THE CAUSES OF RISING INEQUALITY IN AMERICA

THE BANKERS' BAG OF NEW DIRTY TRICKS

Nomi Prins, Daily Beast - Enron was the financial scandal that kicked off the decade: a giant energy trading company that appeared to be doing brilliantly-until we finally noticed that it wasn't. It's largely been forgotten given the wreckage that followed, and that's too bad: we may be repeating those mistakes, on a far larger scale.

Specifically, as the largest Wall Street banks return to profitability-in some cases, breaking records-they say everything is rosy. They're lining up to pay back their TARP money and asking Washington to back off. But why are they doing so well? Remember that Enron got away with their illegalities so long because their financials were so complicated that not even the analysts paid to monitor the Houston-based trading giant could cogently explain how they were making so much money.

The nation's biggest banks, plumped up on government capital and risk-infused trading profits, have been moving stuff around their balance sheets like a multi-billion dollar musical chairs game.

After two weeks sifting through over one thousand pages of SEC filings for the largest banks, I have the same concerns. While Washington ponders what to do, or not do, about reforming Wall Street, the nation's biggest banks, plumped up on government capital and risk-infused trading profits, have been moving stuff around their balance sheets like a multi-billion dollar musical chairs game.

I was trying to answer the simple question that you'd think regulators should want to know: how much of each bank's revenue is derived from trading (taking risk) vs. other businesses? And how can you compare it across the industry-so you can contain all that systemic risk? Only, there's no uniformity across books. And, given the complexity of these mega-merged firms, those questions aren't easy to answer.

Goldman Sachs and Morgan Stanley, for example, altered their year-end reporting dates, orphaning the month of December, thus making comparison to past quarterly statements more difficult. In the cases of Bank of America, Citigroup and Wells Fargo, the preferred tactic is re-classification and opaqueness. These moves make it virtually impossible to get an accurate, or consistent picture of banks 'real money' (from commercial or customer services) vs. their 'play money' (used for trading purposes, and most risky to the overall financial system, particularly since much of the required trading capital was federally subsidized). . .

With taxpayers now on the hook, we need an objective, consistent evaluation of bank balance sheets complete with probing questions about trading and speculative revenues, allowing for comparisons across the banking industry. This lack of transparency leaves room to misrepresent risk and trading revenue.

The long-term solution is bringing back Glass-Steagall. Being big doesn't just risk bringing down a financial system-it means you can also more easily hide things. Remember the lesson from the Enron saga: when things look too good to be true, they usually are.

DEMOCRATS CAN'T EVEN FIND FUNDS TO EXTEND COBRA

LA Times - The American Recovery and Reinvestment Act, passed in February, launched a temporary government program to subsidize the often crippling cost of buying health insurance through a former employer's plan after a layoff.

However, the so-called COBRA subsidy was designed to last no more than nine months for each person who was unemployed. Hundreds of thousands who got this subsidy when it was first made available in March are slated to roll off the program today.

The insurance subsidy will also no longer be available for Americans who lose their jobs starting today.

If the subsidy is not extended, hundreds of thousands will lose the subsidy each month, forcing them to pay health insurance premiums that are three times higher than what they're currently paying.

The White House wants to extend the subsidies, an Obama administration spokeswoman said. And some Democratic lawmakers are pushing to include an extension in legislation that party leaders are developing to boost job growth. . .

The stimulus bill committed $25 billion for just nine months of COBRA subsidies.

And few believe that Congress will be able to pass a jobs bill before the end of the year, in large part because the Senate is locked in a debate on broader healthcare legislation. There is no indication yet of whether any extension would be retroactive, helping people who lose the subsidy.

BILLIONS FOR BANKS, BUT SMALL FUND FOR SMALL BUSINESSES RUNS OUT

Reuters - The Small Business Administration said that supplemental economic stimulus funds for its two most popular loan programs have run out and new loan volumes could fall if funds are not extended.

The SBA said $375 million in Recovery Act funds for use in loan programs were exhausted, leaving thousands of struggling but viable small businesses in limbo unless new resources can be found.

The money was used to temporarily reduce fees on SBA-backed loans and raise SBA's guarantee percentage on some loans to 90 percent from 75 percent. This saved small businesses up to $60,000 in fees, made lenders more willing to extend credit and helped lure investors back into the market for securities backed by SBA loans.

FOOD STAMP USAGE IN YOUR COUNTY

FOUR THINGS THAT WOULD TRULY HELP THE ECONOMY

Stephen Herzenberg, Pittsburgh Post Gazette - Roosevelt attacked the root cause of The Depression -- the failure of middle-class purchasing power to grow, which caused income inequality to spike in the 1920s while speculation by the well-to-do generated a stock market bubble. Sound familiar?

It should. In the current decade, U.S. income inequality reached the levels of the late 1920s. In recent years, the richest 1 percent of Pennsylvanians have been taking home 68 cents of every dollar increase in income.

To get middle-class consumption going again in the 1930s, Roosevelt championed the "Big Four" social policies:

- a minimum wage to lift purchasing power at the bottom;

- a law strengthening workers' rights to unionize, laying the basis for the emergence of America's middle class through manufacturing unions;

- unemployment insurance, which enabled jobless workers to feed their families; and

- Social Security, which enabled the elderly poor to avoid destitution and increase their consumption.

So far, what is Washington offering as the Great Recession's Big Four? The Big Zero. . .

There are some ideas kicking around the margins that can help shape what today's Big Four might look like. Three of the best ideas would update elements of the New Deal.

First, the minimum wage should rise again with the overall wage level. Though long forgotten, between 1938 and 1968, the purchasing power of the minimum wage more than doubled. Let's put minimum-wage earners on that same track today.

Unionization is another important tool to rebuild the middle class, starting in the service sectors that pay too poorly -- in offices, health care and child care, supermarkets and retail stores, hotels and restaurants, and building services.

Unionization won't cause these local jobs to disappear; you can't outsource a nurse's aide job at the local hospital to Tijuana. If these workers earned $15 per hour plus benefits -- instead of $10 per hour with no benefits -- the American middle class would come back. Empowering workers to achieve this specific change is why Congress must pass a proposed federal law that restores workers' freedom to create a union -- the Employee Free Choice Act.

We also need to update our unemployment insurance system. Today's unemployed workers don't just need income to tide them over until the assembly line starts moving again. Unemployed -- and many employed -- workers also need more access to job training that is linked to credentials and career pathways.

The final piece of today's Big Four would be a massive investment in an environmentally sustainable low-carbon economy, implemented in a way that rebuilds our fragile manufacturing base and expands the number of family- sustaining jobs.

ONE IN FOUR HOME MORTGAGE HOLDERS ARE UNDER WATER

Wall Street Journal - The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American Core Logic, a real-estate information company based in Santa Ana, Calif. . .

These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.

Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American.

Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage, according to the Census Bureau. . .

Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.

More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value. . .

About 7.5 million households were 30 days or more behind on their mortgage payments or in foreclosure at the end of September, according to the Mortgage Bankers Association. Many of those homes will be lost to foreclosure, adding to the supply of homes for sale.

OBAMA'S FUNNY FIGURES

Caroline Beam, Bloomberg - The administration was already skating on thin ice when it announced on Oct. 30, with great fanfare, that 640,329 jobs had been created or saved as a result of the $787 billion American Recovery and Reinvestment Act.

Not 640,000, or even 640,300. Six-hundred-forty-thousand- three-hundred-and-twenty-nine. . .

Even Vice President Joe Biden had the good sense to round up to the nearest million, which puts the number of jobs created or saved in line with "government and private forecasters' estimates" for the Recovery Act.

Local newspapers across the country started to notice problems with the, er, jobs. Small stuff, like jobs that weren't created and congressional districts that don't exist. . .

Watchdog.org, a collection of independent journalists covering state and local government, has put together a "Guide to the Stimulus, District by (Phantom) District." Overall the group found that 440 phantom districts in 50 states, the District of Columbia and four U.S. territories received $6.4 billion and created or saved -- let's consolidate to "craved" -- 30,000 jobs. That works out to $213,333 per job. . .

The Government Accountability Office, the investigative arm of Congress, issued its own report last week, citing "a range of significant reporting and quality issues that need to be addressed."

