Political Economy category archive

Running out of people to lay off (emphasis added):

In news on the closely watched jobs market, the U.S. Labor Department said initial claims for state unemployment insurance fell 47,000 to a seasonally adjusted 522,000 in the week ended July 11.

The figure was much lower than expected, but was not seen as a sign of a sudden, sharp improvement in the labor market.

Claims were “massively distorted by the shift in timing of summer shutdowns,” economists John Ryding and Conrad DeQuadros at RDQ Economics in New York said in a note to clients.

A Labor Department official said there had been far fewer seasonal layoffs than anticipated in early July in the automotive sector and elsewhere in manufacturing.

Many of the jobs typically shed for summer plant retooling were cut earlier, and in some cases permanently, as the industry slashed output in the spring to reflect extremely weak demand.

A caller to the Diane Rehm show:

Given a choice between a disinterested bureaucrat and an insurance company employee with a fiduciary interest in denying me coverage, I’ll take the bureaucrat.

Follow the link for his analysis. Here’s his conclusion:

The bottom line is there are a ton of indicators saying the worst is over. Now — this does not mean we have clear skies ahead because nothing could be farther from the truth. There are huge challenges. But, all signs are the worst is over.

Avedon at Eschaton:

. . . .when someone claims they oppose healthcare reform because it is too expensive, there really is only one sensible response: “If you are worried about costs, why don’t you support single-payer, which will save hundreds of billions of dollars?”

Imagine living in a society where reliable police and fire protection were available only to those who worked for the largest employers. In this fictional country, people with enough money might be able to buy personal protection – but perhaps not if they’d suffered a burglary five years ago, or once called 911 for a kitchen fire.

(snip)

Substitute health insurance for police and fire protection, and you have one of the best – and least-heralded – arguments for universal health care, according to a small but growing number of economists.

Read the whole thing.

Also, read this and this.

And from The Nation:

It’s time to part ways with obstructionist Republicans and pass a strong healthcare bill with a majority vote, which is possible if efforts cease to get a handful of Republicans to cross over. Redefining bipartisanship at a time when the GOP has become a male, pale and stale party committed to deficit demagoguery and fearmongering is the common sense and, I’d even argue, pragmatic course. Instead of wasting time on recalcitrant GOP holdouts, do what Drew Westen, author of the terrific book “The Political Brain,” advises to pass meaningful healthcare change: “Focus on principles, tell compelling stories, move people emotionally and send clear messages.”

“Male, pale, and stale.” I love it.

Military folks are changing their shopping habits:

Military families either went to the commissaries for the first time or shifted more of their grocery shopping to the government exchanges while “not spending as much at the Farm Fresh or not going over to Costco any more,” Maloney said.

This morning, Second Son called to make an eye doctor’s appointment. He can’t get one until late August.

Seems all the persons who have been laid off are making appointments before their health coverage runs out.

Reuters:

Fresh signs of weakness in U.S. job markets on Thursday underlined the strains faced by a recession-struck U.S. economy that contracted slightly less in the first quarter than previously thought.

The Labor Department said the number of U.S. workers filing new claims for unemployment benefits last week jumped unexpectedly by 15,000 to a higher-than-forecast, seasonally-adjusted total of 627,000.

Continued claims, which gauge how many Americans were still on jobless rolls after an initial week of claims, rose 29,000 to 6.738 million in the week ended June 13, the latest period for which the data was available.

I was in the local quicky lube this morning–I’d pushed the current oil change as far as I could–and only one of the two bays was in use until I arrived.

A fellow came in looking for a job (I guess you would call it a “lube job”). The manager took his application, but warned him that things were really bad, that he was having to cut his employees’ shifts and hours. “Just this morning,” he said, “I had to send two persons home because I didn’t need them today.”

“The industry and its backers are using fear tactics to tar a transparent and accountable health-care option as ‘government-run health care,’ ” Potter told the senators. “But what we have today is Wall Street-run health care that has proved itself an unworthy partner to doctors, hospitals,” and patients.

Brendan has more. Read this and this (warning: language).

Best done out of the light

U.S. banks are fighting the Obama administration plan to create a consumer agency for financial services as they seek to protect fees, such as credit-card penalties that have almost doubled to $19 billion in five years.

Fees imposed by banks accounted for 53 percent of industry income in 2008, up from 35 percent in 1995, according to R.K. Hammer Investment Bankers, a credit-card advisory firm. JPMorgan Chase & Co., the second-largest U.S. bank by assets, said such revenue doubled in the first quarter. A U.S. Consumer Financial Protection Agency also may add costs by expanding scrutiny.

Honestly, you can’t make this stuff up:

McDonald’s developed a complex scheme to keep country-club fees it paid for executive Tim Fenton out of the fast-food giant’s 2007 proxy statement, according to the civil complaint, filed in federal court in Illinois in late March by Lisa Bridges, who formerly worked for McDonald’s as a senior director of executive compensation.

The fees were $2,940.80. Fenton made more than $3.5 million in total compensation during 2006.

The suit, brought under the whistle-blower protection provision of the post-Enron Sarbanes-Oxley Act, claims McDonald’s discriminated against Bridges by firing her when she objected to the company’s alleged scheme.

It’s not just the pay and the bonuses. It’s the perks.

No wonder executives start to think of themselves as somehow anointed, rather than appointed.

The reality is all glitz and packaging and the old shell game:

(Elizabeth) Warren said that banking has changed over the years, from an old model that she called “simple and effective: consumers shopped around for products and terms, and lenders evaluated the creditworthiness of potential borrowers before making loans.

