This CF&P Foundation’s Economics 101 video discusses Moral Hazard, which occurs when bad choices are subsidized. This often happens when government intervention lets people take risks while having little or no skin in the game. Housing policies, for instance, subsidized mortgages, thus enabling irresponsible borrowing, leading to bubbles and bailouts. Politicians may be setting the stage for the next crisis with a too big to fail policy that will subsidize the biggest financial institutions.This CF&P Foundation’s Economics 101 video discusses Moral Hazard, which... more
It's the first day back at work in the New Year and the question on my mind is "Are things finally going to get better?" Well, unfortunately, a year's end is a pretty artificial time marker. And it seems the economy knows that.
According to speakers at the annual American Economic Association conference prospects for a big recovery anytime soon are bleak. "'It will be difficult to have a robust recovery while housing and commercial real estate are depressed,' said Martin Feldstein, a Harvard University professor and former head of the National Bureau of Economic Research." Additionally, national unemployment is still at 10% (as of the end of November, albeit with a slight dip from the previous month).
But come on, it's the first Monday of the New Year. Let's not get all pessimistic yet! Wall Street (though I don't think it's a good economic indicator) jumped 1.5% today.
What other signs are you seeing out there? Optimistic or pessimistic? Give us your 2010 predictions and the small signals you're seeing where you live.
The government's Christmas Eve pledge of unlimited financial aid to mortgage giants Fannie Mae and Freddie Mac is aimed at making sure the housing market doesn't take another turn for the worse and cause the economic recovery to unravel.
This insurance policy taken out by the Treasury Department will help keep mortgage rates low, and may wind up being a gift of sorts to struggling homeowners and banks. But there's a catch: the housing crisis is now likely to cost taxpayers much more.
The Obama administration's latest lifeline to Fannie and Freddie will cover unlimited losses through 2012, lifting an earlier cap of $400 billion. It also eases restrictions on the size of the companies' investment portfolios. That's a reversal of the Bush administration's September 2008 plan to shrink the size of the companies' holdings of mortgage-backed securities.
The action, which didn't need the approval of Congress, could position Fannie and Freddie to get more aggressive in dealing with the housing crisis, perhaps taking troubled mortgage investments off banks' books.
Yesterday we found out that there was going to be some leftover money from TARP and that Obama wanted to put it to job growth. He gave a speech today outlining some plans. Among the highlights? Assisting small businesses, putting more money to infrastructure and encouraging investments in clean energy. He also called on businesses to do their part for job creation as well, saying there was only so much government could do.He'll meet with lawmakers tomorrow to get some of these plans rolling.
The Treasury is estimating that the original cost of the TARP program for banks (estimated over ten years) can be revised down by about $200 billion. Does that mean the President will want to use that money for jobs?
From WSJ:
"The White House has been under pressure to tame the $1.4 trillion budget deficit, which has ballooned as the U.S. borrows vast sums of money. But with unemployment at 10%, the administration is also under pressure to find ways to create new jobs. Lowering deficit projections could help alleviate concerns that a new jobs bill would further inflate the deficit."
November saw the unemployment rate fall slightly (an estimated .2 percent) and though that was a welcome surprise for economists, it still means a lot of folks need jobs. That said though, it's not like the TARP money was already spent - it was just an estimated cost. It's likely any jobs program will face a lot of criticism from those worried about a bulging federal deficit.
The President is expected to make an announcement tomorrow.
A sobering statistic from this New York Times article about the stigma fading from food stamps: 1 in 4 children in the US get food thanks to food stamps. Additionally, 1 in 8 adults use food stamps. It's perhaps unsurprising, seeing as we saw that nearly 15 percent of Americans couldn't afford enough food in 2008 (and that included those who use food stamps).
The New York Times also has a great interactive feature that breaks down food stamp usage by county across the US. Leading the race for highest number of people on food stamps are Hidalgo County, Texas and The Bronx, NY.
What's your county look like? Have you been on food stamps during the recession? Tell us on The Real Recovery.
