Congrats to Live my Life/TARP video - another win!

In the wake of this week's Fed dumping of more details behind its bailout and subsidization of the global banking community program, we got reminded that TARP was a tiny fraction of the aid inhaled by the banks that screwed us all to begin with. Indeed, as we knew and now see in more detail, the Fed was, and remains, the biggest bailout and least accountable (when it matters) engineer. The data dump re-underscores the unprecedented largesse granted to the US banking system in its hours of need, as opposed to the US general population. Another reason why we'd be better off without Bernanke.

But, there's some good news. My friends, Michael Cornell, Tracey Paleo and the rest of the talented, enthusiastic and dedicated team behind the Live My Live Video - just won ANOTHER award! - this time FIRST place in the music video category of the California Film Awards. Check out the video, if you haven't already.

Second Anniversary: Fannie & Freddie Government Protection Program

It's hard to believe, given the incompatible realities of the anemic economy and the stalwart insistence of the Federal Reserve, Treasury Department and Andrew Ross Sorkin that things would have been so much worse without the bailout, that it was exactly two years ago that the government first moved to subsidize the ailing government sponsored entities (GSE's), Fannie Mae and Freddie Mac, whose stock prices now hover at around 30 cents. 

Yet, today marks the second anniversary of that first step in what became a multi-trillion dollar bailout and subsidization of the entire financial sector. On Sunday, September 7, 2008, the government announced it would buy $200 in preferred stock in Fannie and Freddie (their stock prices subsequently plunged as trading opened on September 8, 2008), followed by another $200 billion round of purchasing in February, 2009. As a quiet Christmas Present last year, Treasury Secretary, Tim Geithner, raised the cap on how much stock the government could purchase to keep the entities afloat - from $200 billion a pop, to - ready for it? - an unlimited amount.

In the past two years, the Treasury Department has explicitly purchased $220 billion of mortgage-backed securities (MBS). It has increased guarantees for the Government National Mortgage Association (GNMA) to $398.4 billion and for the Federal Housing Authority to $365.9 billion. The Fed has bought another $1.4 trillion of GSE mortgage backed securities. And, according to the July Sigtarp report, the government is providing an implicit guarantee of $5.5 trillion for Fannie/Freddie and $1.3 trillion for the Federal Home Loan Bank (FHLB).

Considering that the balance of sub-prime loans at these agencies was only about half a trillion dollars worth, it would seem that this method of excessive, strategy-devoid subsidizing remains - well - haphazard, expensive, and reckless. Far more efficient and economical would be extracting the non-performing loans from their securitized container and forcing their restructuring to benefit the borrower and thus, the related security in which that loan lives, rather than throwing a whole pile of money at the general entity without pinpointing and separating of the worst loans, and thus, providing a more cost-effective remedy to the problem.

Since almost everyone's mortgage lives somewhere within the GSE framework, it's in all of our best-interests to find a solution. This kind of bottom up approach to bailing out and subsidizing has always made more financial sense - to me, anyway. 

Maybe the Fed should rethink the term 'Economy'

Today, in a South Carolina speech, Fed Chairman Ben Bernanke repeated a bunch of stuff he's said in the past, stuff that confirms the status prevailing in his head - that he (along with notable DC cohorts) are invincible gods that stopped another Great Depression in its tracks simply by spilling out tons of money into the banking system, even if the results aren't that stellar for most of the rest of the country...

(note, I'm about to paraphrase him):

- The economic recovery isn't going as fast as we thought/said it was.

- We need to keep rates low so we don't choke the recovery that isn't going as fast we thought/said it was (though in practice that means banks will keep hoarding capital to trade and corporations will bulk up on debt.)

- The 'recovery' is still jobless (though he can't seem to understand why.)

- Households will probably start buying more at some point because incomes will magically rise which will help the economic recovery that isn't going as fast as we thought/said it was.

He probably said more, but I lost interest in the premise of his delusion - that the true majority of people in this country are feeling like they're actually in the midst of an economic recovery - slow or otherwise.

Since the trillions of dollars of bailouts poured into Wall Street, what's basically happened is:

- The largest banks are doing better (cause of the trillions of dollars).

- The largest corporations are reloading up on debt (cause of the trillions of dollars that went to their banks and the fact that rates are so low.) This July marked a month of record debt issuance for big firms.

And yet, none of this is translating into:

- Small businesses or individuals getting equivalently good terms on restructuring debt, or gaining loans for expansion or to keep current payroll numbers and not have to cut jobs. Instead, bankruptcies continue to rise.

- New jobs (people applying for initial unemployment claims continue to stream into that status at a rate of just under half a million a week, and that figure doesn't count freelancers or contractors who can't get unemployment so can't file claims to begin with). The unemployment rate is likely to push up to 10% again at this rate (even with DC figure tinkering), and that's not even including everyone who's underemployed.

- Higher general salaries (higher productivity yes - but, people working more hours for less money, is not the stuff of a true recovery.)

- Less foreclosures - the first half of this year marked a greater amount of home foreclosures than the first half of 2009 or 2008. 

Maybe it's time Bernanke reconsidered what the term 'economy' means to the general population.

What do you guys think - how should 'the economy' really be measured?