Non-recovery News: More Jobs Lost, Record Low Homes Sold

Another Thursday, and the Labor Department released new figures for people filing their first-time unemployment claims. Figures are now at a 9-month high, as bad as they were last November (a year after the multi-trillion bailout and subsidization of the banking system began.) This is not an indication of recovery, despite DC spin, nor is it a slow recovery - it's a deterioration - it would be a useful policy to admit this, rather than sugar-coat it, so we can examine better methods to create jobs.

The ranks of the new unemployed grew by an additional 12,000 people more this week vs. last week, to half a million people led by California, Indiana and North Carolina. Last's week's already bad number of 484,000 was revised upward to 488,000.  Those merry analysts got it wrong going in, again: "Analysts polled by Reuters had forecast claims slipping to 476,000 from the previously reported 484,000 the prior week".

Keeping track of other non-recovery news: pending home sale figures slipped to their lowest level since 2001 last month, while the number of houses waiting to be sold (or 'inventory') represents a 9 month backlog (the highest since last August.) Bank repossessions of foreclosed homes are near record levels, and have risen for the past 8 months. 

And, Tim Geithner and Ben Bernanke keep claiming those bailouts worked.

Obama's in Hollywood & Traffic's a Nightmare

As a transplanted New Yorker living in LA, I've become used to obscene congestion - but President Obama's latest fundraising efforts have redefined the notion of heavily snarled roads. The big man's in town to speak at a fundraising event at the Hancock Park (yes, it's a nice neighborhood) home of TV producer, John Wells, on behalf of the DCCC. Nancy Pelosi's supposed to be dropping by as well to join the usual Hollywood crowd of DEM donors - Steven Spielberg, Barbara Streisand, Jeffrey Katzenberg, etc.

This is Obama's fourth trip to LA, the other 3 have also been to raise campaign money. Considering the state's flirting with bankruptcy and a veritable highway full of economic woes (like the rest of the country), it seems like the ticket costs (of $2500 per person, $30,400 per sponsoring couple) could be used for much better purposes - if only we had those public campaign caps Obama used to talk about during the pre-election period. Just saying. Ironically, Obama's leaving for Seattle tomorrow to talk about strengthening the economy (and more fundraising.)

Blackstone buying Dynegy: Deja Vu to next Energy Crisis

I hate when mistakes are so obviously repeated, yet no one seems to care. Yesterday, Blackstone announced it would take-over (i.e. take private) Houston-based energy company, Dynegy, in a $4.7 billion deal in which Blackstone would acquire $4 billion of Dynegy's debt, and Dynegy would sell 4 power plants to NRG, Energy Inc. Because of the sheer inability to look more than no steps in front of it, Congress left open a really important loophole (within a financial reform package comprised of loopholes) for certain private equity firms. They get to keep buying energy companies - they get to take them private, away from the eyes of regulators, and by doing so - they get to screw around with your lights.

About a decade ago, a little company called Enron (aka one of the fastest growing companies in the country in 1999) messed about with everything from unregulated energy derivatives to broadband to power grids. That didn't end well. And it wasn't just Enron - many energy companies participated in the great energy manipulation play at the turn of this century. I list them all and describe the repercussions in the 'Energy, Enron and Entropy' chapter in my first book, Other People's Money. The companies included Williams, El Paso, Reliant and Dynegy. Dynegy was also the hot potato between Enron and Citigroup - after a merger with Enron failed, Enron declared bankruptcy. The whole situation forced Citigroup's favorite former Treasury Secretary, Robert Rubin, to lob a call into the rating agencies to play down Enron's debt problems (no conflict of interest was ever determined, so what if Enron owed money to Citigroup).

At any rate, the Enron situation was caused by a severe lack of energy industry oversight (at the physical power grid and financial derivatives level), despite energy being something upon which each of us relies every day. And now, the non-introspective attitude of New York Times and other, journalists shows the Blackstone-Dynegy deal as just another smart financial play:

"Buyout firms have been seeking to put their billions of dollars in untapped investor capital to use. With banks openly seeking out deals to back once again, private equity firms have sought to step up their core business of acquiring and selling companies.

This type of depiction ignores the growing danger of this trend for the rest of us. Those smart firms - they used to dabble in energy, then moved over to housing, and now they're back to energy. Yet, each decision results in disaster for the rest of us. Plus, running energy companies in the dark, so to speak, is exactly what set us up for the Enron/Worldcom type fraud, disruption, bankruptcy and layoff cycle of 2001-2002. We are being set up again. Dynegy shareholders are getting some cash and some private equity firm will have control over its customers' energy demands and the related billing. Maybe Congress will pretend to do something about this in a few years, once it's over and the blackouts and related job cuts are behind us.