Five Million Will Lose Unemployment Benefits by June and Fed Loses Billions on Real Estate Assets

 Today, the National Employment Law Project (NELP) released new national and state-by-state analyses finding that nearly 1.2 million jobless workers will become ineligible for federal unemployment benefits in March unless Congress extends the unemployment safety net programs from the American Recovery and Reinvestment Act (ARRA). By June, this number will swell to nearly 5 million unemployed workers nationally who will be left without any jobless benefits.

Retiring Senator Evan Bayh (D-IN): “But if I could create one job in the private sector by helping to grow a business, that would be one more than Congress has created in the last six months…” 

The US Federal Reserve is sitting on significant paper losses on the real estate assets it acquired in the Bear Stearns rescue, with much of the red ink coming from debt used to back some of the most high-profile buy-out deals of the bubble years.

Among the debts weighing on the central bank’s portfolio are those used in financing the acquisitions of Hilton Hotels, which is being restructured, and hotel operator Extended Stay, which is in bankruptcy, people familiar with the matter say.

The Fed holds these and other real estate assets in a vehicle known as Maiden Lane I, which was set up to pave the way for JPMorgan Chase’s purchase of Bear. At the time the deal was struck in March 2008, JPMorgan feared that if it bought all of Bear’s assets it would be left with too much exposure to the real estate market. Bear, for example, originally had $5.4bn of Hilton debt, a huge concentration

The assets in Maiden Lane I – all of which came from Bear’s mortgage desk – were originally valued at $30bn when a final agreement on the portfolio was reached in June 2008 by the New York Fed, its advisers at asset managers BlackRock and JPMorgan. At the end of 2009 the Fed said the assets were worth $27.1bn (€20bn, £17.4bn).

People familiar with the portfolio said Maiden Lane I’s losses were concentrated in commercial real estate assets, which had a face value of $8.4bn and an estimated worth of $7.7bn when they were acquired by the Fed.

As of September they had been marked down to $4bn, filings show.

About two-thirds of the Maiden Lane I portfolio involved mortgage debt backed by government-created entities, people familiar with the matter said. Those people describe the debt as highly illiquid, a factor that has resulted in its failure to rally strongly as credit markets recovered and interest rates fell.

“It was the scrapings off the slaughterhouse floor,” said one person. “It started with the things that were not good enough to get securitised.”

The Fed has disclosed little detail on these or other assets in the Maiden Lane I portfolio, fearing such revelations could hurt sales efforts, a person familiar with the matter said. JPMorgan and the New York Fed declined to ­comment.

Maiden Lane I was funded with $28.8bn from the New York Fed and $1.15bn from JPMorgan, which agreed to absorb the first $1bn of any losses.

The struggles of the portfolio could stir the debate on Wall Street over whether the New York Fed, then run by Tim Geithner, who is now Treasury secretary, struck a particularly good deal for taxpayers in the Bear rescue.

In a typical restructuring, creditors are made whole before shareholders are paid. In the Bear case, shareholders received $10 a share while creditors – in this case, the Fed – may lose money.

Mr. Geithner told Congress in 2008 that the central bank had three “risk mitigants” to protect its interests in the Bear deal: JPMorgan’s agreement to take the first $1bn in any losses; the Fed’s long-time horizon as an investor; and the fact that the central bank’s $28.8bn loan was backed by “a pool of professionally managed collateral”.

Testifying before Congress last month, Jamie Dimon, JPMorgan’s chief executive, said the New York Fed received “the less risky mortgage assets” on Bear’s books. He added: “It would have been irresponsible for us to take on the full risk of all those assets at the time.”

The Obama administration on Tuesday said it was “on track” to spend 70 per cent of last year’s economic stimulus funds by the end of September, as it prepares to ramp up payments to thousands of infrastructure projects across the US.

Senior officials, speaking on the eve of the first anniversary of the signing of the legislation, sought to defend the benefits of the stimulus, claiming it helped the economy emerge from a deep recession.

“It did an enormous amount to jumpstart the economy and turn it around,” said one senior official in the administration, which claims 2m jobs were saved or created by the stimulus so far.

US officials said about 57 per cent of the stimulus cash – or $453bn – was accounted for in tax breaks, direct payments to local governments and individuals, and infrastructure.

  ‘Meet the Press’ transcript for February 7, 2010 MR. GREGORY:  And you look at the stock market, the fact that it’s been on a downward path for the past couple of weeks, down over 6 percent since January, what kind of warning sign is, is that? 