Gene Dodaro, head of the GAO, told the House Oversight and Government Reform Committee he had found about 4,000 reports showing no money expended but the equivalent of 50,000 full-time jobs created. . .

In the face of a 10.2 percent unemployment rate and growing doubt about government claims of jobs created, the administration is standing by its 640,329. . .

HUNGER IN AMERICA HITS NEW LEVEL

Washington Post - The nation's economic crisis has catapulted the number of Americans who lack enough food to the highest level since the government has been keeping track, according to a new federal report, which shows that nearly 50 million people -- including almost one child in four -- struggled last year to get enough to eat. This Story

At a time when rising poverty, widespread unemployment and other effects of the recession have been well documented, the report released Monday by the U.S. Department of Agriculture provides the government's first detailed portrait of the toll that the faltering economy has taken on Americans' access to food.

The magnitude of the increase in food shortages -- and, in some cases, outright hunger -- identified in the report startled even the nation's leading anti-poverty advocates, who have grown accustomed to longer lines lately at food banks and soup kitchens. The findings also intensify pressure on the White House to fulfill a pledge to stamp out childhood hunger made by President Obama, who called the report "unsettling."

The data show that dependable access to adequate food has especially deteriorated among families with children. In 2008, nearly 17 million children, or 22.5 percent, lived in households in which food at times was scarce -- 4 million children more than the year before. And the number of youngsters who sometimes were outright hungry rose from nearly 700,000 to almost 1.1 million.

Among Americans of all ages, more than 16 percent -- or 49 million people -- sometimes ran short of nutritious food, compared with about 12 percent the year before. The deterioration in access to food during 2008 among both children and adults far eclipses that of any other single year in the report's history.

CELEBRITY MEDIA BUBBLE JOINS THE RECESSION

Nicole LaPorte, Daily Beast - It's hard to believe that it was a little more than a year ago that People magazine made headlines by forking over $14 million-in partnership with the fabloid Hello!-for the first, exclusive photos of Brad Pitt and Angelina's newborn twins, Vivienne and Knox. The sale was more than three times what People paid for the couple's firstborn, Shiloh. . .

More recently, however, the celebrity media bubble has burst-destroyed by the recession, among other factors-leaving hordes of paparazzi, the agencies that employ them, and the magazines and Web sites that showcase their wares, facing a new, very bleak reality.

The Daily Beast recently quantified just how far the paparazzi market has fallen. Taking a basket of photos sold by the paparazzi agency x17 Inc. during the golden years, 2005 to 2007, we created an index that compared the prices those snapshots fetched then with estimates of what they would garner now. All told, a typical celebrity shot sells for 31 percent less than it did in 2007. The drop off has been more dramatic at the high end of the market. Six-figure photographs are down more than 50 percent.

TEN YEARS AGO: CLINTON, SUMMERS, SCHUMER BLOW IT

''I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past," said Senator Byron L. Dorgan, Democrat of North Dakota

NY Times November 5, 1999 - Congress approved landmark legislation today that opens the door for a new era on Wall Street in which commercial banks, securities houses and insurers will find it easier and cheaper to enter one another's businesses.

The measure, considered by many the most important banking legislation in 66 years, was approved in the Senate by a vote of 90 to 8 and in the House tonight by 362 to 57. The bill will now be sent to the president, who is expected to sign it, aides said. It would become one of the most significant achievements this year by the White House and the Republicans leading the 106th Congress.

''Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,'' Treasury Secretary Lawrence H. Summers said. ''This historic legislation will better enable American companies to compete in the new economy.''

The decision to repeal the Glass-Steagall Act of 1933 provoked dire warnings from a handful of dissenters that the deregulation of Wall Street would someday wreak havoc on the nation's financial system. The original idea behind Glass-Steagall was that separation between bankers and brokers would reduce the potential conflicts of interest that were thought to have contributed to the speculative stock frenzy before the Depression. . .

Administration officials and many Republicans and Democrats said the measure would save consumers billions of dollars and was necessary to keep up with trends in both domestic and international banking. Some institutions, like Citigroup, already have banking, insurance and securities arms but could have been forced to divest their insurance underwriting under existing law. Many foreign banks already enjoy the ability to enter the securities and insurance industries. . .

But consumer groups and civil rights advocates criticized the legislation for being a sop to the nation's biggest financial institutions. They say that it fails to protect the privacy interests of consumers and community lending standards for the disadvantaged and that it will create more problems than it solves.

The opponents of the measure gloomily predicted that by unshackling banks and enabling them to move more freely into new kinds of financial activities, the new law could lead to an economic crisis down the road when the marketplace is no longer growing briskly.

''I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010,'' said Senator Byron L. Dorgan, Democrat of North Dakota. ''I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.''

Senator Paul Wellstone, Democrat of Minnesota, said that Congress had ''seemed determined to unlearn the lessons from our past mistakes.''

''Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis,'' Mr. Wellstone said. ''Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place.''. . .

''The concerns that we will have a meltdown like 1929 are dramatically overblown,'' said Senator Bob Kerrey, Democrat of Nebraska. . .

''If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world,'' said Senator Charles E. Schumer, Democrat of New York. ''There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive.''. . .

The White House has estimated the legislation could save consumers as much as $18 billion a year as new financial conglomerates gain economies of scale and cut costs.

MAJOR MONEY CHANGERS HEAD FOR TEMPLE TO JUSTIFY THEIR GREED

Bloomberg - Barclays Plc Chief Executive Officer John Varley stood at the wooden lectern in St. Martin-in-the- Fields on London's Trafalgar Square last night and told the packed pews of the church that "profit is not satanic."

The 53-year-old head of Britain's second-biggest bank said banks are the "backbone" of the economy. Rewarding high- performing bankers with more pay doesn't conflict with Christian values, he said. Varley was paid 1.08 million pounds ($1.77 million) and no bonus in 2008.

"Talent is highly mobile," Varley, a Catholic, said. "If we fail to pay or are constrained from paying competitive rates then that talent will move to another employer."

"Is Christianity and banking compatible? Yes," he said in an interview after the speech in the 283-year-old church. "And is Christianity and fair reward compatible? Yes."

Varley joins Goldman Sachs International adviser Brian Griffiths and Lazard International Chairman Ken Costa as London bankers who've gone into London churches in recent weeks and invoked Christianity to defend a banking system that critics say has created wealth and inequality in the U.K.

"The injunction of Jesus to love others as ourselves is an endorsement of self-interest," Goldman's Griffiths said Oct. 20, his voice echoing around the gold-mosaic walls of St. Paul's Cathedral, whose 365-feet-high dome towers over the City, London's financial district. "We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.". . .

"It seems like the bankers aren't listening to society," said Jacob Needleman, a professor of philosophy at San Francisco State University and author of "Money and the Meaning of Life." Needleman said Griffiths should make "an immediate donation of some several million pounds to a beautiful charity" to show he can "walk the talk."

STUDY: NEARLY HALF OF ALL U.S. CHILDREN WILL USE FOOD STAMPS

Washington University, St Louis - "49 percent of all U.S. children will be in a household that uses food stamps at some point during their childhood," says Mark R. Rank, Ph.D., poverty expert at the George Warren Brown School of Social Work at Washington University in St. Louis.

"Rather than being a time of security and safety, the childhood years for many American children are a time of economic turmoil, risk, and hardship," Rank says.

Other study findings include:

- 90 percent of black children will be in a household that uses food stamps. This compares to 37 percent of white children.

- Nearly one-quarter of all American children will be in households that use food stamps for five or more years during childhood.

- 91 percent of children with single parents will be in a household receiving food stamps, compared to 37 percent of children in married households.

PHILLY TRANSIT WORKERS STRIKE

Boston Globe - The Philadelphia transit system's largest union said that contract negotiations had broken down and its workers are on strike, bringing the city's bus, subway and trolley operations to a halt before Tuesday morning's rush hour.

The strike by Transport Workers Union Local 234 will all but cripple a transit system that averages more than 928,0000 trips each weekday. The union represents more than 5,000 drivers, operators and mechanics of the Southeastern Pennsylvania Transportation Authority.