The end of this week will see the venerable American holiday tradition of Black Friday, when on the day after Thanksgiving, Americans rush to consume as many retail deals as possible. And if you're serious about Black Friday, then you're probably already looking for the deals. Online there's blackfriday.info, bfads.net (that's Black Friday Ads), black-friday.net, theblackfriday.com. But honestly, with nearly a fifth of Americans out of work (according to the broadest unemployment calculation), hasn't this just been a whole year of Black Friday deal-hunting?
I spoke with Loren Bendele of Savings.com (http://savings.com) a site that focuses on bringing their community together with savings and discounts. He said their site, which started in March of 2007, has definitely seen a big increase in users because of the recession. And as more people move online to find deals in tough times, more companies are looking to find them. "We're seeing aspirational brands that are offering deals now," Bendele said. "Consumers are more aware and merchants are embracing deals."
Savings.com has selected some users to be what they call "Deal Pros" - people who know how to find the best deals and share them with the rest of the community. Some of them, said Bendele, are people that are fine with money. But as the recession has gotten worse, many of them are people who are maintaining their quality of life through saving money.
Is that you? Have you been scraping by by clipping coupons? Tell us about on The Real Recovery.
So should you rush out and try to trampled this Friday? Though there are plenty of deals to be had one of the DealPros offers some sage advice on the savings.com blog:
"For me it has become a day to stay at home or look for alternative ways to enjoy the day. Now, don't get me wrong, I love a good deal. But Black Friday has become that day that turns every mall in America into some lost scene from the movie Dawn of the Dead. It's just too much chaos to deal with in-person. So join me in giving in to the post-turkey daze and just saying no to the zombie hordes running wild through the aisles of your local Wal-Mart."FROM THE NEWS BLOG:... more
John Henion is a freelance video producer in the San Francisco Bay Area. He was laid off from a staff position in 2008 (full disclosure: at Current) and entered into the freelance world. He blogs about unemployment at Unemploymentality. We spoke yesterday for The Real Recovery.
Life for a freelancer can be tough - especially at the beginning. John Henion moved out to California from Michigan where he'd already established himself with freelance work. In California he had none. He said the move made him "take a step back and do things I didn't want to do." For example, John was about 30 when he moved here, had already produced his own independent documentary, but found himself taking a production assistant role on "Wife Swap" just to be working. "I was beyond the point where I wanted to pick up trash on the set and being told to go get lunches," he said. "After that experience I realized I didn't need to lower the bar that much."
The goal as a freelancer is to have steady work. There are some great benefits - like being your own boss and scheduling your own time off - but there are somethings that are definitely not benefits - like not having benefits. John was lucky to have insurance through a domestic partnership with his girlfriend, but he said for many freelancers the decision about whether or not to get insurance is just whether or not you want to take your chances.
After being laid off, John said it took him about 6-8 months before he was getting steady work again. These days, he has about 5-6 return customers and pulls in a lot of one-off projects. He's been able to work himself back up to an income level comparable to having a full-time staff position. But that comes with a lot more work than just the actual time spent working. "The worst part is...I have to deal with chasing down money. Some people wait until the last minute to pay you or wait until you raise a stink. You know, they want to keep that money on their books as long as they can."
The most important thing John has found to remember freelancing is that no matter how much time he spends at an office, no matter how many new friends he makes in a workplace, being a freelancers puts him in a different position. "As a freelancer they can just stop calling. First time that happened I thought I did something wrong....When they stop calling it's not personal....They're not supposed to roll over and kiss you in the morning, just leave some money on the bedstand."
Are you a freelancer? Have a recession story to tell? Post it to The Real Recovery.
Here's a math problem for you: The national unemployment rate hits its highest point since the 80s in October: 10.2 percent. According to a report released this week last year 14.6% of Americans couldn't afford to buy enough food. How does that add up?
