Lately, we’ve been getting report after report in our media that the “greatest recession since the Depression” is over or almost over or showing signs of weakening…Really?
Here’s a snippet from a March, 2009 N.Y. Times article: “Retail sales are up. Industrial production is up. So are housing starts, non-farm employment, exports and business confidence. Even department store sales in the New York area are finally turning around. At the same time, inflation, interest rates, new jobless claims and personal debt are all, gratifyingly, down. Is the recession over? Finally, after 19 months, the answer appears to be yes.”
Isn’t this a bit crazy? What is he talking about? Unemployment continues to climb with another 500,000 jobs lost in April and a tsunami of foreclosures predicted for this summer and into next year. So, who’s out of recession? Why the stock market, of course, and why not? They’ve emptied the U.S. Treasury to save the Fat Cats of Wall Street while the rest of us are left with plunging home values and no jobs. The S & P 500 continues to climb and the banks are eager to get out from under the TARP.
Well, whoopee, for them…That same N.Y. Times [different article, of course] notes that 5.4 million homeowners nationwide are now delinquent or in some stage of foreclosure. That’s about 10% of ALL mortgages and that is very scary. I guess several factors are driving these homeowners into foreclosure. The first must be job loss. It’s hard to pay your mortgage with no income. The second must be plunging home prices which ties into job loss as more and more go into foreclosure driving prices down still further.
It really kills me to listen to the suits on TV gabbling about the “end is in sight” and other equally nauseatingly self-serving opinions. If you are an investment banker on Wall Street, then I guess it’s over for you. The taxpayers bailed you out. If you’re an autoworker, not so much. Or, an auto-dealer. Or, anyone involved in the peripheral auto industry, supplies, parts, repairs. Oops, there goes a good chunk of California as well.
So, why would these bloated opinionators be so determined to call an end to the recession? Besides bankers, they might be politicians or connected to the new administration or the Democratic party. I’m an Obama supporter, too, but getting increasingly tepid about him. His vaunted plan to save 4 million homes from foreclosure? Well, we’re 3 months into it and so far a mere 100,000 have had their loans modified. That means payments are reduced to manageable levels for 3 to 5 years, but the principal will not be reduced one iota. That’s what’s really fueling foreclosures and delinquencies: buyers are massively upside down in their home values. It really doesn’t make much sense to keep paying the mortgage, even a “modified” mortgage when you are $100,000 to $200,000 “under water”. The banks don’t want to reduce the principal balances on their loans. No, they want to have the TARP money from taxpayers and then continue on their merry way. Life will go as before–sweet–for them. Obama and his administration have apparently caved to the banks’ desires and have not asked them to reduce the principal balances owed.
No, Obama & Co. would prefer to announce the “end is in sight” and ignore the tsunami of foreclosures expected this summer and into next year as the unemployment rate continues to climb, and homeowners’ equity continues to sink. This problem is especially acute here in California. Our unemployment rate is soaring; our state government has crumbled; every state agency, including schools and universities, is taking a huge hit, compromising our future as well as our present; homeowners are losing equity by the minute.
Obama was actually here a few days ago for a massive fundraiser. That’s what California means to politicians–parachute in, grab dough from our fat cats and then high tail it back to D.C. where they proceed to ignore us again….Left coast indeed.