December 07, 2007

Economy : No! Don't.Say.The.R.Word!

'Advanced Manufacturing' is something that Labor Sec'y. Elaine Chao is really excited about. We used to call it final assembly, but Frank Luntz has been hard at work helping the Bush Admin to spin this pig of an economy. Elaine thinks this will save the US economy. Of course, by the time it's clear it won't, Elaine will be off on to a consulting gig. And trust me, no one on Wall St. will miss her or her pollyanna economic analysis.

Here's what's out today

  • Non farm payrolls are in for November at 94k, full 60k less than the US needs to maintain static employment levels. Which means that over the past 6 months, we haven't hit static levels in any month. Unemployment held steady, mostly because the government is running those #'s in a really funky way. For one, after about 12 weeks you fall off the count whether or not you have a job. Which makes the Admin look good but hides how bad things really are
  • University of Michigan Consumer Sentiment falls from 76.1 in November to 74.5 in December. The dollar falls still further
  • Household income was marginally higher than expected, but still anemic and running behind inflation when you count food and energy prices. Which the Government doesn't.
  • But what about the subprime fix-it from Treasury Sec'y Paulson? Too little, too late. To paraphrase Senator Durbin, you have people drowning 20 feet offshore and the Bush Admin just tossed them a 10 foot rope. Not to mention the onerous guidelines for the freeze that are even tougher than those for an FHA loan. Then you throw in what this will do to the debt maket...

    ``If the government goes in and changes contracts it will definitely have a chilling effect on the securitization of mortgages,'' said Milton Ezrati, senior economist and market strategist at Lord Abbett & Co. in Jersey City, New Jersey, which oversees $120 billion in assets. ``When the government comes in and says you have contracted to have this arrangement and you can no longer have it, I think it opens the door for lawsuits.''

    Don't get it? Let me put it this way... you pay a premium for a bond that will deliver dependable principle and interest payments over time. Then the government steps in and renegotiates the contract, giving you less income. Sound fair, right?

    The bottom line is that a freeze isn't going to work, especially not with the economy spiralling the drain. What's needed to actually help people is to refinance them out of these mortgages. FHA Secure was a good first step, but what we need is FHA Modernization which is trapped in the Senate by some Republicans. Because of the perception that it will hurt the private mortgage insurance companies.

    Thanks, Sen. Dole! Way to put your own narrow interests ahead of the rest of the country.


    Posted by mcblogger at December 7, 2007 02:26 PM

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