael loves it – go figure.
” They acquired over $2 billion in securities backed, in part, by the $3 billion Stuyvesant Town mortgages”.
You show me where F/F were involved in any way, shape or form as to what you described and I will reconsider.
But your link shows nothing at all like what you state.
On the other hand, this concerns the housing bubble how? And how does it possibly concern the GSEs being involved with things because of “affordable housing goals”?
I think this is worthless, but even if it is real, it has nothing to do with “affordable housing goals”, or “government mandates” and everything to do with what caused the financial crisis; stone cold greed on the part of the private CEOs.
I am gonna yank this from another topic that has gone off the page.
Full D.C. Circuit Court Will Rule on PPACA Subsidies
jack
September 6, 2014 12:41 pm
What is evil about ruling that the law says what it says. Even the chief architect of the law is on tape telling State legislators that they should set up State-run exchanges so that their residents could get subsidies.
If it were not for that incentive, why would a State waste the money to duplicate the work of the central government.”
Strangely enough, it appears that the Halbig people can actually read, but have a problem when their reading does not agree with their ideology:
“It is no secret that the people bringing the challenge to the Obamacare subsidies in the Halbig and King cases—challenges now seeking review from both the full D.C. federal appellate bench and the U.S. Supreme Court after federal appellate courts in Virginia and D.C. came out in opposite ways last month—are some of the same people who brought the 2012 constitutional challenge to the Affordable Care Act before the high court (the same counsel, and one of the same plaintiffs).
What’s less known, however, is that in the 2012 constitutional case, these same challengers filed briefs describing Obamacare to the court in precisely the way they now say the statute cannot possibly be read.
Namely, they assumed that the subsidies were available on the federal exchanges and went so far as to argue that the entire statute could not function as written without the subsidies. That’s a far cry from their argument now that the statute makes crystal clear that Congress intended to deny subsidies on the federal exchanges.”
Go to the two links below (From Fannie-June and Dec of 2009) and then go to the bottom of page two and study the default rates. You will see that the default rate on Credit Enhanced mortgages were 3Xs what they were for conventional mortgages.
The credit enhanced loans were junk. Who provided this credit enhancement (and the junk loans)? AIG, of course. There were others involved as well, but when the cards fell, AIG was most exposed to the total US market. So AIG had to be bailed out. AIG was the ultimate TBTF, and was central to the whole mess.
Through these ‘first loss’ insurance policies (and CDS) the market for junk loans got out of hand. I maintain that the GSEs enabled that process by taking on all of the dressed up junk.
There is a legal concept called lender liability – I think the GSEs failed in their fiduciary responsibilities. I think Congress, the regulators and the auditors looked the other way.
I was of Fox Biz channel in November of 2007. I said on the show that F/F would be busted in a year. They lasted 8 months. Was I a sage? No, I saw what AIG was doing and I was aware of what the likes of UGI (the AIG sub) were doing with junk loans. Crap properties were being sold to unqualified buyers at high prices. The jazzed up paper was going to F/F. If I could see it coming how could the Execs at F/F and Lochhart at FHA not know? They did.
Bush had a hand in this. He wanted to boost housing to distract from the war. He likens his housing goals to his meme on homeland security:
“Economic security at home is just an important part of — as
homeland security. And owning a home is part of that economic security.”
Then he followed with:
“I called upon the private sector to help us and help the home
buyers. I’m proud to report that Fannie Mae has heard the call and, as
I understand, it’s about $440 billion over a period of time. Freddie
Mac is interested in helping. I appreciate both of those agencies
providing the underpinnings of good capital.”
