History > 2009 > USA > Economy (IX)
3 December 2009
The Big Zero
December 28, 2009
The New York Times
By PAUL KRUGMAN
Maybe we knew, at some unconscious, instinctive level, that it
would be an era best forgotten. Whatever the reason, we got through the first
decade of the new millennium without ever agreeing on what to call it. The
aughts? The naughties? Whatever. (Yes, I know that strictly speaking the
millennium didn’t begin until 2001. Do we really care?)
But from an economic point of view, I’d suggest that we call the decade past the
Big Zero. It was a decade in which nothing good happened, and none of the
optimistic things we were supposed to believe turned out to be true.
It was a decade with basically zero job creation. O.K., the headline employment
number for December 2009 will be slightly higher than that for December 1999,
but only slightly. And private-sector employment has actually declined — the
first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even
at the height of the alleged “Bush boom,” in 2007, median household income
adjusted for inflation was lower than it had been in 1999. And you know what
It was a decade of zero gains for homeowners, even if they bought early: right
now housing prices, adjusted for inflation, are roughly back to where they were
at the beginning of the decade. And for those who bought in the decade’s middle
years — when all the serious people ridiculed warnings that housing prices made
no sense, that we were in the middle of a gigantic bubble — well, I feel your
pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages
in Florida, are underwater, with owners owing more than their houses are worth.
Last and least for most Americans — but a big deal for retirement accounts, not
to mention the talking heads on financial TV — it was a decade of zero gains for
stocks, even without taking inflation into account. Remember the excitement when
the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted
that the good times would just keep rolling? Well, that was back in 1999. Last
week the market closed at 10,520.
So there was a whole lot of nothing going on in measures of economic progress or
success. Funny how that happened.
For as the decade began, there was an overwhelming sense of economic
triumphalism in America’s business and political establishments, a belief that
we — more than anyone else in the world — knew what we were doing.
Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary
(and now the Obama administration’s top economist), gave in 1999. “If you ask
why the American financial system succeeds,” he said, “at least my reading of
the history would be that there is no innovation more important than that of
generally accepted accounting principles: it means that every investor gets to
see information presented on a comparable basis; that there is discipline on
company managements in the way they report and monitor their activities.” And he
went on to declare that there is “an ongoing process that really is what makes
our capital market work and work as stably as it does.”
So here’s what Mr. Summers — and, to be fair, just about everyone in a
policy-making position at the time — believed in 1999: America has honest
corporate accounting; this lets investors make good decisions, and also forces
management to behave responsibly; and the result is a stable, well-functioning
What percentage of all this turned out to be true? Zero.
What was truly impressive about the decade past, however, was our unwillingness,
as a nation, to learn from our mistakes.
Even as the dot-com bubble deflated, credulous bankers and investors began
inflating a new bubble in housing. Even after famous, admired companies like
Enron and WorldCom were revealed to have been Potemkin corporations with facades
built out of creative accounting, analysts and investors believed banks’ claims
about their own financial strength and bought into the hype about investments
they didn’t understand. Even after triggering a global economic collapse, and
having to be rescued at taxpayers’ expense, bankers wasted no time going right
back to the culture of giant bonuses and excessive leverage.
Then there are the politicians. Even now, it’s hard to get Democrats, President
Obama included, to deliver a full-throated critique of the practices that got us
into the mess we’re in. And as for the Republicans: now that their policies of
tax cuts and deregulation have led us into an economic quagmire, their
prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we
achieved nothing and learned nothing. Will the next decade be better? Stay
tuned. Oh, and happy New Year.
The Big Zero,
Is One More Casualty of Recession
December 20, 2009
The New York Times
By ERIK ECKHOLM
PROVIDENCE, R.I. — For the Cardente family, the shutoff of
their electricity and gas in September was a wrenching marker in a two-year
A run of mishaps, including illness and the husband’s workplace injury,
extensive structural damage from a burst water bed and the mother’s layoff from
a nursing job, had already upended their middle-class lives. Then the pile of
utility bills emerged as a headache to rival the past-due mortgage.
“You always try to pay your mortgage or rent to keep a roof over your head,”
said Debra Cardente, the mother. “Then you ask, do you pay your electric or gas
bill, pay your telephone or put food on the table?”
The recession has accentuated what was already a growing home-energy challenge
for low-income and many middle-class households across the nation. Rising
numbers have had their utilities shut off, causing desperate scrambles to pay
arrears and penalties to get them restored.
In 2009, some 31,000 households in Rhode Island will have their utilities shut
off, and the effort to juggle energy bills and mortgages is helping push some
homeowners into foreclosure, said Henry Shelton, director of the George Wiley
Center, a consumer advocacy group here. (Here, as in many states, utilities may
not disconnect the poor in the winter.)
Since 2000, the cost of heating a home with fuel oil has more than doubled and
the cost of heating a home with electricity has risen by one third, outpacing
many incomes. The recent surge in unemployment has thrown even more people into
Last winter, applications for federal energy assistance soared and Congress
nearly doubled money for the program, known as Liheap, to $5.1 billion. In 2009,
a record 8.1 million households, up from 6.1 million in 2008, received one-time
grants, averaging about $500, according to data released Friday by the National
Energy Assistance Directors’ Association.
Congress kept the financing at $5.1 billion for the coming year. Energy prices
have dipped slightly, but applications this fall are up an additional 20
percent, so grants will shrink or more people will be turned down, the
“Households will do just about anything to stay connected,” said John Howat, an
analyst with the National Consumer Law Center in Boston. If they cannot pay,
some people move and open a new account under a different name. Some run
extension cords from a neighbor’s house, others spend weeks getting heat from
dangerous kerosene stoves and light from candles.
The Cardentes got their power turned back on by borrowing money from relatives
and paying $3,500 toward arrears of more than $10,000. But they defaulted on a
plan that called for them to pay $723 each month, and the utility demanded the
balance of almost $5,000. They are applying for Liheap aid and plan to appeal to
the utility for more time.
For some low-income families, the federal grants have been welcome but just too
small. Suzette Orazi, 50, and her husband, Juan Lizardo, 45, live with a teenage
son in a house in Providence that is heated inefficiently with electric room
units. As energy prices climbed over the last several years, so did their
utility bills, while Mr. Lizardo lost his job as a jewel polisher.
The $1,000 they got from Liheap last winter hardly made a dent in their growing
arrears, now over $11,000. The power company recently threatened to cut them off
but later said that in accord with state protections for low-income customers,
it would not do so in winter. It is still pressing for an immediate $2,456,
“We just can’t make that payment,” said Ms. Orazi, who receives disability. The
couple fears losing the house as well as the electricity needed to live in it.
California, like Rhode Island, requires lower electric rates for low-income
consumers. Even so, as unemployment in California climbed past 12 percent, the
number of shutoffs among such families rose by one-fifth in the year that ended
in August, according to a report last month by the state’s Division of Ratepayer
In Connecticut, the number of shutoffs for all incomes rose from 86,074 in 2008
to 105,300 in just the first nine months of 2009, according to the state’s
Public Utilities Commission.
New Jersey is widely praised for its program for low-income residents: a family
of four making less than $38,588 pays only about 6 percent of its income on
utilities. Those one step up, with incomes up to $49,612 for a family of four,
are eligible for Liheap grants.
But many families just above that level, with incomes between $50,000 and
$66,000, have found themselves in energy trouble in a high-cost state where
unemployment is 9.7 percent. New Jersey Shares, a nonprofit organization that
provides up to $1,000 in energy assistance to that group, has already helped a
record 19,000 families this fall and turned away an additional 18,000 for lack
of money, said its director, James M. Jacob. Many seeking aid are facing
imminent shutoffs, he said.
With energy costs becoming a chronic challenge, consumer advocates in Rhode
Island and elsewhere are pushing for alternatives to one-time grants, citing the
program in New Jersey and a similar one adopted this year in Illinois, setting
bills as a share of income.
Such an approach would make a world of difference for the Cardente family, for
example; in hard times, their bills would have been cut, and when Ms. Cardente
and her husband find work, the bills would rise.
New Hampshire already has income-linked subsidies, but in mid-December, citing
rising hardship, the governor and legislative leaders said they would rush
through a bill for still more aid. Indiana, Nevada, Ohio and Pennsylvania are
among states that reduce utility bills according to income levels, said Mr.
Howat, the consumer advocate.
