RKMBs Forums .::Important::. Politics and Current Events Great Depression 2.0 May Be On Its Way

But that larger figure doesn't include a huge number of unemployed folks who have given up looking for work because they feel the search is hopeless. Last Friday's report said 661,000 such people left the labor force in December.

According to MEM in the stimulus thread, the stock market is a good indicator on whether or not we need to do something.

President Obama wants to cut down to size those too-big-to-fail banks. But his vow on Thursday to rewrite the rules of Wall Street left many questions unanswered, including the big one: Would this really prevent another financial crisis?

The president's proposals to place new limits on the size and activities of big banks rattled the stock market, but banking executives were perplexed as to how his plan would work. Indeed, many insisted the proposals, if adopted, would do little to change their businesses.

Moreover, it was unclear if the twin proposals -- to ban banks with federally insured deposits from casting risky bets in the markets, and to resist further consolidation in the financial industry -- would have done much if anything to forestall the crisis that pushed the economic system to the brink of collapse in 2008.

Mr. Obama appeared to be leaving crucial details to be hashed out by Congress, where partisan tussling has already threatened another reform the president supports -- the creation of a consumer protection agency that would have oversight over credit cards, mortgages and other lending products.

Wall Street figures, many caught off guard by the news, reacted cautiously.

"I am somewhat skeptical about how much the federal government can actually regulate," said John C. Bogle, the founder of Vanguard, the mutual fund giant. "We need to try, but all the lawyers and geniuses on Wall Street are going to figure out ways to get around everything."

Indeed, Mr. Obama acknowledged that "an army of industry lobbyists" had already descended on Capitol Hill, but vowed, "If these folks want a fight, it's a fight I'm ready to have."

Shares of big banks -- potentially the biggest losers should the proposals be enacted -- fell sharply, dragging the broader market down by about 2 percent. Even as the markets stumbled, Mr. Obama -- still stinging from the Democrats' loss on Tuesday of the Massachusetts seat formerly held by Senator Edward M. Kennedy -- ramped up his populist approach, one week after he proposed a new tax on large financial institutions to recoup projected losses from the 2008 bailout.

Mr. Obama said the banks had nearly wrecked the economy by taking "huge, reckless risks in pursuit of quick profits and massive bonuses."

The administration wants to ban bank holding companies from owning, investing in or sponsoring hedge funds or private equity funds and from engaging in proprietary trading, or trading on their own accounts, as opposed to the money of their customers.

Mr. Obama called the ban the Volcker Rule, in recognition of the former Federal Reserve chairman, Paul A. Volcker, who has championed the proposal. Big losses by banks in the trading of financial securities, especially mortgage-backed assets, precipitated the credit crisis in 2008 and the federal bailout.

It was not clear, however, how proprietary trading activities would be defined.

Officials said that banks would not be permitted to use their own capital for "trading unrelated to serving customers." Such a restriction would most likely compel banks that own hedge funds and private equity funds to dispose of them over time. Officials said, however, that executing trades on a client's behalf and using bank capital to make a market or to hedge a client's risk would be permissible.

Federal regulators have already leaned hard on banks to curb pure proprietary trading, and the banks expect that regulators will demand more capital if they keep making risky bets, making the practice far less profitable.

Some of the biggest firms, applying a narrow definition, say that pure proprietary trading constituted less than 10 percent of their revenue, and in some cases far less. Morgan Stanley, for example, already abandoned all but two proprietary trading desks last year.

The Buckingham Research Group estimated that the new rules would reduce revenue at Citigroup, Bank of America and JPMorgan Chase by less than 3 percent. Goldman Sachs, which typically derives a tenth of its revenue from such trading, said it would be able to contend with the new rules.

"I would say pure walled-off proprietary-trading businesses at Goldman Sachs are not very big in the context of the firm," David A. Viniar, the firm's chief financial officer, said in a conference call.

Mr. Obama also is seeking to limit consolidation in the financial sector, by placing curbs on the market share of liabilities at the largest firms. Since 1994, the share of insured deposits that can be held by any one bank has been capped at 10 percent.

The administration wants to expand that cap to include all liabilities, to limit the concentration of too much risk in any single bank. Officials said the measure would prevent banks at or near the threshold from making acquisitions but would not require them to shrink their business or stop growing on their own.

The Obama administration said the new proposals were in the "spirit of Glass-Steagall" -- a reference to the Depression-era law that separated commercial and investment banking, which was repealed in 1999.

Economists have debated whether the repeal of that act contributed to the crisis. The two big investment banks that imploded, Bear Stearns and Lehman Brothers, were not commercial banks, and Goldman Sachs and Morgan Stanley converted to bank holding companies only after the system started to come unglued.

The industry was left buzzing with questions about timing and scope. Officials said the new restrictions would apply to overseas firms, like Barclays and UBS, with large American operations, but it was not clear how -- or whether -- foreign governments would go along. Officials also said the proposal called for a "reasonable transition period" for firms to comply with the rules, but the timetable was not specified.

Timothy F. Geithner, the Treasury secretary, and Lawrence H. Summers, the president's chief economic adviser, developed the proposals at the request of the president and worked closely with Mr. Volcker, according to White House officials. The plan was completed over the holidays and submitted to the president with a unanimous recommendation from the economic team.

While Mr. Geithner and Mr. Summers debated concerns that proprietary trading was not at the heart of the recent crisis, they concluded that reforms needed to address potential sources of risk in the future.

