“At the Bank of America, the largest U.S. lender by assets, 7.8 percent of credit-card accounts were delinquent in February by more than 30 days …”.
And it’s even worse when you remember that February only has 28 days.
Category: Economics & Business
Best Dean Baker Line of the Day
Dean Baker never tires of telling us that the news media doesn’t have a clue:
In the Morning Edition top of the hour news summary (not on web), NPR told listeners that car sales are down because of low consumer confidence. Wrong!
Car sales are down because consumers have seen $6 trillion in housing bubble wealth and have also seen around $8 trillion in stock wealth disappear. The reduced spending is the result of reduced wealth.
Most interesting line of the day
“So if you are part of the 30 percent of American households who rent and you’re trying to decide when to buy, relax.
“The market is still coming your way.”
David Leonhardt in The New York Times, observing that housing prices still have a way to fall.
Stuff
The Roku Digital Video Player
Why is this recession so different from the one in 1982? Unemployment was worse then than it is now (so far). The very important difference — interest rates. They were historically high in 1982 (3-month T-bills 12.49%). They are historically low today (3-month T-bills 0.28%). Then the Fed could lower interest rates to prime the economy (and did). Today the Fed has nowhere to go.
Bank number 17 for 2009 was gobbled up by FDIC this evening. That’s about 2 a week so far. It was 25 in all of last year. There were none that failed in 2005 and 2006 and only three in 2007.
Just one dollar
Step right up, put down a dollar and buy yourself a share of CitiGroup, just one dollar, 100 cents. Step right up.
(On May 30, 2007, the stock closed at $55.20.)
Best line of the day, so far
“The road to economic hell is paved with good intentions and bad banks.”
Simon Johnson writing about the banks and recovery in “Confusion, Tunneling, And Looting.”
NewMexiKen is beginning to think that Treasury secretary Geithner is dull-witted enough to have just screwed up by mistake on his income taxes.
The Geography of a Recession
Interactive map displaying county-by-county unemployment. More interesting than it sounds.
News Item Tells Part of the Story
Ford sales off 48% say the news stories today. But that’s not the whole story.
Last month Ford sold 99,400 vehicles.
In February 2008 Ford sold 192,799 vehicles.
In February 2007 Ford sold 211,150 vehicles.
In February 2006 Ford sold 244,021 vehicles.
So a more accurate headline might be, “Ford sales down 60% in three years.” While the biggest drop has been over the past year (made worse by the fact that there was one more day last February), the decline is part of a continuing trend, and that seems to me to be a significant factor. See if you can find mention of it in any of today’s news stories.
Hard to call it best, but it’s a line of the day alright
“I’ve been joking for some time that the Dow will probably hit rock bottom at about 3600 on or around September 20 of this year. The reason? That’ll be the 10th anniversary of the publication of “Dow 36,000.” Hey, the market has to rock bottom somewhere. No one has any better idea.”
Congratulations
Citi closed at $1.20 a share today but you just bought god-knows-how-many shares at $3.25 each.
February Economic Summary in Graphs
Desperately Protecting A.I.G.’s House of Cards
Just about everybody is pointing to this report from Joe Nocera if you want to understand the A.I.G. disaster.
And it’s your disaster now.
Gulp
Dow at Lowest Point Since 1997
There is, however, one very, very positive fact about the huge drops in the housing and stock markets. The losses are a tremendous transfer of wealth from the older generation(s) to the younger. Everything is a bargain again (or will be when the bottom gets here), and those with enough time should see significant appreciation.
Alas, I’ll be dead by then.
The Crisis of Credit Visualized
A pretty useful and interesting video (about 11 minutes) — The Crisis of Credit Visualized.
Hey we didn’t have to wait until next week
Citigroup is at $2 at this moment.
It was $2.51 at closing yesterday.
Update 9:15 AM MST: $1.97. Bank of America at $3.26.
GM down to $1.71. Once America’s largest company, all of its stock is now worth just over ONE billion dollars.
Or about 40% less than Panera Bread.
11:25 AM MST: Citi $1.74 Bank of America $2.80 GM $1.53
GM market cap now less than a billion.
2:10 PM MST: Citi closed at $1.95, Bank of America at $3.79 and GM at $1.77
Line of the day
“The Dow industrials declined 1.2% to a new bear-market closing low as bank stocks continued to grind downward. Bank of America and Citigroup dropped 14% each.”
The DJIA consists of just 30 stocks. For the price of a six-pack of decent beer (including tax), you could get a share each of GM ($2), Citigroup ($2.51) and Bank of America ($3.93). (The beer would have more value.)