The subsidies are usually paid for by raising rates for household, commercial
and industrial customers, posing political risks. In Rhode Island, a bill to cap
utility bills for the poor at 6 percent of income has been introduced by State
Representative Arthur Handy, Democrat of Cranston. But in a statement last June,
the state’s Division of Public Utilities and Carriers expressed “reservations”
about the proposal, and its prospects remain uncertain.
James E. Lanni, the state’s associate administrator of utilities, said the plan
would place an unreasonable burden on consumers, raising the average electric
bill by 3.7 percent and the average gas bill by 5 percent to yield $15.2 million
in subsidies. He said that the doubling of federal energy aid, along with other
programs, had reduced need and that if fees were not linked to consumption,
people would have no incentive to conserve energy.
In an interview, Mr. Handy countered that with his plan, utilities would save
money on dealing with delinquent accounts and spend less money disconnecting and
The Rhode Island legislature is expected to consider the measure early next
Utility Bill Is One
More Casualty of Recession, NYT, 20.12.2009,
Fed Says Economy Improving,
December 17, 2009
The New York Times
By CATHERINE RAMPELL
WASHINGTON — The Federal Reserve said on Wednesday that it was
still wary of raising interest rates anytime soon because it believed the
economy, though improving, remained tenuous.
In a statement released after two days of Federal Open Market Committee
meetings, the central bank said its benchmark overnight interest rate would
remain at virtually zero, its level for the last year. The statement repeated a
pledge to keep the rate “exceptionally low” for “an extended period.”
The committee noted that economic activity, including household spending, had
continued to pick up and that the deterioration in the labor market was slowing.
Improvements in the financial markets have also become “more supportive of
growth,” the statement said.
But businesses are still cutting back on fixed investment, and employers are
still reluctant to hire.
Additionally, the Fed said that it was gradually slowing its purchases of
mortgage-backed securities and other agency debt, and that most of its emergency
liquidity programs would expire in February.
The statement comes at a time when the central bank’s response to the financial
crisis — and to its denouement — is being watched closely by traders and
politicians alike. Lawmakers have been threatening to take away some of the
bank’s supervisory powers and subject it to greater oversight.
The bank’s chairman, Ben S. Bernanke, also endured some tongue-lashings in his
reconfirmation hearings earlier this month. And the Senate Banking Committee has
scheduled a confirmation vote on Thursday morning. If the committee approves Mr.
Bernanke for a second term, his nomination will be considered by the full
Mr. Bernanke and the Fed face a difficult balancing act in the quest to return
monetary policy to normal after two years of unprecedented intervention in the
If the Fed waits too long to raise interest rates and draw down its balance
sheet, it risks severe inflation. But tightening too early, or even intimating
that it could tighten soon, might spook markets and derail the recovery.
Wednesday’s release echoed the language used in the last few statements, saying
that the threat of a major increase in prices remains subdued.
Economic output grew at an annualized rate of 2.8 percent in the third quarter.
Consumer prices increased 0.4 percent at a seasonally adjusted rate in November,
according to a government report released Wednesday morning. Additionally, the
Fed’s favored barometer of inflation, a measure based on consumer spending that
excludes food and energy, has increased 1.4 percent over the last year.
November’s jobs report, which was better than expected but still showed payroll
job losses on net, has signaled that the job market may recover in the coming
Despite such relatively optimistic economic news in recent weeks, Fed officials
have shown hesitation about pulling back its emergency policy measures.
“Though we have begun to see some improvement in economic activity, we still
have some way to go before we can be assured that the recovery will be
self-sustaining,” Mr. Bernanke said in a speech at the Economic Club of
Washington last week.
Mr. Bernanke is expected to be reconfirmed by Congress to serve another four
years as chairman, in spite of some vocal opposition. His current term ends Jan.
In an indication of his growing popular acclaim for his handling of the crisis —
if not necessarily his leadership before the crisis — Mr. Bernanke was named
“Person of the Year” by Time Magazine on Wednesday. He has received similar
accolades in recent weeks from other magazines.
Fed Says Economy
Improving, Though Slowly, NYT, 17.12.2009,
Obama Presses Biggest Banks
to Lend More
December 15, 2009
The New York Times
By HELENE COOPER
and ERIC DASH
WASHINGTON — President Obama pressured the heads of the
nation’s biggest banks on Monday to take “extraordinary” steps to revive lending
for small businesses and homeowners, prompting assurances from some financial
institutions that they would do more even as they continued to shed their
supplicant status in Washington.
Meeting with top executives from 12 financial institutions, Mr. Obama sent a
clear message that the industry had a responsibility to help nurse the economy
back to health and do more to create jobs in return for the huge federal bailout
last year that kept Wall Street and the banking system afloat.
But Mr. Obama also confronted the limits of his power to jawbone the industry as
banking companies continued to repay government money received in the bailout.
Citigroup and Wells Fargo, two of the biggest, announced on Monday that they
were doing precisely that.
If the banks came hat in hand to Washington a year ago to assure their survival,
they returned on Monday in a much stronger position to deal with the government.
As they scurry to repay the government and escape its influence over their
operations, they have been fighting elements of legislation to regulate their
industry more tightly.
At the same time, the banks are seeking to restore executive pay to high levels
and asserting that the government’s demand that they hold bigger financial
buffers against possible losses makes it hard for them to issue more loans.
During the hourlong meeting in the Roosevelt Room of the White House, Mr. Obama
prodded the executives to stop fighting the regulation legislation intended to
deal with the problems that led to the financial crisis, White House officials
“I made very clear that I have no intention of letting their lobbyists thwart
reforms necessary to protect the American people,” Mr. Obama said in remarks
after the meeting. “If they wish to fight common sense consumer protections,
that’s a fight I’m more than willing to have.”
The heads of three of the biggest companies — Goldman Sachs, Morgan Stanley and
Citigroup — did not even make it to the White House meeting in person. They had
waited until Monday morning to travel on commercial flights to Washington and
then were held up by fog.
By contrast, James E. Rohr, PNC Financial’s chief executive, drove his own car
on Sunday evening to Washington from Pittsburgh, stopping at a Wendy’s for a
sandwich en route. Other chief executives made sure they would arrive on time:
Jamie Dimon of JPMorgan Chase flew into Washington on one of the bank’s private
jets, while Kenneth D. Chenault of American Express took Amtrak.
Executives at the meeting said that Mr. Obama had told the missing three that he
understood that their flight had been canceled. But he directed strong words at
the industry afterward.
“America’s banks received extraordinary assistance from American taxpayers to
rebuild their industry,” Mr. Obama said. “Now that they’re back on their feet,
we expect an extraordinary commitment from them to help rebuild our economy.”
He added, “Ultimately in this country we rise and fall together; banks and small
businesses, consumers and large corporations.”
In the glare of the presidential spotlight, Bank of America used the occasion to
say it would increase lending to small and mid-size businesses by $5 billion
next year over what it lent to them in 2009. JPMorgan Chase announced a similar
increase in early November and recently experienced an increase in new
applications for loans.
Wells Fargo said in a statement on Monday that it expected to increase lending
in 2010 as much as 25 percent, to more than $16 billion, for firms with $20
million or less in annual revenue.
The banking executives promised Mr. Obama that they would take second looks at
loans they had denied over the last year. Richard K. Davis, the chief executive
of US Bancorp, told reporters after the meeting that the executives were aware
of the public perception that they were profiting with hefty bonuses at taxpayer
expense, and that they realized they were “under a microscope” and needed to
align themselves more closely with the needs of consumers.
But he cautioned that banks had a responsibility to carefully evaluate the
qualifications of each client, lest there be a repeat of the bad lending
practices that contributed to the financial crisis to begin with.
“We simply want to assure that we make qualified loans,” he said.
White House officials acknowledged that beyond the legislation on Capitol Hill,
the administration’s leverage to prod the bankers, particularly on lending, was
limited. But Robert Gibbs, the White House spokesman, said that Mr. Obama would
keep up the public pressure. “I think that the bully pulpit can be a powerful
thing,” he said.
In calling the bankers to the White House, Mr. Obama was seeking to capitalize
on public anger over the continuation of big bonuses for Wall Street executives,
coupled with the slow pace of renewed lending by institutions bailed out by
During Monday’s meeting, Mr. Obama did not repeat the language he used in an
interview on “60 Minutes” on CBS Sunday night, in which he termed the bank
executives “fat cats.” During the meeting, “he didn’t call us any names,” Mr.
