Surging U.S. Unemployment Rate Puts Pressure on Obama

By Bob Willis | Bloomberg.com

The jump in the U.S. unemployment rate to the highest level in a quarter century last month suggests the recession is deeper than the Obama administration forecasts and additional measures may be needed to restart growth.

The jobless rate rose to 8.1 percent in February as employers reduced payrolls by 651,000, the Labor Department said yesterday in Washington. Losses have now exceeded 600,000 for three straight months, the first time that’s happened since collection of the data began in 1939.

Unemployment has already reached the average rate the White House projected for the whole year. The administration needs to keep its focus on repairing the banking system and implementing the stimulus rather than get diverted by other goals such as healthcare changes, said John Ryding, chief economist at RDQ Economics LLC in New York.

“They should be focused on stabilization” of financial firms “and stimulus — and that should not only be ‘Job one,’ that should be the only job right now,” Ryding said in an interview with Bloomberg Television. “The question is, is it recession or is it something worse than recession?”

U.S. stocks posted the biggest weekly decline in three months after American International Group Inc. reported a $61.7 billion loss and billionaire investor Warren Buffett said the economy is in “shambles.” …

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Opinion from News Donkey: Obama recently held a White House summit to facilitate progress on the important issue of health care. An underlying pillar of health care is the economy, which is in a state of major distress that is only going to get worse unless Geithner and the US Treasury Department take swift action. However, Geithner is virtually working alone right now. For a nation with the extensive resources of the United States, we really ought to be able to do better than this. Obama may want to hold a summit to facilitate vetting and confirmation for all the Treasury Department positions. It is alarming that of 15 key positions only one has been filled, despite the fact that it has been over four months since the presidential election. One might have thought priority attention would have been given by Obama’s transition team to staffing for the Treasury. Past administrations may not have filled positions for the Treasury any faster, but then they did not face such huge economic challenges either. Health care is an important issue, but the economy is truly an emergency and needs to be more than just a high priority issue along side other issues. Fielding an incomplete team to tackle our huge economic problems is not putting forth our best foot. Washington needs to spend less time worrying about distractions like Rush Limbaugh and instead work non-stop on solving our economic problems.

Related News:
49% Say Obama Should Delay Health Care Reform Until Economy Is Better
Timothy Geithner, Alone and Working Night and Day

FDIC Warns US Bank Deposit Insurance Fund Could Tank

AFP

WASHINGTON (AFP) – The US government is warning banks that its deposit insurance fund could go broke this year as bank failures mount.

The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC’s plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.

Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protect.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote.

The FDIC chief said in the letter that the rapidly deteriorating economic conditions raised the prospects of “a large number” of bank failures through 2010.

“Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative,” she wrote …

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CNBC Mad Money’s Jim Cramer Speaks Out Again On Banking Fiasco

CNBC Mad Money

Washington still can’t seem to get this banking thing right. That was the focus on Cramer’s Outrage Monday.

Treasury Secretary Geithner’s decision to forsake Citigroup’s preferred shareholders could have disastrous consequences for Bank of America, the Mad Money host said, and maybe even US Bancorp and Wells Fargo, too.

Cramer reiterated his forbearance plan to save the banks, in which the government would give money to ailing financial institutions in exchange for a promissory note of sorts to pay that money back. Instead of Washington trying to run a company like Citi, which Cramer said Geithner and friends just couldn’t, this plan allows banks to solve their own problems in the private sector. It got us out of the savings-and-loan crisis, and Cramer thinks it could work again.

Hey, we could instead go the Bolshevik route, fully confiscating banks. That seemed to work out well, right? Watch the video for Cramer’s explanation of that revolutionary move.

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Related News: CNBC’s Rick Santelli Gives the “Rant of the Year”

SPIN METER: Oh Really? That Wasn’t Bailout Cash?

By MATT APUZZO | Associated Press

WASHINGTON – Ask a bailed-out bank about its Las Vegas retreat, its corporate jet or its evening in Beverly Hills and you’ll probably get a response like this: Oh that? That wasn’t taxpayer money.

But ask the same bank to account for its billions in bailout money and things get murkier. Money is fungible, they say, so once the bailout check cleared, it got mixed up with the bank’s own money. Now it’s impossible to separate the two piles and explain where the money went.

To some in Congress, that sounds like the banks are trying to have it both ways.

“Don’t insult our intelligence,” Rep. Brad Sherman, D-Calif., told banking executives at a hearing last month.