(DC was pulling the strings for GSEs, F/F were never true private sector entities. Bush made a few calls and got a half trillion in loans)
Politicians of all stripes had their hands in the GSEs. The first thing they did when F/F went down was to stop the money flow from F/F back to Congress. No one involved in this story has clean hands.
i guess i am aware of the hypocrisy of some old white men, and also young white men, and young and old white women and black and all of them folds.
but when you say “old white men” you are saying… and i am quite sure “thinking”… if it can be called that… that “all” old white men” are evil and “no” non men, non white, non old are evil. which is not only bad logic and bad understanding of human (all human) nature, but it is inflammatory and provokes feelings of hate both ways, and counterproductive.
if you have something to say about evil people who happen to be old white men, say it. adding “old white men” does nothing for your argument, and subtracts considerably from your credibility, and tends to create an opposing ignorant steroetype of “liberals.”
you might… well, someone might… be able to do something about bad behavior.. even convince the behaver to change his ways… but you aren’t going to get any old white straight rich men to stop being old, white, male, or even straight. and the track record of getting them to give up being rich is not encouraging.
No one is saying that the GSEs did not buy bad paper. You are taking that fact and making it into something it is not, that the GSEs were the reason the bad paper was issued. That is a total crock.
And you know you are placing the cart before the horse. I am sure you are familiar with Richard Bowen’s admission of the process repeated by every bank. Why not just give it up?
BTW,
I am not interested in anything, anybody says on Fox News.
Another wonderful jobs report this morning. About six and a half years after the beginning of the Great Recession, we are wandering out of the doldrums.
We have created 142,000 new jobs, the VAST majority of them in all of the lowest paid job sectors of the economy. Added to that, the unemployment rate has been slashed to 6.1% and the labor participation rate has crept down to 62.8%. We have large numbers of part time employees who really need full time work, which is good because that will keep a lid on wages.
It is the best of times, it is the worst of times.
Monetary policy can cure anything and everything such as our post war recessions, but monetary policy has not cured our current economic ‘downturn’. The current policy seems designed to undo savers by a death of a thousand cuts while protecting the bankers at whatever cost. I want the US Supreme Court to rule that I am a bank corporation, personhood is overrated.
Fiscal policy can resurrect the economy such as the Great Depression in 1933-1936 (NOT!) but fiscal policy has not cured our current Great Recession 2008-2014. Last night just before I nodded off I whispered ‘Dear Lord, please save the Export-Import Bank’. Global Free Trade will save us, we just haven’t tried enough of it and half hearted belief is not good enough.
We have thrown all our economic experts’ accumulated knowledge and wisdom at our meandering recovery. Time for another approach. Let’s throw a virgin into a volcano once a month! Trust me, at some point this is going to work.
Sarcasm off.
This morning’s jobs report has put the Work Force Participation Rate at the lowest level since 1978.
In today’s WSJ there is an article that states that fully 34% of the workforce does not have a full time job. The WSJ describes them as: independent contractors, temps, and moonlighters,
Put these two together and what do you get? It means that 53m ‘workers’ aren’t working in a way that was assumed. It’s safe to assume that a fair bit of those independent contractors, temps and moonlighters aren’t paying taxes.
Is the 36 year record low in Work Force Participation a temporary factor? Will it reverse, to a healthier level, in the next 3 years? Or will it fall further?
If it will not reverse direction, then what are the long-term macro implications?
This is one of those things that support the conclusion of Secular Stagnation. It also supports Eddie L’s belief that CBO/SSA do not have a ‘correct’ path of what ‘Potential Growth’ is today and what it could be in the future.
The WSJ article:
http://blogs.wsj.com/atwork/2014/09/04/one-in-three-u-s-workers-is-a-freelancer/?mod=e2tw
Bruce:
First: Participation Rate has been at that level during 2014 before. March, April, May, June, besides August at 62.8 and last year also. This is hardly a news bulletin.
Second: We already know many people are working temporary jobs and under the table to make ends meet.
Third: What you do not mention are the Republicans and the Tea-baggers have blocked every fiscal action in Congress after 2010 and continue to do so.
Forth: As Sandwichman has pointed out in his analysis, there are actions which can be taken to alleviate much of the issues with U3 if Congress had an eye towards progressive actions to grow the economy rather than austerity to contract it.
Fifth: SS/Medicare will not be the core economic issues if the civilian Labor Force does not grow as they are side issue to the economy and hamstringing them will not solve the prime economic issue of putting people back to work.