Davis said, adding that “we agree viscerally that more lending needs to be
But with the unemployment rate at 10 percent, the White House needs to move the
conversation from visceral to specific, administration officials said. Mr. Obama
pressed the bankers to come up with possible solutions, according to
administration officials and industry officials. In contrast to the lecturing
tones of a similar meeting last March, several people in attendance Monday
described this session as more constructive.
“There were no pitchforks, no fat cat bankers,” said Mr. Rohr of PNC.
Several of the chief executives, armed with statistics about initiatives to hire
new bankers, replied that they were very focused on lending. Some, like Mr.
Davis of US Bancorp, raised ideas like giving a second look to previously denied
loans. Others proposed cutting the red tape on Small Business Administration
Mr. Obama will meet next week with representatives of smaller banks, where he is
expected to sound similar tones.
Helene Cooper reported from Washington,
and Eric Dash from New
Obama Presses Biggest
Banks to Lend More, NYT, 15.12.2009,
Wells Fargo to Repay U.S.,
a Coda to the Bailout Era
December 15, 2009
The New York Times
By ERIC DASH and ANDREW MARTIN
When Washington pressed the nation’s largest banks to take
billions in federal support last autumn, few protested more loudly than Wells
Fargo. On Monday, Wells became the last of the big lenders to rush through a
repayment before the end of the year, signifying a fitting bookend to the
Hours after Citigroup confirmed it was exiting the federal Troubled Asset Relief
Program, Wells said it would return the $25 billion it was given to weather the
worst financial storm since the Depression. Wells, the largest consumer bank in
the United States, will raise $10.4 billion in a share sale to help replenish
Wells joins Citigroup, Bank of America and JPMorgan Chase, its largest rivals,
in shedding the stigma of taxpayer support and the restrictions on compensation
that came with it. At the same time, President Obama was pressing chief
executives of large bailed-out banks to step up lending to help an economic
“The stigma of TARP is becoming such an emotional, testosterone-driven thing
that they want to be done with the government,” said David H. Ellison, a
portfolio manager at FBR Funds, which specializes in financial stocks. “If Bank
of America, if Citigroup can do it, then why not me, too?”
Mr. Ellison said banks appeared to be “rushing in” to pay back the government,
so they can offer bigger bonuses to their executives and get lawmakers off their
But the prospect of huge losses on mortgages and commercial real estate loans
early next year might also be causing the repayment stampede, he said.
“It may be as much about raising capital as it is paying off TARP,” he said.
While bank profits surged this year as the economy recovered and the stock
market rebounded, many banks were fearful of what next year might bring and
wanted to raise money in the capital markets now.
Although the recession has ended, high unemployment means banks like Wells and
Citigroup, which aggressively peddled consumer loans, will face looming losses
as consumers struggle to make ends meet. The stock market is also likely to
level off after a breakneck year, analysts said.
Any sudden event on the world stage, like a further weakening in emerging
markets or a sovereign default, could restrain the environment for raising
Only nine months ago, big institutional investors were so fearful during the
credit crisis that they refused to pour money into the banks that badly needed
it. Talk of nationalization prevailed.
But confidence has come back to the market, in part because the government has
shown its willingness to save large banks whose demise would produce systemic
risks after the fall of Lehman Brothers.
Yet even as banks pay back their bailout money, the government is still
extending them billions of dollars in taxpayer support through other programs
run by the Federal Reserve and the Federal Deposit Insurance Corporation.
In spite of the recent rush to repay the government, many financial experts say
the financial system is sound. At both Citigroup and Wells Fargo, regulators
required the banks to swap in private money almost dollar for dollar with the
“You are talking about them having about the same amount of capital and less of
a government role, which the markets will like,” said Douglas J. Elliott, a
former investment banker and fellow at the Brookings Institution.
Even so, other financial experts worry that the government may be making a
terrible mistake by allowing the biggest banks to exit too quickly.
If the economy takes a turn for the worse, they argue, these same large banks
will return to the government for a new round of aid.
“The guarantee is no longer explicit, it’s implicit — just like the implicit
guarantee for Fannie Mae and Freddie Mac,” said Dino Kos, a banking analyst and
former Federal Reserve official. “This is the nature of the ‘too big to fail’
For the banks’ existing stockholders, repayment comes at a high cost. As part of
Citigroup’s agreement with the government, the bank is planning to raise about
$17 billion by selling stock, which will dilute the value of existing shares.
“It’s terribly negative,” said Richard Bove, an analyst at Rochdale Securities.
“Management has shown that it is willing to take any action to harm shareholders
as long as the executives get paid more money.”
Mr. Bove said the payback did nothing to improve Citigroup’s overall financial
health, nor did it remove the bank entirely from government control. Instead,
Citigroup’s management had “ruined” the stock price for the next three or four
months, he said.
On Monday, Citi’s stock lost 25 cents and closed at $3.70.
Citigroup will still operate under a loose set of pay restrictions. By contrast,
Wells will now face no pay restrictions since it will have fully repaid its
bailout funds. But that may hold less significance, because Wells, a commercial
bank, does not have the traders and bankers who demand multimillion-dollar
salaries and bonuses.
That became a sore point for Wells when Henry M. Paulson Jr., then the Treasury
secretary, summoned its chief executive to appear last October with seven others
at the Treasury Department.
At the meeting, Richard M. Kovacevich, then the Wells Fargo chairman, protested
strongly that, unlike its New York rivals, Wells was not in trouble because of
investments in exotic mortgages, and did not need a bailout, according to people
briefed on the meeting.
But Wells has since changed its tune as it struggles to digest Wachovia, which
it took over at the height of the financial crisis after a heated fight with
Citigroup. After that merger, Wells was saddled with a giant portfolio of
troubled real estate loans, and it faces a coming wave of losses on its
pick-a-pay mortgages and commercial real estate and corporate loans.
Under the terms of the deal, Wells will raise $1.35 billion by issuing common
stock to Wells benefit plans. The bank will also increase equity by $1.5 billion
through asset sales.
Wells’s current chief executive, John G. Stumpf, said the move was a good deal
for investors and taxpayers, who walk away from their investment in the bank
with a $1.4 billion dividend.
Jeff Zeleny reported from Washington,
and Eric Dash from New
Wells Fargo to Repay
U.S., a Coda to the Bailout Era, NYT, 15.12.2009,
Poll Reveals Depth and Trauma
of Joblessness in U.S.
December 15, 2009
The New York Times
By MICHAEL LUO
and MEGAN THEE-BRENAN
More than half of the nation’s unemployed workers have
borrowed money from friends or relatives since losing their jobs. An equal
number have cut back on doctor visits or medical treatments because they are out
Almost half have suffered from depression or anxiety. About 4 in 10 parents have
noticed behavioral changes in their children that they attribute to their
difficulties in finding work.
Joblessness has wreaked financial and emotional havoc on the lives of many of
those out of work, according to a New York Times/CBS News poll of unemployed
adults, causing major life changes, mental health issues and trouble maintaining
even basic necessities.
The results of the poll, which surveyed 708 unemployed adults from Dec. 5 to
Dec. 10 and has a margin of sampling error of plus or minus four percentage
points, help to lay bare the depth of the trauma experienced by millions across
the country who are out of work as the jobless rate hovers at 10 percent and, in
particular, as the ranks of the long-term unemployed soar.
Roughly half of the respondents described the recession as a hardship that had
caused fundamental changes in their lives. Generally, those who have been out of
work longer reported experiencing more acute financial and emotional effects.
“I lost my job in March, and from there on, everything went downhill,” said
Vicky Newton, 38, of Mount Pleasant, Mich., a single mother who had been a
customer-service representative in an insurance agency.
“After struggling and struggling and not being able to pay my house payments or
my other bills, I finally sucked up my pride,” she said in an interview after
the poll was conducted. “I got food stamps just to help feed my daughter.”
Over the summer, she abandoned her home in Flint, Mich., after she started
receiving foreclosure notices. She now lives 90 minutes away, in a rental house
owned by her father.
With unemployment driving foreclosures nationwide, a quarter of those polled
said they had either lost their home or been threatened with foreclosure or
eviction for not paying their mortgage or rent. About a quarter, like Ms.
Newton, have received food stamps. More than half said they had cut back on both
luxuries and necessities in their spending. Seven in 10 rated their family’s
financial situation as fairly bad or very bad.