Well outside of the various nitpicks that can be done to both of those numbers, one big culprit is "underemployment". We've been talking about underemployment a lot in The Real Recovery because I think it's a more accurate measure of how many Americans have been affected by the recession. If you "get discouraged" and stop looking for a job, you no longer count as "unemployed". Or, as we're talking about this week: if you go freelance part time.
The official measure of underemployment is called the U-6 and the Bureau of Labor Statistics describes it in breathtaking terms:
Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers
In October, when we saw that big 10.2% unemployment number, the U6 number was at 17.5% Nearly a fifth of the population!
You know what that does not include though? All the Americans who've taken pay cuts or reduced hours in the recession. (More digging through numbers to come).
Want to get involved with The Real Recovery? Here's two easy things you can do:
- Post your story to the group. How have you been affected? Are you underemployed? Have you taken a pay cut?
- Help me find some other numbers to look at. How many Americans have taken pay cuts?
Hey freelance workers, this week The Real Recovery is all about you. We want to hear from people who freelance successfully, people who have gone freelance after losing their job, and people who are barely scraping by with freelance work.
Did you know: If you're freelancing, even making far less money than you can survive on, you don't count as 'unemployed'? You fall under a different category called 'underemployment' - here's the applicable part of the definition from Wikipedia:
"Involuntary part-time" workers -- workers who could (and would like to) be working for a full work-week but can only find part-time work. By extension, the term is also used in regional planning to describe regions where economic activity rates are unusually low, due to a lack of job opportunities, training opportunities, or due to a lack of services such as childcare and public transportation.
The national unemployment rate is 10.2% as of October. That's according to the Bureau of Labor Statistics. The BLS doesn't seem to keep a national underemployment number, which is a lot harder to nail down. But we recently saw that in California underemployment was estimated to be about a fifth of the total population.
This is another topic we want to tackle. As we're trying to put together a picture of the Real Recovery, we want to try to get a handle on underemployment estimates. We'll be working on that for the next month or so. If you want to get involved in that effort, send me a message on Current.
And this week - if you freelance or ever have - tell us about your experience by posting your story on The Real Recovery.
This week on The Real Recovery we're looking at how the recession is affecting college grads. It's tough to graduate into such a tight job market. Especially if you've got loans. For many, going to college automatically comes with a big chunk of money that must be paid off. As finding a job gets harder - that amount of money can hang like an albatross from your neck.
The image featured here, posted on The Broke Grad Student, shows average student loan debt by state - and no matter where you live, that average is somewhere between $13K and $26K. That's a lot of money!
But despite the high costs the question for many American high schoolers is not whether to go but where to go. Are too many Americans going to college?
From the Chronicle of Higher Education:
"Marty Nemko: Increasing college-going rates may actually hurt our economy. We now send 70 percent of high-school graduates to college, up from 40 percent in 1970. At the same time, employers are accelerating their offshoring, part-timing, and temping of as many white-collar jobs as possible. That results in ever more unemployed and underemployed B.A.'s. Meanwhile, there's a shortage of tradespeople to take the Obama infrastructure-rebuilding jobs. And you and I have a hard time getting a reliable plumber even if we're willing to pay $80 an hour—more than many professors make."
It's estimated that on average college grads tend to make about 80% more per year in salary than those without a degree. That's a pretty significant and motivating number, especially when you take into consideration the higher unemployment numbers for those without a college degree that we looked at yesterday. But if you've got loans - some of that has to go to paying them off. And for grad students it's even worse.
Faced with a difficult job market and high student debts, many folks with a B.A. duck back into graduate school to forestall repayments they can't afford. But as you can imagine - that just leads to more debt. Forbes has a controversially titled article that tackles the high debts a law degree can come with: The Great College Hoax.
"Accepted into the California Western School of Law, a private San Diego institution, [John] Kellum couldn't swing the $36,000 in annual tuition with financial aid and part-time work. So he did what friends and professors said was the smart move and took out $60,000 in student loans. Kellum's law school sweetheart, Jennifer Coultas, did much the same. By the time they graduated in 1995, the couple was $194,000 in debt. They eventually married and each landed a six-figure job. Yet even with Kellum moonlighting, they had to scrounge to come up with $145,000 in loan payments. With interest accruing at up to 12% a year, that whittled away only $21,000 in principal. Their remaining bill: $173,000 and counting."