Sixth: The Millennial generation is a cohort larger than baby boomers and they are the ones who can not find work.
Seventh: The Millennials do not like banks and would rather do without you and Wall Street.
Eighth: Bruce, you need to solve the core problem rather than fixate on Social Security, Medicare, PPACA, Medicaid, etc. Without a solution, you will be out of business.
Run, You didn’t read my bio. I’m pushing 65 – soon to be getting SS and Medicare. I left Wall Street 19 years ago. I have had no involvement of any kind in financial services since. I’ve been ‘retired’ for years. So when you say, “you and Wall Street”, and “you will be out of business”, you are way off the mark.
The Wall Street of today bears no resemblance to what I left in 1995.
You point to Congress and say that things could be done. I suspect that you’re right about that. But I asked the question ‘if things could be turned around in the next three years’.
Do you really expect that progressive legislation is going to happen in that period? I don’t. The risk is that the Senate goes to the Republicans this fall. Obama would have to veto things.
In 2017 things could be different. But I did specify the 3 year window.
http://brucekrasting.com/
Bruce:
I am almost 66. The VA finally took me in this year after 5 years of asking. I suffered no external wounds and I have two rolls of ribbons which I would gladly give back to have my friends with me again. In the late sixties and seventies I was poisoned by the water at Camp Lejeune which was tainted. At 33 my platelets dropped to 5000 which means I was a bleeder due to poisoning. We did not know what hit me and the gov was not telling us.
The Senate will not go to the Repubs if you read Sam Wang. Princeton Election Consortium The Dems will control it as we need them to shut down Jimmy Cricket McConnell and Boehner. Michigan will go Dem for the Senate with Peters. Kansas will go Independent with Orman. Statistical analysis like the 538 Blog was in 2012. I need to post on this. This just changed as of recent and previously it was 50-50.
Things will not turn around in three years unless the baby-boomers rise up and do it for now. The Millennial generation are the lever which will bring change as TBTF and the Investment bankers such as GS are gonna have to kiss their butts. So far from what I read, the Millennial generation will not accept them as the norm.
OK…so the Cleveland Fed has an article that says that the Beveridge curve hasn’t shifted like some people thought it might have earlier in the recession. But they say that the Beveridge curve is “an empirical relationship between job openings and unemployment that is viewed as a measure of the efficiency with which the labor market is matching unemployed workers to the available openings.”.
Am I the only one that looks at that definition and thinks that given the numbers of people who are underemployed in terms of the match of their skills to the job they hold the curve just might have shifted in ways these analysts are ignoring?
http://www.clevelandfed.org/research/trends/2014/0914/02labmar.cfm
Run – I agree – The Senate is likely to go 50-50. So Joey Biden will have the deciding vote. This is not an outcome that will bring any change; quite the opposite.
And I don’t see Boomers ‘rising up’. Why would they? Boomers want to see things unchanged for their age group.
I understand your anger with TBTF, but this is a much smaller issue today than it was 6 years ago. For sure the TBTFs had a hand in the blow up of 2008, but the Government Enterprises (Fannie and Freddie) were as much a part of the problem as the private sector financial institutions.
What is the most Progressive factor in the US today? That would have to be the Federal Reserve. It has taken extraordinary measures the past 6 years in an effort to increase employment. What has been the outcome of that effort? The answer is that small savers have gotten killed while the 10% has made an absolute killing in the stock market. Wealth inequality has never been higher than today – thank the Fed for that.
I think the millennials all want to work for the TBTFs. GS pays its secretaries a 6 figure salary.
Look at what Obama did yesterday, he put off action on immigration – Why? Because to do so would have hurt Dems in the Bi Elections. Both Reds and Blues are doing things for politics that are not in the country’s best interests.
Bruce:
“The three-year study from Scratch, an in-house unit of Viacom that consults with brands, found that a third of millennials believed they’ll be able to live a bank-free existence in the future. In the age of Simple, Square, and Bitcoin, these millennials, defined as those born between 1981 and 2000, overwhelmingly believed that the way they access money and pay for things will be completely different in five years.”