But the impact on their lives was not limited to the difficulty in paying bills.
Almost half said unemployment had led to more conflicts or arguments with family
members and friends; 55 percent have suffered from insomnia.
“Everything gets touched,” said Colleen Klemm, 51, of North Lake, Wis., who lost
her job as a manager at a landscaping company last November. “All your
relationships are touched by it. You’re never your normal happy-go-lucky person.
Your countenance, your self-esteem goes. You think, ‘I’m not employable.’ ”
A quarter of those who experienced anxiety or depression said they had gone to
see a mental health professional. Women were significantly more likely than men
to acknowledge emotional issues.
Tammy Linville, 29, of Louisville, Ky., said she lost her job as a clerical
worker for the Census Bureau a year and a half ago. She began seeing a therapist
for depression every week through Medicaid but recently has not been able to go
because her car broke down and she cannot afford to fix it.
Her partner works at the Ford plant in the area, but his schedule has been
sporadic. They have two small children and at this point, she said, they are
“saving quarters for diapers.”
“Every time I think about money, I shut down because there is none,” Ms.
Linville said. “I get major panic attacks. I just don’t know what we’re going to
Nearly half of the adults surveyed admitted to feeling embarrassed or ashamed
most of the time or sometimes as a result of being out of work. Perhaps
unsurprisingly, given the traditional image of men as breadwinners, men were
significantly more likely than women to report feeling ashamed most of the time.
There was a pervasive sense from the poll that the American dream had been
upended for many. Nearly half of those polled said they felt in danger of
falling out of their social class, with those out of work six months or more
feeling especially vulnerable. Working-class respondents felt at risk in the
Nearly half of respondents said they did not have health insurance, with the
vast majority citing job loss as a reason, a notable finding given the tug of
war in Congress over a health care overhaul. The poll offered a glimpse of the
potential ripple effect of having no coverage. More than half characterized the
cost of basic medical care as a hardship.
Many in the ranks of the unemployed appear to be rethinking their career and
life choices. Just over 40 percent said they had moved or considered moving to
another part of the state or country where there were more jobs. More than
two-thirds of respondents had considered changing their career or field, and 44
percent of those surveyed had pursued job retraining or other educational
Joe Whitlow, 31, of Nashville, worked as a mechanic until a repair shop he was
running with a friend finally petered out in August. He had contemplated going
back to school before, but the potential loss in income always deterred him. Now
he is enrolled at a local community college, planning to study accounting.
“When everything went bad, not that I didn’t have a choice, but it made the
choice easier,” Mr. Whitlow said.
The poll also shed light on the formal and informal safety nets that the jobless
have relied upon. More than half said they were receiving or had received
unemployment benefits. But 61 percent of those receiving benefits said the
amount was not enough to cover basic necessities.
Meanwhile, a fifth said they had received food from a nonprofit organization or
religious institution. Among those with a working spouse, half said their spouse
had taken on additional hours or another job to help make ends meet.
Even those who have stayed employed have not escaped the recession’s bite.
According to a New York Times/CBS News nationwide poll conducted at the same
time as the poll of unemployed adults, about 3 in 10 people said that in the
past year, as a result of bad economic conditions, their pay had been cut.
In terms of casting blame for the high unemployment rate, 26 percent of
unemployed adults cited former President George W. Bush; 12 percent pointed the
finger at banks; 8 percent highlighted jobs going overseas and the same number
blamed politicians. Only 3 percent blamed President Obama.
Those out of work were split, however, on the president’s handling of job
creation, with 47 percent expressing approval and 44 percent disapproval.
Unemployed Americans are divided over what the future holds for the job market:
39 percent anticipate improvement, 36 percent expect it will stay the same, and
22 percent say it will get worse.
Marina Stefan and Dalia Sussman contributed reporting.
Poll Reveals Depth
and Trauma of Joblessness in U.S., NYT, 15.12.2009,
Paul A. Samuelson,
Dies at 94
December 14, 2009
The New York Times
By MICHAEL M. WEINSTEIN
Paul A. Samuelson, the first American Nobel laureate in
economics and the foremost academic economist of the 20th century, died Sunday
at his home in Belmont, Mass. He was 94.
His death was announced by the Massachusetts Institute of Technology, which Mr.
Samuelson helped build into one of the world’s great centers of graduate
education in economics.
In receiving the Nobel Prize in 1970, Mr. Samuelson was credited with
transforming his discipline from one that ruminates about economic issues to one
that solves problems, answering questions about cause and effect with
mathematical rigor and clarity.
When economists “sit down with a piece of paper to calculate or analyze
something, you would have to say that no one was more important in providing the
tools they use and the ideas that they employ than Paul Samuelson,” said Robert
M. Solow, a fellow Nobel laureate and colleague.of Mr. Samuelson’s at M.I.T.
Mr. Samuelson attracted a brilliant roster of economists to teach or study at
the university, among them Mr. Solow as well as such other future Nobel
laureates as George A. Akerlof, Robert F. Engle III, Lawrence R. Klein, Paul
Krugman, Franco Modigliani, Robert C. Merton and Joseph E. Stiglitz.
Mr. Samuelson wrote one of the most widely used college textbooks in the history
of American education. The book, “Economics,” first published in 1948, was the
nation’s best-selling textbook for nearly 30 years. Translated into 20
languages, it was selling 50,000 copies a year a half century after it first
“I don’t care who writes a nation’s laws — or crafts its advanced treatises — if
I can write its economics textbooks,” Mr. Samuelson said.
Histextbook taught college students how to think about economics. His technical
work — especially his discipline-shattering Ph.D. thesis, immodestly titled “The
Foundations of Economic Analysis” — taught professional economists how to ply
their trade. Between the two books, Mr. Samuelson redefined modern economics.
The textbook introduced generations of students to the revolutionary ideas of
John Maynard Keynes, the British economist who in the 1930s developed the theory
that modern market economies could become trapped in depression and would then
need a strong push from government spending or tax cuts, in addition to lenient
monetary policy, to restore them. No student would ever again rest comfortably
with the 19th-century nostrum that private markets would cure unemployment
without need of government intervention.
That lesson was reinforced in 2008, when the international economy slipped into
the steepest downturn since the Great Depression, when Keynesian economics was
born. When the Depression began, governments stood pat or made matters worse by
trying to balance fiscal budgets and erecting trade barriers. But 80 years
later, having absorbed the Keynesian preaching of Mr. Samuelson and his
followers, most industrialized countries took corrective action, raising
government spending, cutting taxes, keeping exports and imports flowing and
driving short-term interest rates to near zero.
Lessons for President Kennedy
Mr. Samuelson explained Keynesian economics to American presidents, world
leaders, members of Congress and the Federal Reserve Board, not to mention other
economists. He was a consultant to the United States Treasury, the Bureau of the
Budget and the President’s Council of Economic Advisers.
His most influential student was John F. Kennedy, whose first 40-minute class
with Mr. Samuelson, after the 1960 election, was conducted on a rock by the
beach at the family compound at Hyannis Port, Mass. Before class, there was
lunch with politicians and Cambridge intellectuals aboard a yacht offshore. “I
had expected a scrumptious meal,” Mr. Samuelson said. “We had franks and beans.”
As a member of the Kennedy campaign brain trust, Professor Samuelson headed an
economic task force for the candidate and held several private sessions on
economics with him. Many would have a bearing on decisions made during the
Though Professor Samuelson was President Kennedy’s first choice to become
chairman of the Council of Economic Advisers, he refused, on principle, to take
any government office because, he said, he did not want to put himself in a
position in which he could not say and write what he believed.
After the 1960 election, he told the young president-elect that the nation was
heading into a recession and that Mr. Kennedy should push through a tax cut to
head it off. Mr. Kennedy was shocked.
“I’ve just campaigned on a platform of fiscal responsibility and balanced
budgets and here you are telling me that the first thing I should do in office
is to cut taxes?” Professor Samuelson recalled, quoting the president.
Kennedy eventually accepted the professor’s advice and signaled his willingness
to cut taxes, but he was assassinated before he could take action. His
successor, Lyndon B. Johnson, carried out the plan, however, and the tax cut
reinvigorated the economy.
Adding a Bite to Academia
In the classroom, Mr. Samuelson was a lively, funny, articulate teacher. On
theories that he and others had developed to show links between the performance
of the stock market and the general economy, he famously said: “It is indeed
true that the stock market can forecast the business cycle. The stock market has
called nine of the last five recessions.”
