By David Glenn Cox
Wonderful news, the recession is over and we won! Of course, when I say we I mean Wall Street and the big banks.
May 6 (Bloomberg) — A peak in the number of jobless claims signals
the worst U.S. recession in half a century may end in June, according
to Thomas Lam, an economist at United Overseas Bank Ltd. in Singapore.
May 6 (Bloomberg) — U.S. stocks advanced to a four-month high as
investors speculated banks don’t need as much capital as had been
projected and a report showed employers cut fewer jobs than economists
The job losses were at 491,000 for last month and Citi-group shares
surged 17% on news that the bank would only need five billion more
dollars. Isn’t that wonderful? Citi, having been already lent
forty-five billion along with government loan guarantees in excess of
over three hundred billion, now only needs five billion more to pass
its stress test! And the economy only lost half a million jobs instead
of the expected six hundred and fifty thousand jobs the private
economist’s estimated. (Actual job losses 603,000)
God, the news is so good it makes me want to go buy a new Pontiac,
quick, before they disappear. GM posted its eighth straight quarterly
loss and laid off another twenty-one thousand employees, but that’s
part of their plan for recovery, to eliminate employees. You see?
That’s good news, the economy is on the mend. Walt Disney shares surged
12%, its biggest rise in six months after they cut staff at their theme
parks. I suppose it’s Snow White and the Five Dwarfs now, and I guess
Minnie is a stay-at-home mouse and Mickey delivers pizzas at night!
Yes, it is a rosy picture indeed, as the economy comes roaring back
to life from death’s door. Sadly the recovery isn’t uniform, there are
still those few pockets of our economy not benefiting from government
assistance. Mainly workers, the self employed and even those who once
thought themselves rich, they continue to struggle in this reviving
economy. All in all probably 95% of the population is still struggling;
this minority’s misfortunes are caused by their lack of influence in
Where once employees were given pink slips, employers now find
themselves in trouble. The number of jumbo mortgages in default surged
by 127% in the first ten weeks of this year. Jumbo mortgages are loans
in excess of $417,000. Chuck Dayton put down almost twenty-five percent
when he purchased his $950,000 home a block from the Pacific Ocean in
Newport Beach, California. Chuck was earning a cool half million a year
in his drywall business. Mr. Dayton defaulted in January on $46,000 in
Damn, and John McCain was going to cut his taxes, too. But what is
missing from Mr. Dayton’s plight? Now don’t get me wrong because I went
through the exact same situation Mr. Dayton is facing now, only with
smaller dollar amounts. But what is missing is the scorn and derision.
Where are the pundits and politicians who excoriated sub-prime buyers,
calling them dead beats who mislead innocent bankers by trying to buy a
home that they could never afford?
If the poor and middle class should have known better, then why not
the Chuck Daytons of the world? I sympathize with Mr. Dayton; it’s hard
to take a fall, and the higher up you are the harder the fall. He is a
victim just as the millions of ignored and invisible Americans are
victims. I’m sure it is some small comfort not to be called a bum every
night on the six o’clock news because you lost your house. But there is
a distinction; Mr. Dayton lost his home because of the hard times
outside Wall Street and the banks, and this caused his business to
fail. The rest of us just made bad financial decisions.
Home sales in the Hamptons on Long Island fell 67%, the largest
number since numbers have been kept. Ninety of those million dollar
homes in East Hampton and South Hampton are in the foreclosure process
and yet not one call has gone out to fire those responsible for such
risky lending practices. Then, to add insult to injury, President
Obama’s mortgage assistance plan has no provisions for jumbo mortgages.
The irony is bitter-sweet, that those who campaigned the loudest
against mortgage bailouts now complain, “How come I’m not included?”
But what we are dealing with is a cancer; the disease is
metastasizing itself and spreading throughout the economy. The
companies that no longer needed workers now no longer need executives
or contractors or surveyors or engineers. Ready for a wake up call?
Type “profits fell 95%” into your browser and watch what happens.
That’s the news that’s not news because it’s not the news they want to
be the news. How long can companies sustain losses of 95% of their
profits? If the dry wall contractors are going broke then what of the
companies that make the dry wall?
But it is every segment of the economy, from dry wall to biotech,
from theme parks to beer companies. Everyone except Wall Street and the
big banks, for them the crisis is over, except for maybe an additional
$15 billion that Wells Fargo needs or the $11.5 billion that GMAC
needs. But they have no doubt where the money will come from. For the
rest of the minority of 95%, we wonder how long they can pour money
into a leaking bucket before they realize the futility of it.
The Obama administration might long be remembered as the
administration that saved the banks but lost everything else, to have
saved the ship’s wheel but lost the ship. Mired in the plutocracy and
unable to rise above insider politics, they serve only those that feed
The Home Owners’ Loan Corporation, established by FDR in 1933, saved
over one million homes from foreclosure by 1935, at a time when America
only had 125 million inhabitants and the rate of home ownership was
much lower. They established the principle of the 25 to 30-year
fixed-rate loans. Until that time private banks would offer no more
than 15-year loans. How much did this big-spending, leftist program
cost the long suffering American taxpayer? 100 million? 500 million? A
billion dollars? It cost them nothing; it cost the American taxpayer
not one dime. When it went out of business in 1951, it returned a small
profit to the US Treasury.
But it stopped the slide in home values; it stopped the forclosures.
It stopped the hemmoraging of the banks. It was the trickle up theory,
that you build a society from the bottom up. A strong middle class
guarantees the future for the wealthy bankers while assisting wealthy
bankers guarantees nothing for anyone, not even those bankers being
helped, and the cancer will continue to spread.
“For want of a nail the shoe was lost, for want of a shoe the horse
was lost, for want of a horse the rider was lost. For want of a rider
the battle was lost, For want of a battle the kingdom was lost, and all
for the want of a horse.”
Today that would read, for want of a nail the bank was lost, so we
gave them enough money for billions of nails and when they lost that we
gave billions more until the kingdom was lost.
“This market is not even close to bottoming out, in my opinion. It continues to drop.” (Chuck Dayton)
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.