“As consumers, millennials have been slow to accumulate wealth. They have huge debt. They’re facing unprecedented underemployment. They’ve been relatively unaddressed as a generation by banks. All of a sudden, you see purchasing power by millennials growing to over $1.3 trillion,” Scratch executive vice president Ross Martin told Fast Company.
As a result, this digital-savvy cohort is looking to the tech sector to provide banking solutions. Half of respondents said they were counting on startups to overhaul how banks work, and three-quarters said they would be more excited in financial services provided by Google, Amazon, Apple, PayPal, or Square than from their own banks.
I do not believe the Millennials want to even get close to TBTF. As to the Fed correcting TBTF and Investment Firms, why is GS and other firms still banks borrowing low interest rate loans which we are subsidizing? Time for them to come off of our teat. There is a whole story behind Fannie and Feddie
I really do not want to talk Fannie and Freddie as this is a completely different topic and there is much out there to dispute your viewpoint. Fannie and Freddie were not the major issue the same as minorities and the CRA were not the issue. Both are distractors to the prime issue. Once they had access to Wall Street, TBTF threw away the lessons learned from the Depression. Lehmans, GS, AIG, etc. were writing checks which had no reserve in case of default. TBTF and investment firms are still as much an issue today as they were then and even more so as the Gov backs them to keep them from failing. It is time to separate Banking from Wall Street again and limit what can be spent of gross profits. Greenspan’s opening the door to investment by banks with the expansion of Section 20 GS was a great mistake in 87.
“but the Government Enterprises (Fannie and Freddie) were as much a part of the problem as the private sector financial institutions.”
When you channel Peter Wallison, you show your ass.
“So Joey Biden will have the deciding vote. This is not an outcome that will bring any change; quite the opposite.”
Ginsberg
EMichael:
If you look at Sam Wang’s statistical analysis (like 538 used to do),
there is a 95% chance the DEMS will control the Senate plus with two independents.
The Power Of Your Vote
State Margin Power
AR Pryor +1.5% 100.0
NH Shaheen +3.0% 85.6
IA Tied 74.4
AK Begich +6.0% 64.1
LA Cassidy +1.0% 38.8
CO Udall +2.0% 35.9
NC Hagan +2.0% 20.5
GA Perdue +2.5% 13.4
KS Orman +10.0% 5.3
KY McConnell +4.0% 1.9
MI Peters +6.0% 1.3
SD Rounds +10.0% 1.0
OR Merkley +13.0% 0.1
As I mentioned earlier, Peters will take Michigan and has a 6% lead over Repub opponent Land. Kansas will go to Independent Orman with a 10% lead once the Dem drops out completely. I think you can figure out the rest.
And yes, Fannie and Freddie were not the major issues. OTC, thrift banks, mortgage service companies were the issue. Mostly it was Alt-A loans and not the subprime which went bad. http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html
I was not disagreeing with your election results, just that even with the Congress in neutral, there is still a big deal about a 50-50 Senate.
I wonder why you mentioned the GSEs then? At least you have forgotten that. But your list misses the investment banks. It was them. Totally. No question. Even the ratings companies were bit(important) players. And they would not have done it with the investment banks paying them off.
““but the Government Enterprises (Fannie and Freddie) were as much a part of the problem as the private sector financial institutions.”
Please show your evidence for this assertion. I’ve already seen the evidence against it.
BTW, Krasting, here’s the evidence that Fannie and Freddie were not to blame. Please falsify each of the items in this article and then provide affirmative evidence that they were to blame.
http://www.theatlantic.com/business/archive/2011/12/for-the-last-time-fannie-and-freddie-didnt-cause-the-housing-crisis/250121/
Joel – You point to an Atlantic article and the FCIC? The FCIC said that F/F were marginal players in the mortgage meltdown. Marginal??