His speeches and his voluminous writing had a lucidity and bite not usually
found in academic technicians. He tried to give his economic pronouncements a
“snap at the end,” he said, “like Mark Twain.” When women began complaining
about career and salary inequities, for example, he said in their defense,
“Women are men without money.”
Remarkably versatile, Mr. Samuelson reshaped academic thinking about nearly
every economic subject, from what Marx could have meant by a labor theory of
value to whether stock prices fluctuate randomly. Mathematics had already been
employed by social scientists, but Mr. Samuelson brought the discipline into the
mainstream of economic thinking, showing how to derive strong theoretical
predictions from simple mathematical assumptions.
His early work, for example, presented a unified mathematical structure for
predicting how businesses and households alike will respond to changes in
economic forces, how changes in wage rates will affect employment, and how tax
rate changes will affect tax collections.
His relentless application of mathematical analysis gave rise to an astonishing
number of groundbreaking theorems, resolving debates that had raged among
theorists for decades, if not centuries.
Early in his career, Mr. Samuelson developed the rudimentary mathematics of
business cycles with a model, called the multiplier-accelerator, that captured
the inherent tendency of market economies to fluctuate. The model showed how
markets magnify the impact of outside shocks and turn, say, an initial
one-dollar increase in foreign investment into a several-dollar increase in
total domestic income, to be followed by a decline.
The Stolper-Samuelson Theorem
Mr. Samuelson provided a mathematical structure to study the impact of trade on
different groups of consumers and workers. In a famous theorem, known as
Stolper-Samuelson, he and a co-author showed that competition from imports of
clothes and similar goods from underdeveloped countries, where producers rely on
unskilled workers, could drive down the wages of low-paid workers in
The theorem provided the intellectual scaffold for opponents of free trade. And
late in his career, Mr. Samuelson set off an intellectual commotion by pointing
out that the economy of a country like the United States could be hurt if
productivity rose among the economies with which it traded.
Yet Mr. Samuelson, like most academic economists, remained an advocate of open
trade. Trade, he taught, raises average living standards enough to allow the
workers and consumers who benefit to compensate those who suffer, and still have
some extra income left over. Protectionism would not help, but higher
Mr. Samuelson also formulated a theory of public goods — that is, goods that can
be provided effectively only through collective, or government, action. National
defense is one such public good. It is non-exclusive; the Navy, for example,
exists to protect every citizen. It also eliminates rivalry among its many
consumers; that is, the amount of security that any one citizen derives from the
Navy subtracts nothing from the amount of security that any other citizen
The features of public goods, Mr. Samuelson taught, stand in direct contrast to
those of ordinary goods, like apples. An apple eaten by one consumer is not
available to any other. Public goods, he concluded, cannot be sold in private
markets because individuals have no incentive to pay for them voluntarily.
Instead they hope to get a free ride off the decisions of others to make the
public goods available.
Mr. Samuelson pushed mathematical analysis to new levels of sophistication. His
“correspondence principle” showed that information about the stability or
instability of a theoretical economic system — whether, after a disruption, the
economy returns to fixed levels of prices and output or, instead, flies out of
control — could be used to predict the aggregate outcome of decisions taken by
consumers and business firms. He showed, for example, that only a stable
economic system would undergo ordinary business cycles like those captured by
Mr. Samuelson’s multiplier-accelerator model.
He analyzed the evolution of economies with a mathematical model, called an
overlapping generations model, that scholars have since used to study, for
example, the functioning over time of the Social Security System and the
management of public debt.
He also helped develop linear programming, a mathematical tool used by
corporations and central planners to calculate how to produce pre-set levels of
various goods and services at the least cost.
Late in his career, Mr. Samuelson laid out the mathematics of stock price
movements, an analysis that became the basis for Nobel-prize-winning research by
his student Mr. Merton and Myron S. Scholes. They designed formulas that Wall
Street analysts use to trade options and other complicated securities known as
But beyond his astonishing array of scientific theorems and conclusions, Mr.
Samuelson wedded Keynesian thought to conventional economics. He developed what
he called the Neoclassical Synthesis. The neoclassical economists in the late
19th century showed how forces of supply and demand generate equilibrium in the
market for apples, shoes and all other consumer goods and services. The standard
analysis had held that market economies, left to their own devices, gravitated
naturally toward full employment.
Economists clung to this theory even in the wake of the Depression of the 1930s.
But the need to explain the market collapse, as well as unemployment rates that
soared to 25 percent, gave rise to a contrary strain of thought associated with
Mr. Samuelson’s resulting “synthesis” amounted to the notion that economists
could use the neoclassical apparatus to analyze economies operating near full
employment, but switch over to Keynesian analysis when the economy turned sour.
Paul Anthony Samuelson was born on May 15, 1915 in Gary, Ind., the son of Frank
Samuelson, a pharmacist, and the former Ella Lipton. His family, he said, was
“made up of upwardly mobile Jewish immigrants from Poland who had prospered
considerably in World War I, because Gary was a brand new steel town when my
family went there.”
But after his father lost much of his money in the years after the war, the
family moved to Chicago. Young Paul attended Hyde Park High School, where as a
freshman he began studying the stock market. At one point he helped his algebra
teacher select stocks to buy in the boom of the 1920s.
“Hupp Motors and other losers,” he remembered in an interview in 1996. “Proof of
the fallibility of systems,” he explained.
He left high school at age 16 to enter the University of Chicago. “I was born as
an economist on Jan. 2, 1932,” he said. That was the day he heard his first
college lecture, on Thomas Malthus, the 18th-century British economist who
studied the relation between poverty and population growth. Hooked, he began
taking economics courses.
The University of Chicago developed the century’s leading conservative economic
theorists, under the later guidance of Milton Friedman. But Mr. Samuelson
regarded the teaching at Chicago as “schizophrenic.” This was at the height of
the Depression, and courses about the business cycle naturally talked about
unemployment, he said. But in economic-theory classes, joblessness was not
“The niceties of existence were not a matter of concern,” he recalled, “yet
everything around was closed down most of the time. If you lived in a
middle-class community in Chicago, children and adults came daily to the door
saying, ‘We are starving, how about a potato?’ I speak from poignant memory.”
After receiving his bachelor’s degree from Chicago in 1935, he went to Harvard,
where he was attracted to the ideas of the Harvard professor Alvin Hansen, the
leading exponent of Keynesian theory in America.
As a student at Chicago and later at Cambridge, Paul Samuelson had at first
reacted negatively to Keynes. “What I resisted most was the notion that there
could be equilibrium unemployment” — that some level of unemployment would be
impossible to eliminate and have to be tolerated. “I spent four summers of my
college career on the beach at Lake Michigan,” he explained. “It was pointless
to look for work. I didn’t even have to test the market because I had friends
who would go to 350 potential employers and not be able to get any job at all.”
Eventually he was converted. “Why do I want to refuse a paradigm that enables me
to understand the Roosevelt upturn from 1933 to 1937?” he asked himself.
A Bold Dissertation
Mr. Samuelson was perceived at the outset of his career as a brilliant
mathematical economist. He shot to academic fame as a 22-year-old l’enfant
terrible at Harvard when he began a boldly sweeping and highly technical
doctoral dissertation, published as a book in 1947 by Harvard University Press.
At Harvard, as at Chicago, he was not shy about critiquing his professors —
“respecting neither age nor rank,” according to James Tobin, a Nobel laureate of
Yale University. The young Mr. Samuelson’s chief complaint against economists
was that they preoccupied themselves with finer economic principles while all
around them people were being thrown into bread lines.
His attitudes did not endear him to the austere chairman of the economics
department at Harvard, Harold Hitchings Burbank, with whom he had a rocky
But the publication of his dissertation was an immediate success. It won him the
John Bates Clark Medal awarded by the American Economic Association to the
economist showing the most scholarly promise before the age of 40; it would
eventually help him win his Nobel Prize, and it was frequently reprinted despite
the heavy resistance of Professor Burbank, selling to economists around the
world for more than 20 years. (“Sweet revenge,” Mr. Samuelson said.)
Among Mr. Samuelson’s fellow students was Marion Crawford. They married in 1938.
Mr. Samuelson earned his master’s degree from Harvard in 1936 and a Ph.D. in
1941. He wrote his thesis between 1937 and 1940 as a member of the prestigious
Harvard Society of Junior Fellows. In 1940, Harvard offered him an
instructorship, which he accepted, but a month later M.I.T. invited him to
become an assistant professor.