Should you go to grad school? Most experts agree it only makes sense if you have a specific goal in mind. Penelope Trunk's Brazen Careerist lists several points against enlisting in grad school to hide out from a recession:
"1. Grad school pointlessly delays adulthood....3. Business school is not going to help 90% of the people who go....5. The medical school model assumes that health care spending is not a mess."
So what's your experience? Did you go to college? Grad school? Did you have an albatross of loan debt? Tell us your story on The Real Recovery.
There is no independent auditor overseeing the federal agency responsible for some $6 trillion in home mortgages, because the Department of Justice's Office of Legal Counsel ruled that the agency's inspector general didn't have authority to operate, according to internal memos obtained by the Huffington Post.
The ruling came in response to a request from the Federal Housing Finance Agency itself -- which means that a federal agency essentially succeeded in getting rid of its own inspector general.
The FHFA is home to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, which are jointly responsible for purchasing or guaranteeing more than 80 percent of new mortgages issued since the middle of 2008, according to FHFA numbers.
Who is faring the worst in this recession? Everyone is doing poorly - but some groups have been more affected than others. The NY Times Economix blog broke down the numbers by huge swaths of demographics last week.
The graph that caught my eye was the very first one - apropos of our Real Recovery topic this week - how are recent college grads affected?
(That said, when you break it down by education, college grads have done comparatively well - those with less education have been more adversely affected.)
The worst affected group is young, African-American men who are less educated. This neat interactive graphic compares all the different demographic slices. Where do you fall on the graph? Has that been your experience?
This week, the Real Recovery is focusing on college graduates - recent, upcoming and all-time. I wanted to highlight a few stories shared in the comment thread on the initial college stories post. If you have one - go to the Real Recovery group, click Post a Story, and start typing!
From user trangster:
I graduated this past May and applied for part time and full time jobs. After months of being rejected by employers for not having work experience because I was earning a college education at the time, I started working as a part time host at a restaurant. I recently picked up another part time job so now I'm working two part time jobs to meet bills. Hopefully I get accepted into grad school next year.
From user sugarlilly:
i am a recent college grad working in a job i love but that requires absolutely no education. sorry sallie mae, that 50 grand will have to wait.
From user Karolein:
The first term I learned on-the-job after college was "reduction in force". It was a rude awakening. I finished graduate school in a recession and it took 18 months to find a full-time, regular job. After 15 years in a nice office, I'm looking again, but instead of living at home I have a mortgage to pay. Life is cyclical.
It's been tumultuous for the economy in the half-week since we launched The Real Recovery: unemployment benefits were extended and then October's unemployment numbers hit over 10 percent. It seems like just the right time to get to the real stories behind the economic stats.
Each week on The Real Recovery we're going to ask a big question - and then spend the week figuring out the answer with your help. For next week - we're looking at those entering the job market for the very first time.
If a tenth of America is unemployed - how hard is it going to be for recent college graduates to get jobs? For college seniors who expect to graduate in 2010? From the National Bureau of Economic Research: "The Career Effects Of Graduating In A Recession":
Graduating in a recession leads to large initial earnings losses. These losses, which amount to about 9 percent of annual earnings in the initial stage, eventually recede, but slowly -- halving within five years but not disappearing until about ten years after graduation.
Starting Monday - we're going to focus on college graduates. Here's how you can get involved:
Are you a college senior?: Post a story on The Real Recovery about your job search. Do you have something lined up? Are you just trying not to think about it?
Did you graduate this year?: How's it been out there in the job market? Have you been able to find work?
Did you graduate years ago?: How was your experience in the economic climate you had? How does it compare to today's?
You can post your story to Current by clicking the "Post a Story" button on The Real Recovery group page and then just start typing!