MR. GREENSPAN:  Well, it’s more than a warning sign.  It’s important to remember that equity values, stock prices, are not just paper profits.  They actually have a profoundly important impact on economic activity.  And if stock prices start continuing down, I would get very concerned. 

www.msnbc.msn.com/id/35270673/ns/meet_the_press/page/3/

  Treasury officials today said they are still concerned about a coming wave of foreclosures, many from pay option ARMs and many from the prime jumbo basket, particularly hard hit by unemployment. Only 2/3 of borrowers in the HAMP program are current on their payments. That’s why officials now say they are looking at unemployment options and more incentives to borrowers to keep paying on trial modifications and on loans that are significantly “underwater” with respect to the property value.

Andrew Sum and Ishwar Khatiwada at the Center for Labor Market Studies, Northeastern University: “Labor Underutilization Problems of U.S. Workers Across Household Income Groups at the End of the Great Recession: A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent.” 

         The number of employed civilians (16+) in December 2009 was more than 9 million below its estimated level in November 2007, the month before the recession got underway. Total unemployment has more than doubled over the past two years, with double-digit unemployment rates prevailing between October and December. At the same time, the number of underemployed; i.e., those persons working part time for economic reasons, has also more than doubled, reaching a new record high of 6.4% of all of the employed in the fourth quarter of 2009.1 In addition, the nation’s civilian labor force has actually shrunk by nearly one million over the past year rather than rising by 1.5 million as earlier projected by the U.S. Bureau of Labor Statistics.

         Over 20 percent of the employed in the bottom decile of the income distribution were underemployed as were 17 percent of those in the second lowest decile (Table 1). The incidence of underemployment problems fell in the 5 to 6 percent range for those workers in the middle two deciles and declined to lows of 2.5 and 1.6 percent for those workers living in households in the top two deciles.

From the National Employment Law Project: WITHOUT CONGRESSIONAL ACTION, NEARLY 5 MILLION JOBLESS WORKERS WILL LOSE BENEFITS BY JUNE – NELP: Long-Term Unemployment Crisis Requires Extension of ARRA Benefits by February 12th.

The latest numbers on the performance of credit-card loans, from issuers including Capital One Financial Corp., Discover Financial Services, J.P. Morgan Chase & Co. and Bank of America Corp. , indicate that consumers remain stressed by high rates of joblessness. Losses stemming from souring credit-card loans remain elevated.

CNN poll: 52% say Obama doesn’t deserve reelection in 2012 Obama faces a 44-52 deficit among both all Americans and registered voters, according to a CNN/Opinion Research poll released Tuesday. Four percent had no opinion.

Different polls can produce significantly dissimilar results.  The CNN poll is a survey of “all Americans and registered voters.”  The more accurate polls survey ‘likely voters’. 

  Last week we cited an article that noted there has been a sizable increase in speculative home building even though there is a record inventory of homes and a high rental vacancy rate (The rental vacancy rate hit 10.7% in Q4 2009.).  Spec builders believe they can take advantage of the Tax Credit for First-Time Buyers, which is scheduled to expire on April 30th.  Good luck! 

  Total tax receipts declined 9.2% y/y and are down 10.4% FYTD y/y.  Yes, the US is still in recession according to tax receipts (income). 

  Individual income taxes declined 16.8% y/y for January and are down 18.0% FYTD y/y.  Corporate income taxes for January are down 28.7% y/y and are -32.3% FYTD y/y.  Where are those fantastic earnings that have been reported?  Oh, we forgot that US corporations run two sets of accounting books – one for the IRS and one to euchre Wall Street and investors. 

  Ambrose Evans-Pritchard: US bank lending falls at fastest rate in history  

Bank lending in the US has contracted so far this year at the fastest rate in recorded history, raising concerns that the Federal Reserve may have jumped the gun by withdrawing emergency stimulus.  

          David Rosenberg from Gluskin Sheff said lending has fallen by over $100bn (£63.8bn) since January, plummeting at an annual rate of 16pc. “Since the credit crisis began, $740bn of bank credit has evaporated. This is a record 10pc decline,” he said…”The shrinking in banking sector balance sheets renders any talk of an exit strategy premature,” he said.

www.telegraph.co.uk/finance/economics/7259323/US-bank-lending-falls-at-fastest-rate-in-history.html

Vice President Joe Biden says “Washington right now is broken” and the country is in “deep trouble” 

unless it attacks ballooning federal deficits.   Asked about the political climate across the country, Biden said in a nationally broadcast interview that “we understand why they’re angry. … We get it.”… 

apnews.myway.com/article/20100217/D9DTU9VO0.html

  ABC News: Drowning in Debt: What the Nation’s Budget Woes Mean for You Economists Predict Cutbacks, Tax Increases That ‘Aren’t Even Imaginable’ 

abcnews.go.com/Politics/national-debt-budget-deficit-scary-forecast-taxpayers/story?id=9854459

South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state… 

         In an interview, Pitts told Hotsheet that he believes that “if the federal government continues to spend money at the rate it’s spending money, and if it continues to print money at the rate it’s printing money, our economic system is going to collapse.”