“Today, the business model has shifted. Giant lenders ‘compete’ for business by talking about nominal interest rates, free gifts and warm feelings, but the fine print hides the things that really rake in the cash. Today’s business model is about making money through tricks and traps,” she said.

Needless to say, the proprietors of the financial medicine shows banksters are protesting.

In labor relations, it is a truism that unions are the creation of management. Fair management does not cause unions.

In finance, regulation is the creation of the medicine show guys.

Not for dining. The Guardian of Sasha Abramsky’s book, Breadline USA:

It is Abramsky’s contention that the current sorry plight of low-income workers is a direct result of the “casino-capitalism experiment started by Ronald Reagan and ignominiously concluded under George W Bush”. And he makes a convincing argument to support his case. Whether the reader shares his view or not will largely depend on his or her own political persuasion. Liberals will cheer, and conservatives will cry foul – it must somehow be the fault of the poor. But whatever one deems to be the root cause, no one could argue that allowing the free market to do its thing for the past 30 years has had a positive effect on the lives of the working poor.

You can’t bank on them, not no more:

First National Bank of Anthony, Anthony, KS

Cooperative Bank, Wilmington, NC

Southern Community Bank, Fayetteville, GA

They’re gonna blow, Cap’n!

The Option Adjustable Rate Mortgages, that is:

That (the recent drop in mortgate interest rates) just postponed the problem, however, because most option ARMs have five-year automatic trigger dates. These loans were most prevalent in states such as California, Florida and Nevada, where home prices have sunk so far that many homeowners are underwater: They owe more than their homes are worth.

The bulk of outstanding option ARMs — a product no longer available to homebuyers — were issued between 2004 and 2007. Monthly payments on these mortgages are due to reset to a higher lending rate between 2009 and 2012.

In related developments, I listened yesterday to a discussion of Mr. Obama’s proposals for financial consumer protection. From the website:

The Administration plans the most sweeping overhaul of financial industry regulations since the Great Depression. The new rules expand powers for the Federal Reserve and change how mortgages are underwritten.

One of the guests, the one from the American Enterprise Institute, mouthpiece of the Ayn Rand school of business regulation, wiggled like a worm to blame the current financial situation on “predatory borrowing.”

The other guests did not let him get away with this. Neither did the callers. One caller who had worked for a mortgage broker called in and described the tactics the broker used to pressure persons into whifty mortgages. Another called to describe how, when he wanted a 30-year straight mortgage, his mortgage broker dragged the process out for weeks trying to sell him one anything but a 30-year straight.

Follow the link to hear the show or click here to listen (Real).

Customers didn’t create this mess. Bankers did.

This American Life, in a follow-up to its marvelous show from last year, “The Giant Pool of Money,” investigates why the regulators missed the boat bust:

One of the biggest questions about this financial crisis gripping our economy: How did it happen? Wasn’t someone supposed to watching things? Making sure people were acting prudently? Stopping, say, the largest insurance company in the world from making a 185 billion dollar bet that it couldn’t make good on? This week, we hear the stories of the people who were supposed to be overseeing things.

Follow the link to hear or download the show. Find other This American Life episodes on the economy here.

MarketWatch:

Amusement-park operator Six Flags Inc. filed for bankruptcy protection on Saturday and is seeking an expedited approval from the court of its pre-negotiated reorganization plan.

Bloomberg has a more longer story here. From the Bloomberg story:

Six Flags shares have fallen 86 percent in the past 12 months as investors have grown skeptical about the company’s ability to refinance preferred income equity redeemable shares, or PIERS, before their August redemption date. On Aug. 15, $287.5 million in preferred stock matures and $131 million of 8.875 percent senior notes come due next year.

The issue doesn’t seem to be profitability in the conventional sense. I read elsewhere (can’t remember where–yesterday was a long time ago) that day-to-day operations have been profitable for the last couple of years. Rather, it seems to be “leverage”–debt.

Despite the magic of double-entry bookkeeping (not the same as two sets of books) and Wall Street’s double-talk, the past year has proven that more debt does not magically mean more wealth (or, to use Wall Street’s double-talk, “wealth-creation”) unless the meny obtained through debt is actually used to create something useful, like a bridge or a school or a factory or such.

I haven’t dug it out yet and may never do so, but I got a dollar to a doughnut that a lot of the debt didn’t have anything to do with building new theme parks and improving the business, but just with “taking the cash out.”

I’m betting that cash didn’t go anywhere useful.

Bloomberg (emphasis added):

Fewer Americans filed claims for unemployment benefits last week, indicating the deepest job cuts may be subsiding even as companies hold off on hiring.

Initial jobless claims fell by 24,000 to 601,000 in the week ended June 6, fewer than forecast and the lowest level since January, from a revised 625,000 the prior week, Labor Department figures showed today in Washington. The number of people collecting benefits rose for a 19th straight time to a record 6.82 million in the prior week.

Meanwhile,

U.S. household wealth fell in the first quarter by $1.3 trillion, extending the biggest slump on record, as home and stock prices dropped.

Reuters:

There were 330,477 (U. S. bankruptcy) filings in the January-to-March period, up 10 percent from the previous quarter and up 35 percent from a year earlier, the Administrative Office of the U.S. Courts said this week. Consumer bankruptcy filings rose 33 percent from a year earlier, while business filings rose 64 percent.

The fee hand of the market.