From Forbes:
This set off a frenzy of subprime and Alt-A mortgage origination, in which–as incredible as it seems–Fannie and Freddie were competing with Wall Street and one another for low-quality loans. Even when they were not the purchasers, the GSEs were Wall Street’s biggest customers, often buying the AAA tranches of subprime and Alt-A pools that Wall Street put together. By 2007 they held $227 billion (one in six loans) in these nonprime pools, and approximately $1.6 trillion in low-quality loans altogether.
From 2005 through 2007, the GSEs purchased over $1 trillion in subprime and Alt-A loans, driving up the housing bubble and driving down mortgage quality.
As usual, there’s two sides to the story. Barny Frank and the GSEs do not have clean hands in this.
The Forbes link:
http://www.forbes.com/2009/02/13/housing-bubble-subprime-opinions-contributors_0216_peter_wallison_edward_pinto.html
Uh, Bruce, you apparently didn’t read the article, since you pointed me to a Wallison article, and the more recent Atlantic article (and the comment thread) pretty thoroughly fisked Wallison.
I asked for a point by point rebuttal. So you’ve got nothing. Thought so.
Anyone that channels Wallison is an AH.
Joel is correct here, and Krasting is Wallison but with an asterisk.
Anyone that brings up Barney Frank in regards to the crisis is incredibly stupid and/or a RWDW.
No one in Congress has less power than a House member of the Minority party with a sitting opposition party President.
By the time Barney Frank had any power(and not much with Bush still in the White House, the die was cast on the financial crisis.
Elvis had left the building.
The horses had left the barn.
The Fat Lady had sung.
But is is reassuring to hear RWDWs blaming “those people” and gays for a problem created by straight(well, most of them) old white men.
Confirms my beliefs.
EMichael
i probably agree with your politics, but you don’t help things a bit by blaming straight old white men. This is absolutely no different than blaming “the jews” or “the blacks” or the commies under the bed.
Try to overcome your racist habits of thinking… and yes, it’s racism even if the people you hate are white. or straight. or old. or men.
Then see if you can come to grips with the real problems. or one of them.
You mean I should not blame “old white men” for blaming people of color and gays for problems created by “old white men”?
Spare me the political correctness.
It is pretty hard to be racist against “old white men” when I am an old white man.
E:
You are making me laugh
Even if it is true?
Lloyd Blankfein
Jamie Dimon
Charles Prince
Angelo Mozilo
John Thain
Ken Lewis
Richard Kovacevich
John Mack
Ronald Logue
Robert Kelly
Forgot my favorite:
“So I’m the schmuck?”
Dick Fuld
A question for the GSE defenders:
In 2006 Fannie and Freddie lent $1.5B to a very leveraged RE deal. The borrower was Tishman, a big NYC developer. The money was used to buy Stuyvesant Town.
The deal went bust in 2010. It’s still in court and F/F still have the loans outstanding. The NYT has this quote re the Stuy Town deal:
“It’s the poster child for the entire housing bubble,” said Daniel Alpert, managing partner of Westwood Capital. “There’ll be some other spectacular blowups, but this will be at the top of the pecking order.”
What was F/F doing back then? They provided the key financing for a $5.4B leveraged RE deal? Is this what the GSEs were supposed to be doing?
The NYT story (there are many):
http://www.nytimes.com/2010/01/26/nyregion/26stuy.html?pagewanted=all
You are getting way out of hand here Krasting.
In terms of your “key financing” of this deal, you are 100% totally wrong. From your link:
” Fannie Mae and Freddie Mac may be in the best position of anyone involved in the deal’s financing. They acquired over $2 billion in securities backed, in part, by the $3 billion Stuyvesant Town mortgages. Fannie and Freddi Mac have to be paid before any other debtholders, but they are not parties to the negotiations over the property.”
I am shocked, shocked I tell you, that the GSEs had mortgages on some of these properties.
Shockingly stupid, and uninformed comment.
Here’s the thing I find most amusing about RWDWs and their GSE infatuation.