Willie Brown, the local's president, said they decided to strike after both sides agreed that they had gone as far as they could go in negotiations. The announcement came just hours after the Phillies beat the Yankees in Game 5 of the World Series, the last game to be played at Citizens Bank Park.

The union had threatened to go on strike during the World Series. But Gov. Ed Rendell over the weekend ordered the union and SEPTA to remain at the bargaining table or risk "significant consequences."

PENSIONS: THE NEXT CASUALTY OF WALL STREE

Mark Brenner, Counterpunch - Nobody wants to admit it, but the next casualty of the Wall Street meltdown will probably be your golden years. For years corporations have been trying to choke the life out of traditional pensions, working hard to get out from under the risk-and the cost-of providing for their retirees. Between last year's credit crunch and changes to federal pension laws, they may get their wish.

Nearly $4 trillion worth of retirement savings were wiped out in the first weeks of the 2008 financial freefall. Half of the drop was concentrated in traditional pension plans, also known as defined-benefit plans. While most workers in these plans haven't had their monthly benefits cut, unlike the 46 million people riding the stock market with 401(k) defined-contribution plans, the storm clouds are gathering.

Even before the financial crisis, traditional pensions were a vanishing breed. Thirty years ago more than a third of the private sector workforce had traditional pensions. Last year that number was down to 16 percent.

Driving the decline were employers looking to get off cheap, eliminating pensions entirely when they could get away with it, and when they couldn't, shifting to 401(k)s. These programs were legalized in 1978 and were originally designed to supplement traditional pensions. Now they're choking them out like kudzu.

Corporations got a great deal, paying about half what they used to towards their workers' retirement by the '90s. Even more important-as anyone who has opened their 401(k) statement recently can attest-the move shifted risk off companies and onto us.

Traditional pensions were a collective solution to a collective problem. Young and old contributing together smoothed out insecurity for all. Now it's just you and the stock market-with far less in your pocket.

Even before the crash, studies showed that 401(k)s leave workers with 10 to 33 percent of what traditional pensions provide. Given the 30-year squeeze on wages, most people haven't saved much either, which explains why more than half of all 401(k) participants have less than $75,000 when they retire.

BANKS JUST WALKING AWAY FROM FORECLOSED PROPERTY

Dayton Daily News - As if the mortgage foreclosure crisis wasn't bad enough, sometime last year a new phenomenon began to emerge: Experts say mortgage lenders and banks began walking away from foreclosed properties, especially in urban areas.

The so-called "walkaways" can occur along several different paths, but the effect is the same - after threatening or getting foreclosure, the lender attempts to abandon the usually vacant property, leaving the original owner, the neighbors and the city to live with the damage.

Owners often accumulate taxes and zoning enforcement fines on property they believe they no longer own.

Neighbors watch their property values decline as the vacant property deteriorates and is often broken into and stripped.

Cities then have to bear the cost of boarding up a structure, maintaining the lawn and, eventually, demolishing it.

Dayton housing inspector John Carter did a study last year of 302 vacant and abandoned residences in the city and found that about 70 percent were bank walkaways. Of those walkaways, he said, about 20 percent had mortgages but no foreclosure was ever filed.

"There are several tragedies to it," said Richard Stock, director of the University of Dayton's Business Research Group. "The very first tragedy is, my God, these people could have continued to be in their house all this time, maintaining it. And then there's the impact on the community." . . .

Dayton Daily News - Nobody is sure exactly how many bank walkaways are occurring. For various reasons, they can't be identified in searches of public real estate and court data without individually pulling case files, experts say. . .

David Rothstein, a researcher with Policy Matters Ohio, summarized the way they occur like this:

- The lender files a foreclosure, gets the foreclosure judgment in court, takes the property to sheriff's auction but doesn't bid on it if no one else does.

- The lender files as above, gets the judgment, sets the sheriff's auction, then cancels the sale at the last minute.

- The lender files as above but then never requests a sheriff's auction.

- The lender doesn't even bother to file foreclosure.

All of these actions leave the foreclosed property in the hands of the original owner who, in many cases, has moved out and is unaware the lender hasn't taken it. . .

JAMES GALBRAITH ON THE VIRTUES OF DEFICITS

John Hanrahan, Neiman Watchdog - Economist James Galbraith says there are "a lot of things that drive me not to read the press," because of "the confused and ignorant positions of most of the news media" on the issues of deficits and fiscal policy. The worst offender in this regard, Galbraith said in an interview with Nieman Watchdog, is The Washington Post editorial page.

"Their editorials reveal a lack of understanding of the structure of the economy...and an indifference to basic accounting," Galbraith said. "To put the point firmly, they say that the economy is recovering but the deficits are a problem. But the economy is recovering because of the budget deficits. Without these budget deficits, there would be no recovery, because it is the deficits that are helping to put more money into households' pockets. To talk of recovery but to criticize the deficits is ridiculous. The whole point of this thing [stimulus spending] is to add to the deficit. The patient is recovering from a deadly illness and yet the press is attacking the medicine.". . .

Galbraith criticized news and editorial coverage that unquestioningly reports the notion "of the relationship of the present to the future, the idea that the public debt puts the debt on our children and grandchildren. This is not true. If I incur a debt personally and die, it comes out of my estate or the pockets of my children. The public debt is not like that. There is the debt, yes, but there are also assets, namely the benefits that accrue to households today [through government stimulus spending]. Without deficits, people today will have no assets to pass down to their children and grandchildren."

Galbraith said that instead of holding the line on spending following the passage of the $780 billion stimulus measure earlier this year, "we need more recovery bills" that are larger and reflect "the true scale of the emergency." In a Washington Monthly article last spring, he outlined an ambitious recovery spending program including public projects, open-ended aid to state and local governments, increases in Social Security and Medicare benefits, and comprehensive foreclosure relief, among other items. Alluding to the cost of such a program, Galbraith wrote:

"The chorus of deficit hawks and entitlement reformers are certain to regard this program with horror. What about the deficit? What about the debt?. . . First, the deficit and the public debt of the U.S. government can, should, must, and will increase in this crisis. They will increase whether the government acts or not. The choice is between an active program, running up debt while creating jobs and rebuilding America, or a passive program, running up debt because revenues collapse, because the population has to be maintained on the dole, and because the Treasury wishes, for no constructive reason, to rescue the big bankers and make them whole."

Galbraith further said that "so long as the economy is placed on a path to recovery, even a massive increase in public debt poses no risk that the U.S. government will find itself in the sort of situation known to Argentines and Indonesians." This is so, he wrote, "Because the rest of the world recognizes that the United States performs certain indispensable functions, including acting as the lynchpin of collective security and a principal source of new science and technology. So long as we meet those responsibilities, the rest of the world is likely to want to hold our debts."

As Galbraith said on another occasion, in support of more stimulus: "Government spending -- that is absolutely the reason why this has not turned into the [second] Great Depression.". . .

Galbraith likewise faulted a prevalent view in the press that "getting credit flowing from the banks" will spur recovery. This is exactly backward, he said. "First, comes household recovery and then the credit will flow," he said.

Right now, Galbraith said, tens of millions of Americans are in no position to seek loans because they lack collateral to borrow against, having lost jobs, lost value in their houses, lost value in stock holdings and retirement plans, etc. For the first time since the 1930s, he said, "millions of American households are financially ruined."

"Borrowers are as important as the lenders," in bringing about recovery, and currently there is a paucity of borrowers because of the economic collapse. . .

RECORD HIGH NUMBER OF FORECLOSURES

CNN - The number of [foreclosure] filings hit a record high in the third quarter. "They were the worst three months of all time," said Rick Sharga, spokesman for Realty Trac, an online marketer of foreclosed homes. uring that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the Realty Trac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country.

OBAMA'S PROGRAMS FOR WORKERS: ANOTHER STUDY IN NOTHINGNESS

Boston Globe - With Democrats in control of Congress and the White House, organized labor had hoped to be celebrating a long list of legislative successes this year. Instead, labor's agenda has been pushed down on the priority list by the very lawmakers they helped elect, leaving some union backers frustrated.

Labor is eager to win passage of a "card check'' bill, a measure that would make it easier for workers to form unions, but the White House and Congress took up a Wall Street bailout plan first.