And also, if you want to get involved as an investigator - send me a message on Current.
The Senate passed a bill yesterday to extend unemployment benefits for the jobless to 14 weeks, and up to 20 weeks for those who live in states with over 8.5 percent unemployment.
From the Washington Post:
"More than 1 million people would have had their benefits ended without the extension, according to the National Employment Law Project, a nonpartisan group that tracks the issue. More than 15 million Americans are now unemployed, more than a third of whom have been out of work for more than six months."
The House has passed the bill today - and it's expected to be signed into law by President Obama very quickly.
Also yesterday we launched The Real Recovery (here's the intro blog post) - our group investigation into how the recession's effects are still lingering despite its end. Are you unemployed - directly affected by this news? Let us know. Go join The Real Recovery group and post your personal story.
We’re launching a big project today on Current News. And we’re going to need your help.
Here’s the idea:
Everybody says we’re headed for an economic recovery, right? The economy grew in the third quarter of this year, the Dow is hovering around 10,000, even Ford managed to make a profit. But the other thing that everybody says is that it’ll be a “jobless” recovery. The economy might grow, but unemployment will stay the same. To say nothing of underemployment – people who have taken lesser positions, started freelancing or stopped looking for new work. While the financial folks celebrate the return of the bull market – what about the rest of us?
We want to paint a picture of what’s really going on out there. As the recession comes to an end – what does the recovery really look like? What is the real recovery?
Over the next few months – until the end of the first quarter of next year – we’re going to conduct a special new experimental project to look at the state of our nation. This is where you come in.
My office is in San Francisco. I can give local perspectives from here. But in order to tell this story from every corner of the country – we need your help. What do things look like where you live? Do you have a personal story about how you’ve been affected by the recession?
How you can get involved:
- The big thing is that you can write your own posts in the group “The Real Recovery”. What are we looking for? Local perspectives and personal perspectives. Just a few paragraphs: How are you or your community affected? Every week we’ll have different questions we’re asking – and we want you to post your answers.
- Now, do you want to get really involved? You can become a part of our Current Investigation Network. That means we’ll put you on an email list where sometimes we’ll reach out digging for info or to ask you to help out with collaborative assignments. If you want to be a part of the project by doing a little real journalism – this is the way to do it.
- And as always, you can clip stories and you can weigh in on the comments of posts. We’ll be highlighting stories people post over on the Blog – and that could be yours.
This is a big new step for Current News, and I’m personally very excited about it. I worked on Collective Journalism for two years, our citizen journalism program, and I think this is an even bigger opportunity to get even more people involved in the journalism we make.
So, what’s the next step?
- Join the group: “The Real Recovery”
- Tell us your story – just a few paragraphs. Either post in the comments here – or post your own story to the group. This Friday we’ll feature some of your contributions.
- If you want to be a part of the investigation team – send me a direct message.
"WASHINGTON -- Goldman Sachs Group Inc. is in talks to buy millions of dollars of tax credits from government-controlled mortgage giant Fannie Mae, but the potential deal is running into opposition from the U.S. Treasury, which could block the deal.
A sale would bring some needed financial respite to Fannie Mae. But the administration is leery about approving a deal that would help Goldman reduce its tax bill, given the animus held by many lawmakers toward big Wall Street firms in general and Goldman in particular.
The Obama administration is looking at the deal with a critical eye and could ..."
You have to be a subscriber to see the rest of the article, but let me try to finish it:
The Obama administration is looking at the deal with a critical eye and could ...continue to do business as usual and sell out the American public in favor of global, corporate elite, who own this country."WASHINGTON -- Goldman Sachs Group Inc. is in talks to buy millions of dollars of... more
The Beckers fell months behind on their mortgage and finally found it was Goldman after their houseThe Beckers fell months behind on their mortgage and finally found it was Goldman... more
will introduce legislation to steer funds repaid by U.S. banks to enemployed, mortgage aid.will introduce legislation to steer funds repaid by U.S. banks to enemployed, mortgage... more