There was actually GSE behavior during the crisis that was abhorrent. The problem for RWDWs is that the behavior was not due to government influence and/or requirements, but the same behavior of the CEOs, Mudd and Syron, that the CEOs of the investment banks engaged. Short term profits were the entire focus.
Faced with an incredible decline in market share during the bubble(something the Wallisons of the world ignore), the GSEs went into a market they had no reason to go into, other than the salaries of their execs.
But that real malfeasance never seems to show up when these ideologues attack the GSEs.
BTW,
Mudd and Syron are two more old white guys.
EMichael
well, it was worth a try. stereotypical thinking is the way humans think except when they are being careful.
i was asking you to be careful.
waste of breath.
Cob,
Obviously it is a waste of breath to try to convince you that the purpose of my old white guy meme is to point out the hypocrisy of the rwdws blaming gays and blacks for the financial crisis.
F/F took 1.5B of senior notes in the deal. There was another 1.5B of senior paper that was Parri Passu with F/F. The other Senior paper was picked up by Wells. So to get F/F its money back there would have to be an offer of $3.5B for Stuytown. So far that money has not stepped up, so F/F are not out of this deal yet.
When F/F spoke for the 1.5b they created an ‘anchor’ where the rest of the capital structure could be built. Wells came in because they were ‘protected’ as they were side-by-side of F/F. So I would say (again) that F/F were a critical component in getting the deal done.
Me? I think this was a stinker from the get-go. This deal was about greed. What was Tishman’s plan? To get the rent stabilized apts, get rid of the tenants and then sell condos. That’s a business plan that F/F should be backing?
For what it’s worth, Maxine Waters and Barney Frank made a stink in 2006. They were trying to protect the middle class renters at Stuytown. But they folded as F/F had most of Congress in their pockets.
F/F got paid $200m in fees for backing the deal. Most of that went into the bonus pool for the fat cats.
I can’t think of a good thing to say about the Stuytown deal and the role F/F played. EMichael loves it – go figure.
From your link. Again.
” They acquired over $2 billion in securities backed, in part, by the $3 billion Stuyvesant Town mortgages”.
You show me where F/F were involved in any way, shape or form as to what you described and I will reconsider.
But your link shows nothing at all like what you state.
On the other hand, this concerns the housing bubble how? And how does it possibly concern the GSEs being involved with things because of “affordable housing goals”?
I think this is worthless, but even if it is real, it has nothing to do with “affordable housing goals”, or “government mandates” and everything to do with what caused the financial crisis; stone cold greed on the part of the private CEOs.
geez
The next thing you know you’ll bring up Raines.
I am gonna yank this from another topic that has gone off the page.
Full D.C. Circuit Court Will Rule on PPACA Subsidies
jack
September 6, 2014 12:41 pm
What is evil about ruling that the law says what it says. Even the chief architect of the law is on tape telling State legislators that they should set up State-run exchanges so that their residents could get subsidies.
If it were not for that incentive, why would a State waste the money to duplicate the work of the central government.”
Strangely enough, it appears that the Halbig people can actually read, but have a problem when their reading does not agree with their ideology:
“It is no secret that the people bringing the challenge to the Obamacare subsidies in the Halbig and King cases—challenges now seeking review from both the full D.C. federal appellate bench and the U.S. Supreme Court after federal appellate courts in Virginia and D.C. came out in opposite ways last month—are some of the same people who brought the 2012 constitutional challenge to the Affordable Care Act before the high court (the same counsel, and one of the same plaintiffs).
What’s less known, however, is that in the 2012 constitutional case, these same challengers filed briefs describing Obamacare to the court in precisely the way they now say the statute cannot possibly be read.
Namely, they assumed that the subsidies were available on the federal exchanges and went so far as to argue that the entire statute could not function as written without the subsidies. That’s a far cry from their argument now that the statute makes crystal clear that Congress intended to deny subsidies on the federal exchanges.”