In the health care debate, labor is seeking to avoid a tax on expensive health care benefits. But President Obama, who slammed the idea during the campaign, this summer indicated he might be open to such an idea.

The Obama administration is also encouraging creation of some charter schools, a long-time concern of teachers' unions, who fear money will be diverted from other public schools. And an increase in the minimum wage, which supporters pushed in the last Congress, when Republican George W. Bush was in the White House, hasn't even been introduced in this Congress.

"It's beyond belief to me,'' said Robert Haynes, president of the Massachusetts AFL-CIO. While Obama and Congress inherited "a big mess'' from Bush, Haynes said, "there aren't any excuses anymore. If you can't deliver health care, and you can't deliver jobs, and if you can't deliver [card check legislation], and you can't figure out how to take care of the working people of this great city and country, you don't deserve to stay in office.''

HALF MILLION HOMEOWNERS HAVE LOAN PAYMENTS REDUCED

NY Times - Half a million troubled homeowners have seen their loan payments lowered under an Obama administration relief plan, the Treasury announced. . . Unaffordable mortgages are now being modified at a pace faster than homes are being sold in foreclosure proceedings, the Treasury secretary, Timothy F. Geithner, said. . . "Half a million families are participating in loan modifications that are substantially decreasing their housing costs." Mr. Geithner added that roughly 40 percent of the 1.2 million homeowners deemed eligible for loan modifications under the Making Home Affordable Program have received them. . .

Many homeowners continue to complain that seeking loan modifications can be frustrating and seemingly futile: Mortgage companies routinely lose documents and require them to resubmit their files repeatedly, while giving them incorrect fax numbers and leaving them on hold for hours only to receive contradictory instructions from customer service officers.

Some mortgage companies assert they cannot modify loans because they merely send out the monthly bills, while the mortgages are owned by investors. Yet industry insiders say many mortgage companies actually profit by delaying the process and keeping homeowners in long-term delinquency, extracting myriad fees along the way. . . .

"Unacceptably large numbers of families across the country are still at risk of losing homes they could otherwise afford to stay in," Mr. Geithner said.

Treasury first announced its anti-foreclosure program in February before delivering details in March: Mortgage companies would be paid $1,000 for each loan they modified, then $1,000 a year for up to three years. The plan was advanced with the promise that it would eventually spare up to four million households from foreclosure.

But by June, evidence was mounting that the program had become a bureaucratic nightmare. Thousands of homeowners recounted poor treatment and disorganization at the hands of their mortgage companies. By the end of June, only about 50,000 loans had been modified, according to a Treasury estimate.

In July, frustrated by the pace of the progress and irritated by legions of homeowner complaints, Treasury summoned major mortgage companies to Washington for what was subsequently described by officials as a dressing-down.

In the months since, mortgage companies have added and trained staff and improved their processes of fielding applications, according to the administration.

"We've put significant pressure on the servicers to ramp up production," said the Housing and Urban Development secretary Shaun Donovan, during Thursday morning's briefing.

Still, the administration acknowledged that glitches and frustrations remain. Treasury and H.U.D. again summoned to mortgage industry officials to Washington for meetings this afternoon aimed at further accelerating the program, Mr. Donovan said.

NATION'S CAPITAL TO PUSH HUNDREDS OF HOMELESS OUT OF SHELTERS

Washington Post - D.C. Council members and shelter providers were stunned to learn this week that the Fenty administration has cut $20 million from the city's homeless services budget for fiscal 2010. Advocates said the funding decrease likely will result in shelters being closed, forcing hundreds of adults and children onto the streets within months. . . A coalition of homeless service providers that receive city funding released a statement Friday saying that more than 100 families in temporary and transitional shelters run by the Community of Hope and House of Ruth are at risk of being removed if the cuts are not restored. An additional 480 women would face eviction; about half of them are housed by Catholic Charities. . . According to a yearly count by the Community Partnership for the Prevention of Homelessness, there were more than 6,000 homeless people living in the District in August. hat group includes about 703 homeless families with about 1,400 children. The District has 164 city-funded beds for families. At least 285 families were on a city waiting list for homeless shelters in July, a number that kept growing as heads of households lost jobs in the recession.

LAGGING INDICATORS

US News - Employers in the United States continue to be more interested in cutting their payrolls than in keeping their existing employees, let alone adding new ones. Employers slashed another 263,000 jobs last month. . .  That brings nonfarm employment down to the level of 2004, when there were about 7 million fewer U.S. workers.

Workers are dropping out: The unemployment rate edged up only slightly, to 9.8 percent, but the number of workers in the labor force fell by 571,000, suggesting the unemployment rate could have been much worse. The ranks of the marginally attached--workers who have dropped out of the workforce because they believe they won't find jobs or because they have other responsibilities, such as school--have grown by 615,000 over the year.

There are not enough jobs: A bill that would provide another 13 weeks of federally funded unemployment benefits to hard-hit states sailed through the House last week but may be complicated by some senators' efforts to get benefit extensions for all states. In some states, eligible workers have already received as many as 79 weeks of benefits. Historically, spells of unemployment that lasted a year or more were very rare, says Harvard economist Lawrence Katz, a Harvard economist. These trends are the sorts that haven't been seen since the Great Depression.

Indeed, the number of workers who have been unemployed for 27 weeks or more--called "long-term unemployed"--rose by 450,000, to 5.4 million. [This is roughly equal to the combined populations of Los Angeles, San Diego and Sacrament says Reuters]

Last month, 36 percent of the unemployed had been out of work for at least six months. The unemployed face a market in which job seekers outnumber job openings by a ratio of 6 to 1.

Progress has slowed: September job losses were much worse than most economists expected--the median estimate was a loss of 175,000. . .

Hours fell back down: Along with payroll cuts, many employers have slashed their workers' hours to help lower expenses, and there are now 9.2 million "involuntary" part-time workers (those who would prefer full-time work). The average workweek edged up in August, but September erased the gain, and the workweek is again at a record low 33.0 hours.

Guardian, UK- California may be the eighth largest economy in the world, but its state staff are being paid in IOUs, unemployment is at its highest in 70 years, and teachers are on hunger strike. . . From its politics to its economy to its environment and way of life, California is like a patient on life support. . . Desperate to pay off a crippling budget deficit, California is slashing spending in education and healthcare, laying off vast numbers of workers and forcing others to take unpaid leave. In a state made up of sprawling suburbs the collapse of the housing bubble has impoverished millions and kicked tens of thousands of families out of their homes. Its political system is locked in paralysis and the two-term rule of former movie star Arnold Schwarzenegger is seen as a disaster – his approval ratings having sunk to levels that would make George W Bush blush. The crisis is so deep that Professor Kenneth Starr, who has written an acclaimed history of the state, recently declared: "California is on the verge of becoming the first failed state in America."

Robert Reich, Salon - Unemployment will almost certainly be in double-digits next year -- and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics' household survey, you can bet there's another either too discouraged to look for work or working part time who'd rather have a full-time job or else taking home less pay than before . . .  And there's yet another person who's more fearful that he or she will be next to lose a job.

In other words, 10 percent unemployment really means 20 percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases. . .

So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going to do a lot of shopping. And businesses that don't have customers aren't going to do a lot of new investing. And foreign nations also suffering high unemployment aren't going to buy a lot of our goods and services.

And without customers, companies won't hire. They'll cut payrolls instead.

Which brings us to the obvious question: Who's going to buy the stuff we make or the services we provide, and therefore bring jobs back? There's only one buyer left: The government.

Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.

Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt. . .

People who now obsess about government debt have it backwards. The problem isn't the debt. The problem is just the opposite. It's that at a time like this, when consumers and businesses and exports can't do it, government has to spend more to get Americans back to work and recharge the economy. Then - after people are working and the economy is growing -- we can pay down that debt.

But if government doesn't spend more right now and get Americans back to work, we could be out of work for years. And the debt will be with us even longer. And politics could get much uglier.

World Socialist - The overall poverty rate in the US rose to 13.2 percent in 2008, as workers across all sectors of the economy became jobless and increasing numbers of families were forced into destitution, according to a new government report. Real median household income also declined by 3.6 percent. . .  Poverty among Hispanics climbed from 21.5 percent in 2007 to 23.2 percent in 2008. Non-Hispanic whites saw poverty rise from 8.2 percent in 2007 to 8.6 percent in 2008, while poverty among Asians was up from 10.2 percent in 2007 to 11.8 percent in 2008. African-Americans were the only group where poverty remained statistically unchanged at a staggering 24.7 percent, or about one in four people.