Harvard made no attempt to keep him, even though he had by then developed an
international following. Mr. Solow said of the Harvard economics department at
the time: “You could be disqualified for a job if you were either smart or
Jewish or Keynesian. So what chance did this smart, Jewish, Keynesian have?”
Indeed, American university life before World War II was anti-Semitic in a way
that hardly seemed possible later, and Harvard, along with Yale and Princeton,
was a flagrant example.
During World War II, Mr. Samuelson worked in M.I.T.’s Radiation Laboratory,
developing computers for tracking aircraft, and was a consultant for the War
Production Board. After the war, having resumed teaching, he and his wife
started a family. When she became pregnant the fourth time, she gave birth to
triplets, all boys.
Marion Samuelson died in 1978. Mr. Samuelson is survived by his second wife,
Risha Clay Samuelson; six children from his first marriage: Jane Raybould,
Margaret Crawford-Samuelson, William and the triplet sons Robert, John and Paul;
a brother, Robert Summers, a professor emeritus of economics at the University
of Pennsylvania, and 15 grandchildren.
A Keynesian Textbook
The birth of the triplets doubled the number of children in the Samuelson
household, which soon found itself sending 350 diapers to the laundry per week.
His friends suggested that Mr. Samuelson needed to write a book to earn more
He decided on writing an economics textbook, but one that would not only be
compelling for students but also sophisticated and complete. And he wanted to
center it on the still poorly understood Keynesian revolution. President Herbert
Hoover, he noted, had never referred to Keynes other than as “the Marxist
“I never quite understood that venom, Mr. Samuelson said.
He said he “sweated blood” writing his book, employing detailed charts, color
graphics and humor. He wrote: “Economists are said to disagree too much but in
ways that are too much alike: If eight sleep in the same bed, you can be sure
that, like Eskimos, when they turn over, they’ll all turn over together.”
It would be difficult to overestimate the influence of “Economics.” Business
Week, taking note of the textbook’s publication in Greek, Punjabi, Hebrew,
Russian, Serbo-Croatian and other languages, once said that it had “gone a long
way in giving the world a common economic language.” Students were attracted to
its lively prose and relevance to their everyday lives. Many textbook authors
began to copy its presentation.
“Economics,” together with shrewd investing, made Mr. Samuelson a millionaire
many times over.
Friendship and Rivalry With Friedman
A historian could well tell the story of 20th-century public debate over
economic policy in America through the jousting between Mr. Samuelson and Milton
Friedman, who won the Nobel prize in 1976. Mr. Samuelson said the two had almost
always disagreed with each other but had remained friends. They met in 1933 at
the University of Chicago, when Mr. Samuelson was an undergraduate and Mr.
Friedman a graduate student.
Unlike the liberal Mr. Samuelson, the conservative Mr. Friedman opposed active
government participation in most areas of the economy except national defense
and law enforcement. He thought private enterprise and competition could do
better and that government controls posed risks to individual freedoms.
Both men were fluid speakers as well as writers, and they debated often in
public forums, in testimony before congressional committees, in op-ed articles
and in columns each of them wrote for Newsweek magazine. But Professor Samuelson
said he always had fear in his heart when he prepared for combat with Professor
Friedman, a formidably engaging debater.
“If you looked at a transcript afterward, it might seem clear that you had won
the debate on points,” he said. “But somehow, with members of the audience, you
always seemed to come off as elite, and Milton seemed to have won the day.”
Mr. Samuelson said he had never regarded Keynesianism as a religion, and he
criticized some of his liberal colleagues for seeming to do so, earning himself,
late in life, the label l’enfant terrible, emeritus. The experience of nations
in the second half of the century, he said, had diminished his optimism about
the ability of government to perform miracles.
If government gets too big, and too great a portion of the nation’s income
passes through it, he said, government becomes inefficient and unresponsive to
the human needs “we do-gooders extol,” and thus risks infringing on freedoms.
But, he said, no serious political or economic thinker would reject the
fundamental Keynesian idea that a benevolent democratic government must do what
it can to avert economic trouble in areas the free markets cannot. Neither
government alone nor the markets alone, he said, could serve the public welfare
without help from the other.
As nations became locked in global competition, and as the computerization of
the workplace created daunting employment problems, he agreed with the economic
conservatives in advocating that American corporations must stay lean and
efficient and follow the general dictates of the free market.
But he warned that the harshness of the market place had to be tempered and that
corporate downsizing and the reduction of government programs “must be done with
Despite his celebrated accomplishments, Mr. Samuelson preached and practiced
humility. The M.I.T. economics department became famous for collegiality, in no
small part because no one else could play prima donna if Mr. Samuelson refused
the role, and, of course, he did. Economists, he told his students, as Churchill
said of political colleagues, “have much to be humble about.”
Paul A. Samuelson,
Groundbreaking Economist, Dies at 94, NYT, 14.12.2009,
Tougher Rules on Wall Street
December 12, 2009
The New York Times
By CARL HULSE
WASHINGTON — The House approved a Democratic plan on Friday to
tighten federal regulation of Wall Street and banks, advancing a far-reaching
Congressional response to the financial crisis that rocked the economy.
After three days of floor debate, the House voted 223 to 202 to approve the
measure. It would create an agency to protect consumers from abusive lending
practices, set rules for the trading of some of the sophisticated financial
instruments that fueled the crisis, and take steps to reduce the threat that the
failure of one or two huge banks or investment firms could topple the entire
Whether all of those measures will become law, however, is uncertain because the
Obama administration wants certain revisions and the Senate will not take up its
version of the legislation until next year.
The Democratic authors of the House legislation hailed the bill as the biggest
change in oversight of Wall Street since the Great Depression, and said they
believed they had struck a careful balance between protecting the public and the
economy while not stifling economic growth and market forces.
“We have a set of rules in place that will allow the most productive parts of
the free market economy, and particularly the financial system, to play the role
they should play, but with much less chance of abuse,” Representative Barney
Frank, Democrat of Massachusetts and a main architect of the measure, said after
The approval of the bill is the most significant step lawmakers have taken to
confront the financial crisis since the $700 billion bailout package was rammed
through Congress at the peak of the emergency more than a year ago. The bill
represents an attempt to address comprehensively what many of its supporters
have called the underlying causes of the collapse — reckless risk-taking
unrestrained by regulation.
No Republican voted for the measure, and 27 Democrats, most from more
conservative districts, broke ranks with their party. Republicans strongly
criticized the Democratic legislation, saying it could restrict the availability
of credit, cause job loss and lead to future bailouts of failing businesses.
“The array of new regulations and taxes on consumers, investors and businesses
will destroy jobs and further undermine the fragile economy,” Representative
Spencer Bachus of Alabama, the senior Republican on the Financial Services
The bill would create, at a cost that could run into the billions, a Consumer
Financial Protection Agency in an attempt to head off the kinds of lending
practices that led many homeowners to take on mortgages they could not afford.
The bill would bring regulation for the first time to a portion of the
over-the-counter market for derivatives. It would create a process for dealing
with troubles at very large financial institutions that might pose a risk to the
financial system and the economy, and require large firms to contribute to a
fund to help with an orderly dissolution of those institutions if they are in
danger of failing.
And the bill includes a number of other provisions to address executive
compensation, investor protections and regulation of hedge funds.
Before approving the measure, House Democrats held off an attempt led by
Representative Walt Minnick, Democrat of Idaho, to replace the proposed new
consumer protection agency with a council made up of existing regulators.
He and other moderate Democrats, joined by Republicans and much of the banking
industry, argued the new agency — a central element of the overhaul —
represented an unnecessary bureaucratic approach that would give the federal
government excessive control over mortgages, credit cards and other financial
“How many new government agencies are necessary to accomplish this task?” asked
Representative Dan Boren, Democrat of Oklahoma. Their effort was defeated on a
vote of 223 to 208, removing a final obstacle to the measure.
In other important preliminary votes, lawmakers slightly scaled back the bill’s
ambitions to address objections from powerful financial interests.
Heeding complaints from banks, the House rejected an effort to allow bankruptcy
judges to restructure mortgage payments, a plan that has passed the House before
but not the Senate.