When news broke that Wells Fargo, recipient of $25 billion in bailout money, was planning a lavish Las Vegas retreat for its top employees, lawmakers howled. The bank canceled the trip but took out full-page newspaper advertisements defending such trips.

“The funds to pay for recognition events such as these do not come from the government,” the ad read. “They come from our profits.”

Does that mean the bank tracks government money and profits separately? No …

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Obama’s Proposes Up to $750 Billion More for Bank Aid

By Roger Runningen and Brian Faler | Bloomberg.com

Feb. 26 (Bloomberg) — President Barack Obama’s first budget request would provide as much as $750 billion in new aid to the financial industry, as well as overhaul the U.S. health-care system and launch a program to cut carbon-dioxide emissions.

The spending blueprint, being sent to Congress today, anticipates the government will run a deficit totaling $1.75 trillion in the year ending Sept. 30, equivalent to about 12 percent of the nation’s gross domestic product. Obama has promised to cut the shortfall — the biggest since World War II – - in half by the end of his first term.

“It’s only by restoring fiscal discipline” that the U.S. can produce growth and prosperity “over the long run,” Obama said during remarks this morning. “That means cutting what we don’t need” to pay for necessary programs.

Obama pledged that his administration will “go through our books page by page, line by line” to cut wasteful or inefficient spending, and said officials have already found $2 trillion in deficit reduction …

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Rasmussen Polls Shed Light on Reactions to U.S. Economic Intiatives

Rasmussen Reports

54% Say ‘No’ To All Bailouts

55% Say Government Mortgage Help Rewards Bad Behavior

Confidence in Stimulus Plan Drops Over Past Week

Nationalizing U.S. Banks May Be Unavoidable

Yahoo! News Blog

A touchy word has entered the public debate about the future of America’s economy. It’s a word that would shock the nation in normal times, but as even Republicans begin to whisper it, temporary “nationalization” of troubled banks is increasingly seen as the best option for fixing our financial system.

While the White House says it continues to “strongly believe that a privately held banking system is the correct way to go,” figures like former Federal Reserve Chairman Alan Greenspan say government intervention could be the least bad alternative left for policymakers.

Simply put: Nationalizing ailing banks could mean the government would tell bank execs to take a hike, and then oversee taxpayer dollars as credit courses through the banking sector’s veins. When all is well, after quickly re-privatizing the banks by possibly selling assets and operations to new investors, the government then steps back and lets a newly regulated bank sector float on its way …

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Treasury Ordered to Turn over Bailout Records

By NEDRA PICKLER | Associated Press

WASHINGTON – A federal judge has ordered the Treasury Department to give the Fox Business Network records about how the agency spent billions in bailout money.

The network filed requests under The Freedom of Information Act for records related to the funds spent on American International Group, the Bank of New York Mellon and Citigroup. The network specifically asked the department to identify the troubled assets purchased, any collateral extended and any restrictions placed on the financial institutions for their participation in this program.

U.S. District Judge Richard Holwell ruled Friday that the Treasury must comply with the request by March 23 …

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U.S. Forced to Offer Discounts to Lure Buyers of Failed Banks

By David Mildenberg and Ari Levy | Bloomberg.com

Feb. 19 (Bloomberg) — U.S. regulators are being forced to sell the assets of failed banks at a discount to lure buyers spooked by the likelihood of increased loan losses amid a deepening recession.

The assets of four banks have been sold to healthier rivals at a combined discount of $107 million this year, the Federal Deposit Insurance Corp. said. The FDIC had to offer a discount just once in 2008, when it engineered 25 bank takeovers.

Buyers for banks are in short supply after last year, when regulators closed the most lenders since 50 were shuttered in 1993. RBC Capital Markets analyst Gerard Cassidy predicts as many as 1,000 more will collapse within five years. The result may be a buyer’s market in which the FDIC will lay out even bigger sums to get rid of seized banks …

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Greenspan: Fix System Before Stimulus

By EAMON JAVERS | Politico

NEW YORK – The famously inscrutable Alan Greenspan used some uncharacteristically candid language to describe the dire plight of the American economy Tuesday night.

“Since the collapse of Lehman Brothers in September, we have been exposed to the most rapid and unremitting set of gloomy statistics that I have ever seen,” the former Fed chairman said at the 401st meeting of the Economic Club of New York.

And later, during a brief question-and-answer session at the New York Hilton, he branded the current economic morass a “once-in-a-century type event.”

As for the current debate in Washington over spending versus tax cuts, Greenspan said he has “little to add” about the question of government stimulus spending, but he asserted the government must fix the financial system as a whole before delivering stimulus spending and tax cuts …

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