LAGGING INDICATORS: THE RETURN OF TENT CITIES

CNN - In cities across the country, people with nowhere to live have done what many would have thought unthinkable before the economic crisis: moved into tents. . . . Tent camps once associated mainly with the "Hoovervilles" of the Great Depression are springing up in places as varied as Sacramento, California; Nashville, Tennessee; Pinellas County, Florida; Providence, Rhode Island; and Seattle, Washington. The camps have often led to standoffs between local governments that say the camps violate housing ordinances and homeless rights advocates who argue that people struggling to get back on their feet need a permanent place to stay.

JOB SEEKERS EXCEED OPENINGS BY RECORD RATIO

NY Times - Despite signs that the economy has resumed growing, unemployed Americans now confront a job market that is bleaker than ever in the current recession, and employment prospects are still getting worse. Job seekers now outnumber openings six to one, the worst ratio since the government began tracking open positions in 2000. According to the Labor Department's latest numbers, from July, only 2.4 million full-time permanent jobs were open, with 14.5 million people officially unemployed. . .

The dearth of jobs reflects the caution of many American businesses when no one knows what will emerge to propel the economy. With unemployment at 9.7 percent nationwide, the shortage of paychecks is both a cause and an effect of weak hiring. . .

Even after companies regain an inclination to expand, they will probably not hire aggressively anytime soon. Experts say that so many businesses have pared back working hours for people on their payrolls, while eliminating temporary workers, that many can increase output simply by increasing the workload on existing employees.

YOU'RE NOT UNEMPLOYED, YOU'RE JUST A LAGGING INDICATOR

Mike Lux, Open Left - A phrase that the President and his economic advisors repeat too often, a phrase that is both politically tone deaf and potentially indicative of a much deeper problem in their thinking [is] "jobs are a lagging indicator" of our recovery. . . That "jobs are a lagging indicator" thing is a phrase that conservative economists (which is most of them) like to use because in their neo-classical economic models about recessions and financial crises, first the bankers regain confidence and their economic health, then they start loaning to businesses again, then businesses get healthy - and finally at the end of the happy cycle - they start hiring workers again. Of course, as the brilliant Paul Krugman piece on the economics profession in the NYT magazine pointed out, many of the same economists said both a real estate bubble and a financial panic were actually impossible because they didn't correspond to their free-market-cures-all-problems-and-provides-perfect-equilibrium models.

If the basic ideas behind the jobs being a lagging indicator phrase sound vaguely familiar, it's because they are essentially another version of the trickle-down economics we have been hearing for years from the two Presidents Bush and President Reagan: give those rich people and corporate CEOs more money, and it will eventually trickle down to the rest. There are a great many problems with this theory, but they can be summed up rather simply with the fact: pretty much nothing ever trickles down. In all the years of the Reagan and Bush presidencies, 20 years in all, the income of middle class workers stagnated (or worse), while the income of the rich skyrocketed. . .

LAUNCHING THE BAILOUT RIP-OFF

Donald L. Barlett and James B. Steele, Vanity Fair - Last October, Congress passed the Emergency Economic Stabilization Act of 2008, putting $700 billion into the hands of the Treasury Department to bail out the nation's banks at a moment of vanishing credit and peak financial panic. Over the next three months, Treasury poured nearly $239 billion into 296 of the nation's 8,000 banks. The money went to big banks. It went to small banks. It went to banks that desperately wanted the money. It went to banks that didn't want the money at all but had been ordered by Treasury to take it anyway. It went to banks that were quite happy to accept the windfall, and used the money simply to buy other banks. Some banks received as much as $45 billion, others as little as $1.5 million. Sixty-seven percent went to eight institutions; 33 percent went to the rest. And that was just the money that went to banks. Tens of billions more went to other companies, all before Barack Obama took office. It was the largest single financial intervention by Treasury into the banking system in U.S. history.

But once the money left the building, the government lost all track of it. The Treasury Department knew where it had sent the money, but nothing about what was done with it. Did the money aid the recovery? Was it spent for the purposes Congress intended? Did it save banks from collapse? Paulson's Treasury Department had no idea, and didn't seem to care. It never required the banks to explain what they did with this unprecedented infusion of capital.

Exactly one year has elapsed since the onset of the financial crisis and the passage of the bailout bill. Some measure of scrutiny and control has since been imposed by the Obama administration, but even today it's hard to walk back the cat and trace the money. Up to a point, though, it's possible to reconstruct some of what happened in the first chaotic and crucial three months of the bailout, when Treasury was still in the hands of Henry Paulson and most of the money was disbursed. Needless to say, there is no central clearinghouse for information about the tarp money. To get details of any kind means starting with the hundreds of individual recipients, then poring over S.E.C. filings, annual reports, and other documentation-in other words, performing the standard due diligence that the government itself failed to perform. In the report that follows, we have no more than dipped a toe into the morass, but one fact emerges clearly: a lot of the money wound up in the coffers of some very surprising institutions- institutions that should have been seen as "troubling" as much as "troubled." A Reverse Holdup

The intention of Congress when it passed the bailout bill could not have been more clear. The purpose was to buy up defective mortgage-backed securities and other "toxic assets" through the Troubled Asset Relief Program, better known as tarp. But the bill was in fact broad enough to give the Treasury secretary the authority to do whatever he deemed necessary to deal with the financial crisis. If tarp had been a credit card, it would have been called Carte Blanche. That authority was all Paulson needed to switch gears, within a matter of days, and change the entire thrust of the program from buying bad assets to buying stock in banks. THE REST OF THE STORY

SOTOMAYOR CHALLENGES MYTH THAT CORPORATIONS ARE PERSONS

Wall Street Journal - In her maiden Supreme Court appearance last week, Justice Sonia Sotomayor made a provocative comment that probed the foundations of corporate law. During arguments in a campaign-finance case, the court's majority conservatives seemed persuaded that corporations have broad First Amendment rights and that recent precedents upholding limits on corporate political spending should be overruled. But Justice Sotomayor suggested the majority might have it all wrong -- and that instead the court should reconsider the 19th century rulings that first afforded corporations the same rights flesh-and-blood people have.

Judges "created corporations as persons, gave birth to corporations as persons," she said. "There could be an argument made that that was the court's error to start with...[imbuing] a creature of state law with human characteristics.". . .

"A corporation is an artificial being, invisible, intangible," Chief Justice John Marshall wrote in an 1819 case. "It possesses only those properties which the charter of its creation confers upon it.". . .

In an 1886 tax dispute between the Southern Pacific Railroad and the state of California, the court reporter quoted Chief Justice Morrison Waite telling attorneys to skip arguments over whether the 14th Amendment's equal-protection clause applied to corporations, because "we are all of opinion that it does.". . .

Subsequent opinions expanded corporate rights. In 1928, the court struck down a Pennsylvania tax on transportation corporations because individual taxicab drivers were exempt. Corporations get "the same protection of equal laws that natural persons" have, Justice Pierce Butler wrote.

From the mid-20th century, though, the court has vacillated on how far corporate rights extend. In a 1973 case before a more liberal court, Justice William O. Douglas rejected the Butler opinion as "a relic" that overstepped "the narrow confines of judicial review" by second-guessing the legislature's decision to tax corporations differently than individuals.

Today, it's "just complete confusion" over which rights corporations can claim, says Prof. William Simon of Columbia Law School.

Even conservatives sometimes have been skeptical of corporate rights. Then-Associate Justice William Rehnquist dissented in 1979 from a decision voiding Massachusetts's restriction of corporate political spending on referendums. Since corporations receive special legal and tax benefits, "it might reasonably be concluded that those properties, so beneficial in the economic sphere, pose special dangers in the political sphere," he wrote. . .

Justice Sotomayor may have found a like mind in Justice Ruth Bader Ginsburg. "A corporation, after all, is not endowed by its creator with inalienable rights," Justice Ginsburg said, evoking the Declaration of Independence.