Read more: http://www.politico.com/magazine/story/2014/08/how-the-halbig-plaintiffs-changed-their-mind-109897.html#ixzz3ClWTlgRC
Personally, I believe that there are reasons for the court to sanction the attorneys and petitioners for their blatant dishonesty.
Won’t happen. But it should.
EMichael – A bit wonkish, sorry.
Go to the two links below (From Fannie-June and Dec of 2009) and then go to the bottom of page two and study the default rates. You will see that the default rate on Credit Enhanced mortgages were 3Xs what they were for conventional mortgages.
The credit enhanced loans were junk. Who provided this credit enhancement (and the junk loans)? AIG, of course. There were others involved as well, but when the cards fell, AIG was most exposed to the total US market. So AIG had to be bailed out. AIG was the ultimate TBTF, and was central to the whole mess.
Through these ‘first loss’ insurance policies (and CDS) the market for junk loans got out of hand. I maintain that the GSEs enabled that process by taking on all of the dressed up junk.
There is a legal concept called lender liability – I think the GSEs failed in their fiduciary responsibilities. I think Congress, the regulators and the auditors looked the other way.
I was of Fox Biz channel in November of 2007. I said on the show that F/F would be busted in a year. They lasted 8 months. Was I a sage? No, I saw what AIG was doing and I was aware of what the likes of UGI (the AIG sub) were doing with junk loans. Crap properties were being sold to unqualified buyers at high prices. The jazzed up paper was going to F/F. If I could see it coming how could the Execs at F/F and Lochhart at FHA not know? They did.
Bush had a hand in this. He wanted to boost housing to distract from the war. He likens his housing goals to his meme on homeland security:
“Economic security at home is just an important part of — as
homeland security. And owning a home is part of that economic security.”
Then he followed with:
“I called upon the private sector to help us and help the home
buyers. I’m proud to report that Fannie Mae has heard the call and, as
I understand, it’s about $440 billion over a period of time. Freddie
Mac is interested in helping. I appreciate both of those agencies
providing the underpinnings of good capital.”
(DC was pulling the strings for GSEs, F/F were never true private sector entities. Bush made a few calls and got a half trillion in loans)
Politicians of all stripes had their hands in the GSEs. The first thing they did when F/F went down was to stop the money flow from F/F back to Congress. No one involved in this story has clean hands.
http://www.fanniemae.com/resources/file/ir/pdf/monthly-summary/063009.pdf
http://www.fanniemae.com/resources/file/ir/pdf/monthly-summary/123111.pdf
From me in 2009 re the AIG/UGI connection:
http://brucekrasting.com/aig-versus-america/
And again from 2009:
http://brucekrasting.com/sp-on-the-mortgage-insurance-industry-trouble/
EMichael
i guess i am aware of the hypocrisy of some old white men, and also young white men, and young and old white women and black and all of them folds.
but when you say “old white men” you are saying… and i am quite sure “thinking”… if it can be called that… that “all” old white men” are evil and “no” non men, non white, non old are evil. which is not only bad logic and bad understanding of human (all human) nature, but it is inflammatory and provokes feelings of hate both ways, and counterproductive.
if you have something to say about evil people who happen to be old white men, say it. adding “old white men” does nothing for your argument, and subtracts considerably from your credibility, and tends to create an opposing ignorant steroetype of “liberals.”
you might… well, someone might… be able to do something about bad behavior.. even convince the behaver to change his ways… but you aren’t going to get any old white straight rich men to stop being old, white, male, or even straight. and the track record of getting them to give up being rich is not encouraging.
so why make enemies?
Cob,
That is not it at all.
BK,
No one is saying that the GSEs did not buy bad paper. You are taking that fact and making it into something it is not, that the GSEs were the reason the bad paper was issued. That is a total crock.
And you know you are placing the cart before the horse. I am sure you are familiar with Richard Bowen’s admission of the process repeated by every bank. Why not just give it up?
BTW,
I am not interested in anything, anybody says on Fox News.
http://fcic-static.law.stanford.edu/cdn_media/fcic-testimony/2010-0407-Bowen.pdf