Has The Economy Been Pulled Back From The Brink? Who Is Recovering?
President Obama's highly anticipated health care speech started on a totally different subject: The economy.
"When I spoke here last winter, this nation was facing the worst economic crisis since the Great Depression, he told Congress and the peole at home. "We were losing an average of 700,000 jobs per month. Credit was frozen. And our financial system was on the verge of collapse."
But," he went on, "thanks to the bold and decisive action we have taken since January, I can stand here with confidence and say that we have pulled this economy back from the brink."
Applause. Applause. Applause.
Are we back from the brink? And what brink is that? On Labor Day night, HBO featured a powerful documentary about a GM Plant in Ohio that was shutting down. It showed the workers, teary eyed and forlorn, making the last truck on "their" assembly line. Their faces told the rest of the story as they asked themselves and each other, "what do I do now? What happens to my family and my life?"
They had no answers, and neither, alas, does Barack Obama.
A "jobless recovery" will not give these workers the money to buy into even the cheapest health care option, public option or not.
The Oama Administration says it is now phasing out support for the banks because the financial sector is doing so well even if hundreds of more banks are expected to fall. The President will now give an speech on the economy next week. Is all well in the wonderful world of finance? He knows better.
Martin Wolf, editor of the Financial Times says it is too early to start withdrawing stimulus programs, "it is still too early to declare victory."
Why? He explains, "Perhaps the most striking success has been the recovery of the financial sector. Indeed, this resurgence, while welcome, is embarrassing: financiers are back to their high-earning ways, while tens of millions of people have lost their jobs, economies are far below potential and public sector debt is exploding upwards. It is little wonder that bonus-bashing is on the menu."
Steven Pearlstein adds in the Washington Post:
"Back on Wall Street, the wise guys are up to their old tricks, suckering investors into a stock and commodity rally, posting huge profits on their trading desks and passing out Ferrari-sized bonuses. The Wall Street Journal reports they've even cranked up the old structured-finance machine, buying up claims to life
insurance proceeds and packaging them into securities."
Look around Mr. Obama: the unemployment rate in real terms is over 16%. The consumer economy is shattered. The commercial real estate market is imploding, and, yes, more foreclosures are on the way also according to the Washington Post:
"A new report foresees another wave of foreclosures, as option adjustable-rate mortgages--an entire class of specialized home loans--will soon reset to higher payments. Estimated to jump by 63 percent on average, the higher rates will likely push many of the already-strained loan recipients over the brink. The loans, also called pick-a-pay loans, are a prime example of the risky lending techniques that created the housing crisis: Borrowers were allowed to pay back the loan with as little as they wanted each month, though that meant many paid less than the interest due"the report says the fallout from the loans could be felt for years, especially in states already hit hard by foreclosures.