3M Co
Alcoa Inc
American Express Company
AT&T Inc.
Bank of America Corporation
Boeing Co.
Caterpillar Inc.
Chevron Corp
Citigroup, Inc.
E.I. du Pont de Nemours and Company
Exxon Mobil Corp
General Electric Company
General Motors Corporation
Hewlett-Packard Co.
Intel Corporation
International Business Machines
Johnson & Johnson
JP Morgan & Chase & Co
Kraft Foods Inc.
McDonald’s Corporation
Merck & Co., Inc.
Microsoft Corporation
Pfizer Inc
The Coca-Cola Company
The Home Depot, Inc.
The Procter & Gamble Company
United Technologies Corporation
Verizon Communications
Wal-Mart Stores, Inc.
Walt Disney Company
Who said it?
“It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring. I understand that once in a hundred years this is what you do.”
So sayeth Mr. laissez faire himself, Alan Greenspan as reported by Financial Times
As Atrios Says
Another exciting day at the dog track.
The Dow closed at 7552.60 (down 3.8%), just higher than its bear market low close of 7552.29 on November 20.
The S&P 500 closed at 789.17 (down 4.6%), but still almost 5% above its November low of 752.44.
Here’s the Four Bad Bears chart brought up to date.
Inside the Meltdown
FRONTLINE investigates the causes of the worst economic crisis in 70 years and how the government responded. The film chronicles the inside stories of the Bear Stearns deal, Lehman Brothers’ collapse, the propping up of insurance giant AIG, and the $700 billion bailout. Inside the Meltdown examines what Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke didn’t see, couldn’t stop and haven’t been able to fix.
On PBS or online beginning tonight.
Financial Crisis for Beginners
We believe that everyone should be able to understand how the financial crisis came about, what it means for all of us, and what our options are for getting out of it. Unfortunately, the vast majority of all writing about the crisis – including this blog – assumes some familiarity with the world of mortgage-backed securities, collateralized debt obligations, credit default swaps, and so on. You’ve probably heard dozens of journalists use these terms without explaining what they means. If you’re confused, this page is for you.
Bank failures
Four banks were closed today, bringing 2009’s total of failed banks to 13.
The Tax Cuts
The major individual tax credits:
“Making Work Pay” Tax Credit.
For 2009 and 2010, the bill would provide a refundable tax credit of up to $400 for working individuals and $800 for working families. This tax credit would be calculated at a rate of 6.2% of earned income, and would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples filing jointly). Taxpayers can receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks, or through claiming the credit on their tax returns. ($116,199,000,000)Economic Recovery Payment to Recipients of Social Security, SSI, Railroad Retirement and Veterans Disability Compensation Benefits.
The bill would provide a one-time payment of $250 to retirees, disabled individuals and SSI recipients receiving benefits from the Social Security Administration, Railroad Retirement beneficiaries, and disabled veterans receiving benefits from the Department of Veterans Affairs. The one-time payment is a reduction to the Making Work Pay credit. ($14,225,000,000)Refundable Credit for Certain Federal and State Pensioners.
The bill would provide a one-time refundable tax credit of $250 in 2009 to certain government retirees who are not eligible for Social Security benefits. This one-time credit is a reduction to the Making Work Pay credit. ($218,000,000)
The Stimulus Plan: The Tax Cuts – ProPublica
There’s more.
Best line of the day, so far
“Some sort of nationalization is inevitable. Why the Obama team thinks it’s a good idea to light a pile of money on fire first is beyond me.”
Future Self vs. Present Self
Interesting way of looking at it.
People “irrationally” value “newness” in cars. That is, above and beyond the quality of the car itself, people will pay for newness, and the price drops substantially when it is no longer new (in a way that seems to go beyond observable capital depreciation). So the time-consistent, quality-optimizing consumer should not fall prey to the lure of the car being new and overpaying for it, but instead would think ahead about the depreciation and the eventual resale value of the car and instead buy a one-year-old car. The time-inconsistent buyer puts too much emphasis on the immediate experience of the new car and not enough on the asset depreciation.
Jeffrey Kling of the Brookings Institution via Economix Blog.
Disconnect
CNBC had Nouriel Roubini and Nassim Taleb on yesterday. Watch the discussion (10 minutes) as the CNBC crew displays a complete disconnect with what Roubini and Taleb are saying.
As Josh Marshall put it: “These two guys are talking about a deep structural crisis in the world economy. And these CNBC yahoos can’t stop asking for stock tips. Really surreal.”
Pathetic, too.
Update: See also this video.