House members also agreed to relax some of the proposed new controls on trading
in derivatives. Rather than subject all over-the-counter derivatives to open
trading, the bill would subject such derivatives only if they were traded
between Wall Street firms, or with a major player like the American
International Group. But the transactions between dealers and customers will
remain largely hidden, so customers will not be able to compare the prices they
are being charged with the prices charged to other customers.
The overhaul of Wall Street regulation is a top domestic priority of the Obama
administration, which supported the House bill and applauded its approval. But
Treasury Secretary Timothy F. Geithner signaled that the administration would
seek changes in any final measure.
Despite the House action, final legislation is not imminent. The Senate is still
developing its own measure for debate early next year and any Senate bill is
likely to differ substantially from the House measure, necessitating further
Most Democrats agreed that stiffened regulation of the financial services
industry was warranted by the events leading up to the financial crisis.
Representative Steny H. Hoyer of Maryland, the House majority leader, cited what
many considered a lack of adequate regulation during the administration of
President George W. Bush as a central reason for the economic collapse.
“This bill puts the referees back on the field,” Mr. Hoyer said.
The chief argument in the House centered on the Democratic proposal that would
assess large financial companies a fee to create a $150 billion fund to cover
the costs of dissolving companies that pose a threat to the economy.
Democrats said the fund did not amount to a reserve for bailouts since it would
not be used to keep companies afloat but would instead lead to a more orderly
shutdown and would be paid for by large companies, not taxpayers.
Republicans, trying to capitalize on public frustration with financial bailouts,
said that failing firms should instead go through normal bankruptcy proceedings.
“We just think at the end of the day that $150 billion in a permanent bailout
fund is not the direction the American people want this nation to go,” said
Representative Mike Pence of Indiana, the No. 3 Republican in the House.
Both sides saw the vote as a political opening in the coming midterm elections.
Republicans sought to turn the issue on dozens of potentially vulnerable
Democrats in swing districts, noting that they had opposed a Republican
procedural move that would have shut down the bailout fund and put the money
toward paying off the national debt.
Floyd Norris contributed reporting from New York.
Tougher Rules on Wall Street, NYT, 12.12.2009,
An Innovation Agenda
December 8, 2009
The New York Times
By DAVID BROOKS
The economy seems to be stabilizing, and this has prompted a
shift in the public mood. Raw fear has given way to anxiety that the recovery
will be feeble and drab. Companies are hoarding cash. Banks aren’t lending to
small businesses. Private research spending is drifting downward.
People are asking anxious questions about America’s future. Will it take years
before the animal spirits revive? Can the economy rebalance so that it relies
less on consumption and debt and more on innovation and export? Have we entered
a period of relative decline?
The first thing to say is, let’s not get carried away with the malaise. The U.S.
remains the world’s most competitive economy, the leader in information
technology, biotechnology and nearly every cutting-edge sector.
The American model remains an impressive growth engine, even allowing for the
debt-fueled bubble. The U.S. economy grew by 63 percent between 1991 and 2009,
compared with 35 percent for France, 22 percent for Germany and 16 percent for
Japan over the same period. In 1975, the U.S. accounted for 26.3 percent of
world G.D.P. Today, after the rise of the Asian tigers, the U.S. actually
accounts for a slightly higher share of world output: 26.7 percent.
The U.S. has its problems, but Americans would be crazy to trade their problems
with those of any other large nation.
Moreover, there’s a straightforward way to revive innovation. In an unfairly
neglected white paper on the subject, President Obama’s National Economic
Council argued that the U.S. should not be in the industrial policy business.
Governments that try to pick winners “too often end up wasting resources and
stifling rather than promoting innovation.” But there are several things the
government can do to improve the economic ecology. If you begin with that
framework, you can quickly come up with a bipartisan innovation agenda.
First, push hard to fulfill the Obama administration’s education reforms. Those
reforms, embraced by Republicans and Democrats, encourage charter school
innovation, improve teacher quality, support community colleges and simplify
finances for college students and war veterans. That’s the surest way to improve
Second, pay for basic research. Federal research money has been astonishingly
productive, leading to DNA sequencing, semiconductors, lasers and many other
technologies. Yet this financing has slipped, especially in physics, math and
engineering. Overall research-and-development funding has slipped, too. The U.S.
should aim to spend 3 percent of G.D.P. on research, as it did in the 1960s.
Third, rebuild the nation’s infrastructure. Abraham Lincoln spent the first half
of his career promoting canals and railroads. Today, the updated needs are just
as great, and there’s widespread agreement that decisions should be made by a
National Infrastructure Bank, not pork-seeking politicians.
Fourth, find a fiscal exit strategy. If the deficits continue to surge, interest
payments on the debt will be stifling. More important, the mounting deficits
destroy confidence by sending the message that the American government is
dysfunctional. The only way to realistically fix this problem is to appoint a
binding commission, already supported by Republicans and Democrats, which would
create a roadmap toward fiscal responsibility and then allow the Congress to
vote on it, up or down.
Fifth, gradually address global imbalances. American consumers are now spending
less and saving more. But the world economy will be out of whack if the Chinese
continue to consume too little. The only solution is slow diplomacy to rebalance
exchange rates and other distorting policies.
Sixth, loosen the so-called H-1B visa quotas to attract skilled immigrants.
Seventh, encourage regional innovation clusters. Innovation doesn’t happen at
the national level. It happens within hot spots — places where hordes of
entrepreneurs gather to compete, meet face to face, pollinate ideas. Regional
authorities can’t innovate themselves, but they can encourage those who do to
Eighth, lower the corporate tax rate so it matches international norms.
Ninth, don’t be stupid. Don’t make labor markets rigid. Don’t pick trade fights
with the Chinese. Don’t get infatuated with research tax credits and other
gimmicks, which don’t increase overall research-and-development spending but
just increase the salaries of the people who would be doing it anyway.
This sort of agenda doesn’t rely on politicians who think they can predict the
next new thing. Nor does it mean merely letting the market go its own way. (The
market seems to have a preference for useless financial instruments and insane
Instead, it’s an agenda that would steer and spark innovation without
controlling it, which is what government has done since the days of Alexander
Hamilton. It’s the sort of thing the country does periodically, each time we
need to recover from one of our binges of national stupidity.
An Innovation Agenda, NYT, 8.12.2009,
AP: Manufacturing Areas
Lead Surprise Job Comeback
December 6, 2009
Filed at 3:33 a.m. ET
The New York Times
By THE ASSOCIATED PRESS
CONOVER, N.C. (AP) -- As record numbers of orders flow through
Legacy Furniture Group's manufacturing plant, workers toil between towers of
piled foam and incomplete end tables precariously stacked five pieces high.
With a 10 percent sales growth this year, Legacy has quickly forgotten the
recession's low point in March, when weak order volumes forced the company to
implement four-day work weeks.
In November alone, the company that specializes in furniture for the medical
industry added a half-dozen employees to its staff of 35. These days, everyone
is clocking overtime and the 40,000-square-foot factory is starting to feel
''We're starting to stack people instead of stacking furniture,'' jokes
co-founder Todd Norris as he navigates rows of hand-sanded chair frames.
Legacy's recent success highlights a trend: Counties with the heaviest reliance
on manufacturing income are posting some of the biggest employment gains of the
nation's early economic recovery. This is a big change from just half a year
ago, when some economists worried that widespread layoffs by U.S. manufacturers
might be part of an irreversible trend in that sector.
The Associated Press Economic Stress Index, a monthly analysis of the economic
state of more than 3,100 U.S. counties, found that manufacturing counties have
outperformed the national average since March. The Stress Index calculates a
score from 1 to 100 based on a county's unemployment, foreclosure and bankruptcy
rates. The higher the number, the greater the county's level of economic stress.
The top 100 manufacturing counties with populations of more than 25,000 saw
their Stress score drop slightly over the spring and summer quarters, largely
due to improvements in the unemployment rate. By comparison, the national
average of similar counties saw county Stress score increases of about 7 percent
over the same time.
Economists say these counties may always have high rates of idled workers as
technology replaces workers on the assembly line and companies find cheaper
labor elsewhere. And manufacturing counties did have an average Stress score of
11.9 in September, while the top counties dedicated to hospitality were at 9.2.
But the early improvements in unemployment rates and manufacturing activity
illustrate that there are, at the very least, signs of stability. U.S.
manufacturers increased production by an average of 1.1 percent each month
through July, August and September, before falling slightly, by 0.1 percent, in
October, according to federal data.