INCOMES OF YOUNG IN 8-YEAR NOSE DIVE

USA Today - The incomes of the young and middle-aged - especially men - have fallen off a cliff since 2000, leaving many age groups poorer than they were even in the 1970s, a USA Today analysis of new Census data found. People 54 or younger are losing ground financially at an unprecedented rate in this recession, widening a gap between young and old that had been expanding for years.

While the young have lost ground, older people have grown more prosperous over the years and the decades. Older women have done best of all. The dividing line between those getting richer or poorer: the year 1955. If you were born before that, you're part of a generation enjoying a four-decade run of historic income growth. Every generation after that is now sinking economically. Household income for people in their peak earning years - between ages 45 and 54 - plunged $7,700 to $64,349 from 2000 through 2008, after adjusting for inflation. People in their 20s and 30s suffered similar drops. . . .

27 PERCENT OF NEW YORK BLACKS UNEMPLOYED OR UNDEREMPLOYED

The Fiscal Policy Institute finds that job loss and wage declines are hitting New Yorkers hard - with some groups experiencing staggering levels of unemployment. Joblessness in New York State has increased by almost 400,000 since early 2008. The overall unemployment rate is just the tip of this economic iceberg. The official unemployment rate for black men jumped from 8.4 percent in the first half of 2008 to 18.3 percent in the first half of 2009. "Black men typically have higher unemployment rate than other groups," said James Parrott, chief economist at the Fiscal Policy Institute and principal author of the report. "But this jump of ten percentage points is an eye-popping increase from just a year ago. Black men are clearly bearing a disproportionate impact of the job loss in New York."

The official unemployment rate is far from the end of the story. The "real unemployment rate" includes people forced to work shorter hours or who are so discouraged they have given up looking for a job. Using the same methodology as the Bureau of Labor Statistics, FPI found that the real unemployment rate for New Yorkers overall is 14.1 percent. For men in New York State it is 12 percent for whites, 17 percent for Hispanics, and 14 percent for Asian and others. For black men, however, the real unemployment rate is a staggering 27 percent. For women in the state, the rates are 11 percent for whites, 18 percent for blacks, 19 percent for Hispanics, and 11 percent for Asian and others.

BANKS CUTTING LENDING TO DANGEROUS LEVEL SAY SOME EXPERTS

Ambrose Evans-Pritchard, Telegraph, UK - Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14 percent in the three months to August. "There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness.". . .

Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9 percent annual pace, the M2 money supply shrank at 12.2 percent and M1 shrank at 6.5 percent.

"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said.

It is unclear why the US Federal Reserve has allowed this to occur.

Chairman Ben Bernanke is an expert on the "credit channel" causes of depressions and has given eloquent speeches about the risks of deflation in the past.

He is not a monetary economist, however, and there are indications that the Fed has had to pare back its policy of quantitative easing (buying bonds) in order to reassure China and other foreign creditors that the US is not trying to devalue its debts by stealth monetization.

Mr Congdon said a key reason for credit contraction is pressure on banks to raise their capital ratios. While this is well-advised in boom times, it makes matters worse in a downturn. . .

US banks are cutting lending by around 1pc a month. A similar process is occurring in the eurozone, where private sector credit has been contracting and M3 has been flat for almost a year.

CREDIT CARD USURERS COME UP WITH NEW WAYS TO HIS CLIENTS

Business Week - New credit-card rules, designed to curb the industry's abusive practices, went into effect a few weeks ago. But already lenders have found ways to get around the regulatory roadblocks-moves that may cost consumers in the end. . . Under the new law, issuers can't raise them without 45 days' notice. But there's a loophole: The rules don't apply to variable-rate cards, with rates that float up and down. That's why companies are moving more consumers into such cards, whose rates are likely to soar from their record lows. Researcher Bankrate.com estimates variable-rate cards will account for 75% of all cards this year, up from 65% in 2008.. . . Starting in February, lenders won't be able to charge consumers a penalty when they go over their credit limit. To make up for the lost revenue, issuers are coming up with a host of other penalties. Fifth Third Bank started levying a $19 tariff if a borrower doesn't use the card for 12 months. . . Citigroup and JPMorgan Chase added annual fees to some products, targeting customers who pay off their balances. . .

WHY IS THE MEDIA DOWNPLAYING THE JOB CRISIS?

Robert Reich - The latest employment figures (released Friday)show job losses continuing to grow. . . Bottom line: almost one out of six Americans who need a full-time job either can't find one or is working part-time. Meanwhile, wage growth among people who have jobs has just about stopped. . . . At the same time, furloughs -- requiring workers to take unpaid vacations -- are on the rise: recent surveys show 17% of companies imposing them. More than 20% of companies have suspended their contributions to 401(k)s and similar pension plans.

So why isn't the media screaming? Partly because these job and wage losses are not, for the most part, falling on the segment of our population most visible to the media. They're falling overwhelmingly on the middle class and the poor. Unemployment among those who have been in the top 10 percent of earnings is closer to 5 percent, and their earnings continue to climb -- although, to be sure, much more slowly than before the meltdown. It's much the same with health-care and pension benefits. Among people under 65 who are in the bottom 20% of incomes, only 21.9% have employer-sponsored health insurance -- if they have a job at all. Half of all people nearing retirement age have a 401(k) balance of less than $40,000. . .

HOMEOWNERS FORCED TO BECOME LANDLORDS

ONE THIRD OF WORKERS UNDER 35 LIVE WITH PARENTS

Art Levine, AlterNet - The AFL-CIO released the results of a disturbing new Peter Hart survey, "Young Workers: A Lost Decade" that found that about a third of workers under 35 live at home with their parents, and they're far less likely to have health care or job security than they were ten years ago. . . A quarter of young workers say they don't earn enough to even pay their monthly bills, a 14% rise from the last survey. . . Thirty-five percent are significantly less likely to have health care than older workers, only 31 percent make enough money to pay their bills while putting anything aside in savings, and almost half are more worried than hopeful about their economic future.

BUSH PROVES SOCIALISM WORKS

This is an amazing story written in a manner to ensure the reader misses the point: socialism can really work, even when George Bush initiates it. All the current nonsense about socialism and health care is neatly contradicted by the fact that the TARP program, started under Bush, has already produced a 14% return on the public investment in Goldman Sachs, a five percent return from JP Morgan and a 12% return on American Express. These figures are extrapolated from best estimates of how much the socialists in the Bush and Obama administration invested in each company.

Sadly, this is just a temporary achievement as America is only allowed to practice lemon socialism, i.e. the government can only put its money where the private sector doesn't want to - into things like healthcare, public schools and mass transit. But it is a wonderful insight into the nonsense with which we discuss the issue, egged on by a conventional media that accepts rightwing economic theory without question. Note the sdyncohantic line: "It has also spurred hopes that the government could soon get out of the banking business."

NY Times - Nearly a year after the federal rescue of the nation's biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again. The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times.

These early returns are by no means a full accounting of the huge financial rescue undertaken by the federal government last year to stabilize teetering banks and other companies. The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages.

But the mere hint of bailout profits for the nearly year-old Troubled Asset Relief Program has been received as a welcome surprise. It has also spurred hopes that the government could soon get out of the banking business.

SCIENTIFIC STUDY FIND JUST A FEW FUNDS, BANKS AND CORPORATIONS CONTROL FINANCIAL MARKETS

Lauren Schenkman, Inside Science News Service - A recent analysis of the 2007 financial markets of 48 countries has revealed that the world's finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power, and point out the worldwide financial system's vulnerability as it stood on the brink of the current economic crisis.

A pair of physicists at the Swiss Federal Institute of Technology in Zurich did a physics-based analysis of the world economy as it looked in early 2007. Stefano Battiston and James Glattfelder extracted the information from the tangled yarn that links 24,877 stocks and 106,141 shareholding entities in 48 countries, revealing what they called the "backbone" of each country's financial market. These backbones represented the owners of 80 percent of a country's market capital, yet consisted of remarkably few shareholders. . .

The most pared-down backbones exist in Anglo-Saxon countries, including the U.S., Australia, and the U.K. Paradoxically; these same countries are considered by economists to have the most widely-held stocks in the world, with ownership of companies tending to be spread out among many investors. But while each American company may link to many owners, Glattfelder and Battiston's analysis found that the owners varied little from stock to stock, meaning that comparatively few hands are holding the reins of the entire market.