Reaction on Capitol Hill also was muted, partly because neither party wanted to be seen as beholden to unpopular banks. The House bill passed last month would consolidate oversight, require stronger capital cushions for the largest banks and impose regulation of some derivatives. In many ways, the new White House proposal amplifies provisions in that bill that would have left regulators discretion over proprietary trading and excessive liability.

Obama Destroys housing Market

• NEW YORK—Stocks are lower as an unexpected drop in new home sales raises questions about how soon the economy will recover.
  
  The report Wednesday comes as traders are also concerned over the shifting landscape for financial regulation.
  
  The Commerce Department says sales of new homes fell 7.6 percent in December. Sales came to a seasonally adjusted annual rate of 342,000, below the 370,000 forecast by a Thomson Reuters survey of economists.
  
  The Dow Jones industrial average is down 29 at 10,165. It had been down 10 ahead of the report. The Standard & Poor's 500 index is down 3 at 1,089, while the Nasdaq composite index is down 1 at 2,202.
  
  Read more: http://www.denverpost.com/business/ci_14277226#ixzz0dpNKTmrs

U.S. economy grows at fastest rate in 6 years

The government and liberal media are manipulating the statistics, bad even in their gentler form at a consistent 9.7% unemployment rate. As I quoted elsewhere, when you include the millions who have given up on finding a job, or who are working 32 hours or less under the threat of lossing their jobs if they don't, unemployment is projected to actually be somewhere between 17 to 22% (as G-man also sourced, earlier in this topic).

The Obama administration's flagship effort to help people in danger of losing their homes is falling flat.

More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes.

Last month alone,155,000 borrowers left the program -- bringing the total to 436,000 who have dropped out since it began in March 2009.

About 340,000 homeowners have received permanent loan modifications and are making payments on time.

Administration officials say the housing market is significantly better than when President Barack Obama entered office. They say those who were rejected from the program will get help in other ways.

But analysts expect the majority will still wind up in foreclosure and that could slow the broader economic recovery.

A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.

Many borrowers complained that the banks lost their documents. The industry said borrowers weren't sending back the necessary paperwork.

Carlos Woods, a 48-year-old power plant worker in Queens, N.Y., made nine payments during a trial phase but was kicked out of the program after Bank of America said he missed a $1,600 payment afterward. His lawyer said they can prove he made the payment.

Such mistakes happen "more frequently than not, unfortunately," said his lawyer, Sumani Lanka. "I think a lot of it is incompetence."

A spokesman for Bank of America declined to comment on Woods's case.

Treasury officials now require banks to collect two recent pay stubs at the start of the process. Borrowers have to give the Internal Revenue Service permission to provide their most recent tax returns to lenders.

Requiring homeowners to provide documentation of income has turned people away from enrolling in the program. Around 30,000 homeowners started the program in May. That's a sharp turnaround from last summer when more than 100,000 borrowers signed up each month.

As more people leave the program, a new wave of foreclosures could occur. If that happens, it could weaken the housing market and hold back the broader economic recovery.

Even after their loans are modified, many borrowers are simply stuck with too much debt -- from car loans to home equity loans to credit cards.

"The majority of these modifications aren't going to be successful," said Wayne Yamano, vice president of John Burns Real Estate Consulting, a research firm in Irvine, Calif. "Even after the permanent modification, you're still looking at a very high debt burden."

So far nearly 6,400 borrowers have dropped out after the loan modification was made permanent. Most of those borrowers likely defaulted on their modified loans, but a handful either refinanced or sold their homes.

Credit ratings agency Fitch Ratings projects that about two-thirds of borrowers with permanent modifications under the Obama plan will default again within a year after getting their loans modified.

Obama administration officials contend that borrowers are still getting help -- even if they fail to qualify. The administration published statistics showing that nearly half of borrowers who fell out of the program as of April received an alternative loan modification from their lender. About 7 percent fell into foreclosure.

Another option is a short sale -- one in which banks agree to let borrowers sell their homes for less than they owe on their mortgage.

A short sale results in a less severe hit to a borrower's credit score, and is better for communities because homes are less likely to be vandalized or fall into disrepair. To encourage more of those sales, the Obama administration is giving $3,000 for moving expenses to homeowners who complete such a sale or agree to turn over the deed of the property to the lender.

Administration officials said their work on several fronts has helped stabilize the housing market. Besides the foreclosure-prevention plan, they cited government efforts to provide money for home loans, push down mortgage rates and provide a federal tax credit for buyers.

"There's no question that today's housing market is in significantly better shape than anyone predicted 18 months ago," said Shaun Donovan, President Barack Obama's housing secretary.

The mortgage modification plan was announced with great fanfare a month after Obama took office.

It is designed to lower borrowers' monthly payments -- reducing their mortgage rates to as low as 2 percent for five years and extending loan terms to as long as 40 years. Borrowers who complete the program are saving a median of $514 a month. Mortgage companies get taxpayer incentives to reduce borrowers' monthly payments.

Consumer advocates had high hopes for Obama's program when it began. But they have since grown disenchanted.

"The foreclosure-prevention program has had minimal impact," said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group. "It's sad that they didn't put the same amount of resources into helping families avoid foreclosure as they did helping banks."

Actually Bush's medical deal was a total give away that will greatly add to the debt every year. There was no attempt to pay for anything, that's only expected of democratic presidents during recessions silly.

As for the wars, reallistically no we couldn't just pull out those countries now that we're there. What would have been nice though is if there had been some plan beyond getting there and hanging the mission accomplished signs.

It's Bush's fault!