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It still pales in comparison to what was done a few years ago, but, at its current pace, the Federal Reserve’s generous central bank liquidity swaps now aiding European banks will soon rival that of the 2008-2009 financial crisis as shown below, another $37 billion being added last week to bring the total up to just shy of $100 billion.
For those of you new to this story, see this WSJ commentary by Gerald P. O’Driscoll the other day and his appearance on CNBC on the same subject.
I’ve never really gotten that argument about how the Federal Reserve and U.S. government tightened too soon in the late-1930s and, as a result, induced another recession. In his column today, Paul Krugman notes:
“The boom, not the slump, is the right time for austerity at the Treasury.” So declared John Maynard Keynes in 1937, even as F.D.R. was about to prove him right by trying to balance the budget too soon, sending the United States economy — which had been steadily recovering up to that point — into a severe recession. Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way.
Yet, anyone able to look at the data back in 1937 would hardly see the U.S. economy as “depressed”, not after three straight years of real GDP growth averaging 11 percent. While perhaps not a “boom”, a “strong recovery” was certainly underway by then.
To be sure, the 1930-1933 downturn was severe, but, according to the data from the BEA above, the U.S. economy had returned to its 1929 bubble output by 1937 when all the policy mistakes were supposedly made.
According to this item at Occupy Wall Street News, the African-American faith community will join forces with Occupy Wall Street to protest economic injustice on Martin Luther King Day next month and they intend to “Occupy the Federal Reserve” in up to twelve cities across the country where regional central bank offices are located.
There’s more than a little bit of irony in the event also being referred to as “Occupy the Dream”, that is, just two years in advance of the 100-year anniversary of the founding of the Fed, what, to the biggest of the banks back then was a “dream” of a monopoly over the industry at a time when smaller regional banks were rapidly gaining market share.
So far, it’s worked out pretty well for them, if not for the rest of us.
A week or two ago it was learned that it takes nearly 1,000 days for a distressed property to wind its way through the foreclosure process in New York and New Jersey and, the assumption at the time was that these were extreme outliers … apparently not.
A CNN/Money report today indicates that in some areas it takes even longer and that the average duration is much higher than I would have guessed.
Nationwide, the average time it takes to process a foreclosure — from the first missed payment to the final foreclosure auction — has climbed to 674 days from 253 days just four years ago, according to LPS Applied Analytics.
It takes much longer than that in Florida, where the process averages 1,027 days, nearly 3 years. In D.C., foreclosure averages 1,053 days and delinquent borrowers in New York often stay in their homes for an average of 906 days.
And while some borrowers are looking for ways to make good with lenders and get their homes back, many aren’t paying a dime. Nearly 40% of homeowners in default have not made a payment in at least two years, according to LPS.
Many of these homeowners are staying in their homes based on a technicality. There is rarely any dispute over whether or not they have stopped paying their mortgage, said David Dunn, a partner at law firm Hogan Lovells in New York, who represents banks and other financial institutions in foreclosure cases.
“In my experience, they never say, ‘I’m not delinquent’ or ‘I want to pay my bill but I’m confused over who to send it to,’ or ‘Oh my God, you mean I didn’t pay my mortgage?’ They’re not in technical default. They’re in default because they’re not paying,” he said.
The robo-signing debacle seems to have been a major factor in extending how long it takes to foreclose on a property and a thousand dollars spent on an attorney appears to be worth many times that amount in mortgage/rent payments that never have to be made.
Following yesterday’s Case-Shiller report on falling home prices, Zillow provided their take on where property values have been heading in this story that included the sobering chart below, little comfort being provided in the fact that home value declines are slowing.
Of course, it would likely be a very different situation if mortgage rates weren’t at freakishly low levels and the backlog of millions of distressed properties moved a little quicker through the foreclosure process, but, that’s what passes for banking policy in the aftermath of the greatest financial bubble that no one saw coming.
Though quite different than in parts of China where, in this New York Times story yesterday, it was learned that the benefits of holding office can be so attractive that one candidate for Laojiaotou village committee chairman spent nearly a quarter of a million dollars for a position that pays less than $50 a month, elected officials in the U.S are doing quite well these days, entering office wealthier than ever before, as detailed in this report at the Washington Post today, and adding to that wealth over time.
Between 1984 and 2009, the median net worth of a member of the House more than doubled, according to the analysis of financial disclosures, from $280,000 to $725,000 in inflation-adjusted 2009 dollars, excluding home equity.
Over the same period, the wealth of an American family has declined slightly, with the comparable median figure sliding from $20,600 to $20,500, according to the Panel Study of Income Dynamics from the University of Michigan.
…
The growing disparity between representatives and the represented means there is a greater distance between the economic experience of Americans and those of lawmakers.
The report chronicles the differences between former Pennsylvania Representative Gary Myers, who was elected to office in 1974 and served only two terms, and another Republican from the same district, Mike Kelly, who won office for the first time last year.
Of course, this is part of the growing income inequality problem that has been festering in the U.S. over the years and that has come to a head after the housing bubble burst (i.e., after most people realized they were only “temporarily” wealthy).
Also see Peter Schweizer’s Throw Them All Out – How Politicians and their Friends Get Rich off Insider Stock Tips, Land Deals, and Cronyism that Would Send the Rest of Us to Prison.
By Tim Iacono, Since 2005
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