“If you would look at this locally, it's always distributed,” Glattfelder said. “If you then look at who is at the end of these links, you find that it's the same guys, [which] is not something you'd expect from the local view.”

Based on their analysis, Glattfelder and Battiston identified the ten investment entities who are “big fish” in the most countries.

The results raise questions of where and when a company could choose to exert this influence, but Glattfelder and Battiston are reluctant to speculate.

"In this kind of science, complex systems, you're not aiming at making predictions [like] . . . where the tennis ball will be at given place in given time," Battiston said. “What you're trying to estimate is . . . the potential influence that [an investor] has."

Glattfelder added that the internationalism of these powerful companies makes it difficult to gauge their economic influence. "[With] new company structures which are so big and spanning the globe, it's hard to see what they're up to and what they're doing,” he said. Large, sparse networks dominated by a few major companies could also be more vulnerable, he said. "In network speak, if those nodes fail, that has a big effect on the network."

WALL STREET JOURNAL FINDS GOLDMAN SACHS GIVING TOP CLIENTS AND TRADERS DIFFERENT ADVICE THAN AVERAGE CUSTOMERS

BAD ADVICE AND THE CRASH

FDIC SEES BANKS AT RISK UP 36%

Washington Post - The federal agency that repays depositors at failed banks said that cleanup costs reduced its insurance fund to $10.4 billion at the end of June, the lowest level since the early 1990s, and that many surviving banks face mounting problems. The decline in the Federal Deposit Insurance Corp. fund increases pressure on those banks because they pay fees to cover the cost of failures, but it does not threaten the safety of accounts in failed banks. The government ultimately guarantees it will protect depositors. The FDIC said banks lost a total of $3.7 billion in the second quarter as growing numbers of borrowers failed to repay existing loans. In response, the industry continued to reduce the volume of its new lending, a major impediment to renewed economic growth. . . The FDIC said Thursday that it counted 416 banks at risk of failing as of the end of June, a 36 percent increase from the first quarter.

BAILOUT WINNERS: FOUR BANKS NOW ISSUE ONE HALF OF ALL MORTGAGES AND TWO-THIRDS OF ALL CREDIT CARDS

Washington Post - When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system. The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit.

J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show. A year after the near-collapse of the financial system last September, the federal response has redefined how Americans get mortgages, student loans and other kinds of credit and has made a national spectacle of executive pay. But no consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected.

"It is at the top of the list of things that need to be fixed," said Sheila C. Bair, chairman of the Federal Deposit Insurance Corp. "It fed the crisis, and it has gotten worse because of the crisis." Regulators' concerns are twofold: that consumers will wind up with fewer choices for services and that big banks will assume they always have the government's backing if things go wrong. That presumed guarantee means large companies could return to the risky behavior that led to the crisis if they figure federal officials will clean up their mess.

BARTERING SOARS IN BAD ECONOMY

Boise Weekly - According to Craigslist, use of its bartering section has rocketed up more than 100 percent from April 2008 to April 2009. Defined by the IRS as the exchange of goods or services without the exchange of money, bartering has found a flurry of new friends in the current economic climate. . .

WALL STREET JOURNAL FINDS GOLDMAN SACHS GIVING TOP CLIENTS AND TRADERS DIFFERENT ADVICE THAN AVERAGE CUSTOMERS

Market Watch - Goldman Sachs Group Inc. regularly provides its top clients with stock-trading tips that differ from the firm's published research reports, The Wall Street Journal reported. The report said that the firm's researchers hold weekly meetings, referred to as the "trading huddle," at which analysts discuss their latest views of individual stocks, and that those views are passed on to the firm's top clients and Goldman traders who run the firm's own money. Stock markets have selective hearing

The paper, citing company documents, said few of the firm's clients who receive written stock research from Goldman ever hear or know about the views that emerge from the meetings.

The report cited research on asset manager Janus Capital Group Inc. as an example of the practice. It said Goldman issued a report on Janus on April 1, 2008, rating the stock neutral, and a day later at one of the weekly meetings told a group of Goldman traders that the stock was likely to go higher.

Following that meeting, the paper reported that research department employees called about 50 favored clients, and passed on the information about Janus from the meeting.

Goldman's clients who receive written research did not find out about the bullish update until six days after the call to top clients, according to the report.

OBAMA'S FORECLOSURE PROGRAM SUBSIDIZING SUBPRIME LENDERS

Washington Post - Many of the lenders eligible to receive billions of dollars from the government's massive foreclosure prevention program helped fuel the housing crisis by issuing risky subprime loans, according to a report to be issued Wednesday by the Center for Public Integrity. Under the $75 billion program, called Making Home Affordable, lenders are eligible for taxpayer subsidies to lower the mortgage payments of distressed borrowers. Of the top 25 participants in the program, at least 21 specialized in servicing or originating subprime loans, according to the center, a nonprofit investigative reporting group funded largely by charitable foundations. Much "of this money is going directly to the same financial institutions that helped create the sub-prime mortgage mess in the first place," Bill Buzenberg, executive director of the center, said in a statement. For example, J.P. Morgan Chase, Wells Fargo and Countrywide, which has been bought by Bank of America, are eligible to receive billions of dollars under the program, according to the report.

CALIFORNIA'S UNEMPLOYMENT RATE REACHES POST WORLD WAR II HIGH

LA Times - California's unemployment rate took an unexpected leap in July, reaching a post-Word War II high of 11.9%. The increase contrasts with the national rate, which declined slightly over the same period, and reflects ongoing weakness in the state's battered construction and financial services industries. The state lost a net 35,800 jobs last month, more than any other state, the U.S. Labor Department said today. It has lost 760,200 jobs over the last year. Every category of non-farm jobs in the state except education and health services experienced year-over-year losses. The construction sector was the hardest hit, shedding 18.6% of its jobs. Manufacturing jobs fell 8.7% from the same time last year.

WORKERS HAVE TO TOIL TEN TIMES AS LONG IN MEXICO CITY FOR A BIG MAC AS IN CHICAGO

Economist - A UBS report published this week offers a handy guide to how long it takes a worker on the average net wage to earn the price of a Big Mac in 73 cities. Fast-food junkies are best off in Chicago, Toronto and Tokyo, where it takes a mere 12 minutes at work to afford a Big Mac. By contrast, employees must toil for over two hours to earn enough for a burger fix in Mexico City, Jakarta and Nairobi.

NEWS FROM THE BUBBLE MACHINE

Zachary A. Goldfarb, Washington Post - One of the Obama administration's top priorities in its revamp is to regulate both derivatives and firms that trade them. But Gary Gensler, chairman of the Commodity Futures Trading Commission, warned key lawmakers in a letter this week that provisions of the administration's proposed legislation could leave significant elements of the derivatives market out of the reach of regulators and undermine efforts to combat fraud. . . Gensler helped craft an Obama administration plan to police this market for the first time. The proposal would require that most derivatives be traded on exchanges, like stocks and bonds, making the market much more transparent. It would also subject the banks and other firms that deal in the derivatives trade to robust requirements. However, the legislation contains several exceptions that are the source of Gensler's concern. For example, the administration has proposed exempting certain types of derivatives used to bet on currencies from regulation by the agency. The CFTC worries that traders could structure derivatives that would otherwise be regulated to fit within this exemption. . . A second concern is that minor traders in derivatives would not have to meet the robust trading requirements envisioned by the legislation. "This excludes a significant class of end users," the agency said. "This major exception may undermine the policy objective of lowering risk." Gensler said Wednesday that he still supports passage of the legislation.

Dean Baker - The NYT reports that Fed Chairman Ben Bernanke seems to be cruising to reappointment in spite of having missed the largest financial bubble in the history of the world, giving us the worst downturn since the Great Depression. The article notes that there are also critics of the way that he has handled the bailout effort, but does not provide details. These details would be helpful to readers.