U.S. state pension funds have $1 trillion shortfall: Pew  

Illinois is in the worst shape, with only 54 percent of its pension obligations funded.

www.reuters.com/article/idUSTRE61H13X20100218

January capacity utilization rose to 72.6% from 71.9% month-on-month.

The US budget deficit was $42.63 billion in January versus a deficit of $91.41 billion in December, and $63.46 billion year-on-year.

In January, outlays fell to $247.88 billion from $310.33 billion in December and compared with $289.55 billion in January 2009.

Receipts were $205.24 billion versus $218.92 in December and were the lowest for a January since 2005. Receipts in January 2009 were $226.09 billion.

The latest monstrosity created by the bureaucrats in the administration is the National Commission on Fiscal Responsibility and Reform. They have to be kidding us. They will attempt to cut the deficit without cutting spending or raising taxes. George Orwell might have put something like this into Animal Farm. More smoke and mirrors.

If you are waiting for monetary and fiscal reforms or for the return of the Glass-Steagall Act you can forget it. At the Senate hearings Paul Volcker told the committee what had to be done, but few were listening and some were argumentative. What we saw was a stage show presented by members of the CFR, Trilateral Commission and the Bilderberg Group. No one has any intention of changing anything in the Senate. The power of campaign contributions and a host of other goodies far overwhelm reason, logic and doing what is right for the American people. The House and the Senate are bought and paid for by Wall Street, banking, and insurance and transnational conglomerates. If you want the changes America you had best vote almost all of them out of office, otherwise you do not have a ghost of a chance of getting your country back and maintaining your freedom.

There will be no strong reforms. Banks and brokerage houses are having a great time using your money to enrich themselves. They are willing to pay to keep that privilege. What they pay is chicken feed to make this happen. That is how cheaply our politicians can be bought off. They do not care and do not understand that the expansion of credit created out of thin air cannot go on indefinitely. Eventually that debt becomes unpayable, which is where we are today, and our currency depreciates not only against other currencies, but also against gold. It has also been reflected in two stock market collapses and a residential and commercial collapse in real estate. Doesn’t this make some kind of impression on lawmakers and the public? Papering over the problem is not going to work and those in the financial world know it.

Most people do not realize it yet, but the global banking and economic systems have already begun to collapse. This is part of the plan to destroy the world’s financial and economic systems to bring about world government and world enslavement. Massive amounts of money are being spent to delay the process to continue the looting and to pick the best time to pull the plug on the system.

As a result of Illuminist greed and deliberate planning, 60% of the world’s wealth is in the hands of 5% of the predator population. As a result we have staggering unemployment worldwide, but particularly in the US, China and Spain. Our government’s inspector general has told Congress it has taken $23.7 trillion to hold the undertow of deflation at bay. Without those funds the system would have already collapsed. In fact, all those funds have done is buy time. The outcome is inevitable. The only thing the elitists can do is pick when. That probably will be when sovereign debtors default and the next Great War is hatched.

The purchasing of most of our politicians by Wall Street, banking, insurance and transnational conglomerates wasn’t difficult. They now control both houses of Congress, which is a very good reason for you to remove them from office. Almost every incumbent must be defeated. It is our last chance to legally use our political system to save our country and our freedom. Our country is being run by a criminal syndicate and we must take it back. Our enemy is confident and above all arrogant. They see their new world order in the distance, which means the final enslavement of the world’s population. That is the bad news. The good news is we are winning. Our access to talk radio and the Internet is bringing our message of truth to the masses in a way never before dreamed of. Back in the 1960s it was pamphlets and discourse with an interested few. Today, we are reaching into every corner of the world with the truth and the good news that we can and will win this battle for our freedom.

The excesses of fractional banking have to be ended. Lending institutions have to be limited by law to an 8 to 1 lending ratio. If that law is broken the institution would be closed and their assets sold to other banks, if our current system of banking is to continue. The power of the Bank for International Settlements has to be broken. The monetary functions of the Federal Reserve have to be returned to our Treasury Department. 

 What the insiders do not understand is that their game is over. We have won. They just don’t know it yet. We have and will continue to accomplish this by educating the masses. Over the last several years the American public has grown to understand the Secrets of the Federal Reserve and how they have been fleeced out of their savings by this cult of criminals. That is a monumental achievement when 70% or more of our populace wants the fed audited. The numbers who understand are growing and over the next two years they will become legions. There is no way out of our current financial and economic predicament other than collapse. This is the way it has been planned. This is the way these people have done this for centuries. This time for them there is no way out. Needless to say, millions in this world will suffer terribly and millions will die as a result of what these elitists have done. Even if these crooks were to try to reform the financial system they couldn’t at this point, because it is irretrievable.