First, he misled Congress last fall to help gain quick approval of the TARP. He told Congress that the commercial paper market was shutting down, so that non-financial corporations could not raise the money needed to pay their bills and meet their payrolls. In fact, the Fed had the ability to prevent a shutdown of the commercial paper market by directly buying commercial paper. Bernanke announced plans to establish a special lending facility to buy commercial paper the weekend after Congress approved the TARP.

Bernanke has also chose to keep all of the Fed's lending secret. While anyone can go to the Treasury's website and find out which banks received money from the TARP and under what terms, Bernanke has refused to make information on Fed's lending available even to members of the relevant congressional oversight committees.

Finally, Bernanke has allowed the distinction between commercial and investment banking to be obliterated. After Goldman Sachs became a bank holding company, Bernanke has allowed it to continue to operate as an investment bank. This means that it has effectively gambled with the FDIC's insurance fund money. Even proponents of the repeal of Glass Steagall insisted that they would never allow this sort of mixture of government insured deposits and speculative investment banking.

For these reasons, even some people who don't think that Bernanke's responsibility for the greatest economic disaster in 70 years disqualifies him for reappointment do not want to see him get another term as Fed chair.

Mike Lux, Open Left - There is a solution to all the complaining by Congress over the Obama administration's plan to give more power to the Federal Reserve. It is a solution that solves the worries people have about giving a secretive, undemocratic institution that blew it in the run-up to this financial crisis more power. It is a solution that looks at least in part to have broad bipartisan support, if one bill with 238 co-sponsors in the House is any indication. It is a solution that Democrats ought to be excited about if they take all their historic statements about government transparency and more democracy seriously.

The only downside is that it would be picking a big policy fight that directly challenges the power of the too-big-to-fail banks.

The idea is simple, has been around for a long time, should have been done a long time ago: make the Fed a more open and democratic institution, rather than the secretive one tied so closely to the big banks it is supposed to be regulating. There are a variety of ideas in this area, some of my favorites being:

- The Federal Reserve Transparency Act, which now has 238 co-sponsors (weirdly a lot more Republicans than Democrats, but with 47 Democrats led by Alan Grayson). This bill gives GAO the authority to audit the Fed and report is findings to Congress.

Requiring the Fed to disclose which banks are receiving trillions of dollars to prop them up.

- Taking bankers off the governing board of the regional Feds, and making sure that only consumer, labor, and public interest representatives are on the governing boards (currently, banking industry representatives or those affiliated with the banking industry are allowed to have three out of nine seats board seats for each of the 12 Regional Feds). Having those kinds of reps placed inside the Federal Reserve is important as well.

- Making the Fed more transparent, and changing the governing structure so that more people than bankers are involved with it, would make it acceptable to progressives to give the Fed more power. Without that kind of restructuring, the issue will not go away, and will likely doom regulatory reform.

- Opening up the Fed should be one of the major things progressives demand before they support giving them any more power.

Washington Examiner - The Inspector General of the Federal Reserve in a video acknowledges that trillions of dollars cannot be accounted for. The astonishing five-minute clip is taken from a Congressional hearing where Federal Reserve Inspector General Elizabeth Coleman is questioned by Congressman Alan Grayson of Florida on May 6th about huge amounts of money for which the Federal Reserve is responsible.

The Inspector General avoids answering almost every question asked by the Congressman. In fact, she appears in this video clip to know less about the finances of the Federal Reserve than Congressman Grayson.

Among the many important questions raised, Grayson requests information on the Bloomberg report that many trillion of dollars in credit have been extended by the Federal Reserve. When the Inspector General avoids answering, Grayson states, "If you're not responsible for investigating that, who is?" Once again, she avoids the question stating, "We've not gotten to a specific level of detail to really be in a position to respond to your question."

At another point, Coleman answers a further question with, "We are not in a position to say whether there are losses." Yet if the Inspector General of the Federal Reserve cannot account for trillions of dollars extended, who can? Grayson holds his composure very well throughout the questioning. He concludes, "I have to tell you honestly, I am shocked to find out that nobody at the Federal Reserve, including the Inspector General, is keeping track of [the unaccounted for trillions]."

THE VIDEO

BEST AND WORST PLACES TO LOOK FOR A JOB

CREDIT CARD COMPANIES RIP OFF CONSUMERS BEFORE NEW RESTRICTIONS GO IN PLACE

ABC News - A recent study of 150 credit cards by BillShrink found that interest rates on purchases and balance transfers for card holders have grown nearly 20 percent from January to July of this year.

Among the companies raising rates the most, according to the study, were:

Capital One, raised purchase and balance transfer rates by an average of 50 percent, cash advance rates by 20 percent and penalty rates by 30 percent.

Citi, which increased its purchase and balance transfer rates by an average of 27 percent. Citi card holders with poor credit have seen their rates increase at least 50 percent.

Discover, which increased its purchase and balance transfer rates by an average of 30 percent. (Discover told ABCNews.com that the company's online balance transfer rate is zero for the first 9 months following the transfer.)

US Bank has increased its purchase and balance transfer rates by an average of 33 percent. . .

BANKRUPTCIES SURGE 34 PERCENT

Washington Post - Personal bankruptcy filings reached 1.25 million in the year ending June 30, up 34 percent from the year before, as Americans continued to grapple with debt, unemployment and devalued homes, according to figures by the Administrative Office of the U.S. Courts. . .

PAY RAISES SMALLEST IN 33 YEARS

Time - For 2009, the typical non-hourly worker will see a 1.8% bump in salary, according to a survey by the human-resources consultancy Hewitt Associates. That increase, the smallest in at least 33 years, doesn't even keep up with inflation. . . Going back to the early 1990s, base salaries never increased by less than 3.4% a year, according to Hewitt, which polled 1,156 large companies to get its latest data. Companies desperate to slash costs are turning to worker salaries more deliberately than they have in the past. Some 48% of companies have frozen salaries this year, compared to just 2% last year

MIDDLE CLASS JOINING THE POOR ON FOOD STAMPS

CNN - As the [Detroit] area's economy worsens --unemployment was over 16% in July -- food stamp applications and pantry visits have surged. Detroiters have responded to this crisis. Huge amounts of vacant land has led to a resurgence in urban farming. Volunteers at local food pantries have also increased. But the food crunch is intensifying, and spreading to people not used to dealing with hunger. As middle class workers lose their jobs, the same folks that used to donate to soup kitchens and pantries have become their fastest growing set of recipients. . . There have been plenty of people struggling in Detroit for a long time. What makes this recession different is the type of people coming in. It's no longer just the homeless, or the really poor. Now it's middle class folks who lost their $60,000-a-year auto job, or home owners who got caught on the wrong side of the real estate bubble. Many of these people have never navigated the public assistance bureaucracy before, and that makes getting aid to them a challenge. "They have no idea where the DHS office is," said DeWayne Wells, president of Gleaners, the food distributor.

A RECOVERY ONLY A STATISTICIAN CAN LOVE

Annys Shin, Washington Post - The pile of economic data indicating that the worst of the recession is over just keeps growing. In the past few weeks, the government has reported that businesses last month shed the smallest number of jobs in nearly a year. The savings rate, after rising rapidly, held steady at levels not seen in at least five years. And from April to June, productivity surged to a six-year high.

But the same data also explain why any recovery isn't going to feel like one anytime soon for millions of Americans. Its existence will be confirmed by statistics, but, over at least the next year, the benefits are unlikely to materialize in the form of higher wages or tax receipts or more jobs.

"It's going to be a recovery only a statistician can love," Wells Fargo senior economist Mark Vitner said. . .

The Labor Department reported Tuesday that business productivity jumped in the second quarter to a seasonally adjusted annual rate of 6.3 percent, far higher than the annual average of 2.6 percent from 2000 to 2008.

Higher productivity helps raise living standards in the long run and is good for corporate profits because it allows companies to produce more without paying higher labor costs. But the boost in productivity was largely due to businesses slashing hours faster than output. Labor costs per unit fell, but so did the buying power of workers, further constraining already weak consumer spending, which accounts for 70 percent of the economy.

Increased productivity, combined with other factors, could also bode poorly for employment because as long as businesses can do more with fewer people, they can delay hiring. Adding to that potential delay is the fact that employers have slashed hours to an unprecedented degree to survive the recession. The average time spent working each week is at a record low, and just under 9 million people are working part time for economic reasons.