Economists cite a range of potential explanations for the early resurgence,
including the ''Cash for Clunkers'' program to stimulate car buying, a weak U.S.
dollar to aid exports, the use of temporary workers, the need to replace
depleted inventories, and stimulus money that is taking root. All of which
raises the question of whether the trend will last.
Here in Catawba County, where native hardwoods and access to power have made the
region a historical hub for furniture manufacturing, the unemployment rate
dropped from a peak of 15.6 in March to 13.6 percent in September.
Elkhart County, Ind., meanwhile, saw such a startling surge in layoffs one year
ago that President Barack Obama made a stop there in the opening weeks of his
presidency. The unemployment rate there, driven by job cuts at RV manufacturers,
spiked in March at 18.9 percent, but has fallen steadily ever since -- to 15
percent in September.
The nation's overall jobless rate has been going the other way, climbing from
8.5 percent to 10.2 percent.
''Manufacturing jobs are here to stay, and they're coming back,'' said Derald
Bontrager, president and chief operating officer of Middlebury, Ind.-based RV
maker Jayco Inc., which recalled or hired 200 laid-off workers over the summer
to help ramp up production after an unexpected sales boom overwhelmed
all-time-low inventories and left the producer unable to meet demand. They're
still trying to catch up.
The Carolina furniture makers who have been hiring since June may also have cut
too many jobs at the base of the recession, says Scott Volz, a consultant who
helps the companies recruit managers. Some of those businesses have also
successfully refocused on specialties -- such as high-end upholstery or quick
turnarounds on custom furniture -- instead of trying to compete directly with
cheap Chinese imports.
Heath Cushman, 32, of Taylorsville, lost his job at a sock plant in 2008 and was
out of work for nine months. His unemployment check was worth more than the
low-paying jobs available back then to a graphic designer with a decade of
''I have a house, a son, a wife, a car payment like everybody else,'' he said.
''Nine dollars an hour, even if it was 60 hours a week, probably wouldn't have
He was considering a long commute, or a move to a city like Charlotte, then he
landed a job at Legacy making what he called a ''generous'' wage. Any doubts he
had about a future in the manufacturing industry vanished as company executives
excitedly described their future plans. Executives are now moving operations to
a larger facility nearby and plan to add some 50 employees.
Mike Walden, an economist at North Carolina State University, said manufacturing
tends to be one of the sectors that leads the way out of recession, as factories
ramp-up to meet pent-up demand. But he questioned whether the new jobs would
stick around for long.
''As we've seen this spurt in manufacturing production over the last six months,
those factories have to go out and bring back some laid-off workers,'' Walden
said. ''In five years, however, those same workers may be back out the door.''
Not all manufacturing workers are going back to similar jobs: Other industries
that frequently seek cheap labor overseas, such as customer service, are also
sponging up bargain employees where layoffs have occurred.
In western North Carolina, widespread manufacturing layoffs were a theme that
predated the recession -- largely due to foreign competition. Yet Catawba County
has been able to find some new employers eager to tap the available work force:
Target Corp. opened a distribution hub in August, Apple Inc. is building an East
Coast data center just 30 miles down the road from a similar Google Inc. server
farm that opened last year as county recruiters brand the region as a ''data
Justin Pennell worked through the early part of the recession building equipment
used by the furniture makers. But the 26-year-old's job in Lenoir was so
unstable that he would frequently go weeks without work and have to draw
unemployment. In January, with the industry idling, he started searching
elsewhere and soon took a job at Target, where he now maintains trucks and
machines, with a steady 40-hour work schedule.
''It's a lot better,'' Pennell said, ''knowing that I'm going to make a certain
amount per week, versus wondering where it's coming from the next.''
Associated Press Writer Mike Schneider
contributed to this report from Orlando,
AP: Manufacturing Areas Lead Surprise Job
Lost Only 11,000 Jobs in November
December 5, 2009
The New York Times
By JAVIER C. HERNANDEZ
In the strongest jobs report since the recession began, the government
reported Friday that the nation’s employers had all but stopped shedding jobs in
November, taking some of the pressure off of President Obama to come up with a
jobs creation program.
The Labor Department reported Friday that the United States economy shed 11,000
jobs in November, and the unemployment rate fell to 10 percent, down from 10.2
percent in October.
The government also significantly revised September and October numbers.
September was adjusted to show a loss of 139,000 jobs instead of 219,000, and
October 111,000 instead of 190,000.
Though the pace has been declining since a peak in January, the November number
was surprising. Economists have been expecting a turning point to come in the
late spring or summer, with employers finally adding workers as a recovery takes
hold. The last time the number was this good was December 2007, when the economy
added 120,000 jobs.
“We’re moving toward stability in the labor market and the end of the tremendous
firing that has plagued America,” said Allen L. Sinai, the founder of Decision
Economics, a research firm. “But it’s going to be bleak for years. While it is
going to be better than what we’ve seen, it’s still going to be terrible.”
A large number of employees are working fewer hours than they would like because
many companies are operating below capacity and have resisted adding staff until
orders turn up and the incipient recovery seems likely to endure. Indeed, a
broader measure of unemployment fell in November to 17.2 percent, from 17.5
percent in October. This broader measure covers not only those seeking work but
those whose hours have been cut and those too discouraged to look for work.
The number of Americans facing long-term unemployment, which includes people who
cannot find work for 27 weeks or more, has been at record highs in recent
months, reaching 5.6 million in October. It was more than 5.9 million people in
November, or 38.3 of percent of those unemployed. Once hiring resumes, those
workers are likely to be among the last to land jobs.
“You create this class of people who essentially become permanently unemployed
and can’t get back in,” said Nigel Gault, chief domestic economist at IHS Global
Insight. “You have people who have lost contact with the labor market, whose
skills are not relevant for jobs for the future, who employers regard with
skepticism because they have been out of work for so long.”
In recent months, the economy has shown modest signs of stability in
manufacturing and construction — each a big source of job loss in the nearly two
years since the recession began. But consumer spending remains tepid even as
holiday shopping gets under way.
On Thursday, President Obama convened a jobs summit and said he would announce
proposals next week to strengthen employment. “We cannot hang back and hope for
the best,” the president said, though he added “our resources are limited.”
Economists generally say that the worst of the recession has passed, and most
forecast mild growth into next year. But that does not change the economic
reality for millions of Americans, who must deal with piles of unpaid bills,
worries about unexpected medical expenses and concerns about losing their homes.
Kathy M. Henry, 39, who lives in a subsidized apartment on the South Side of
Chicago, was laid off from her job as an administrative assistant at an
advertising agency two years ago. Since then, she says, she has applied for more
than 500 jobs. She has received a $1,200 monthly unemployment check since August
of last year, which she describes as not enough to support herself and two of
her children who live with her.
“It’s a constant cycle,” she said. “I’ve applied everywhere, from big
corporations to minute corporations, and I don’t even get an e-mail back. I’m
worried people see me as old and out of touch and decrepit.”
Earlier this week, Ms. Henry’s son, a high school senior, came home with a
packet of class photographs. The $40 cost was beyond her means, she said, so she
decided against purchasing a memento of her son’s senior year.
In Canada on Friday, the government reported that the country’s economy added
more jobs than expected in November, erasing the losses in October. Statistics
Canada reported a net employment gain of 79,000 in November, topping
expectations of a 15,000 gain. The unemployment rate fell to 8.5 percent from
8.6 percent in October.
U.S. Economy Lost Only
11,000 Jobs in November, 5.12.2009,
Obama Turns to Job Creation,
but Warns of Limited Funds
December 4, 2009
The New York Times
By JACKIE CALMES
WASHINGTON — After months of focusing on Afghanistan and health care,
President Obama turned his attention on Thursday to the high level of
joblessness, but offered no promise that he could do much to bring unemployment
down quickly even as he comes under pressure from his own party to do more.
At a White House forum, scheduled for the day before the government releases
unemployment and job loss figures for November, Mr. Obama sought new ideas from
business executives, labor leaders, economists and others. Confronted with
concern that his own ambitious agenda and the uncertain climate it has created
among employers have slowed hiring, the president defended his policies.
Mr. Obama said he would entertain “every demonstrably good idea” for creating
jobs, but he cautioned that “our resources are limited.”
The president said he would announce some new ideas of his own next week. One of
those, he indicated when he participated in a discussion group on clean energy,
would be a program of weatherization incentives for homeowners and small
businesses modeled on the popular “cash for clunkers” program.
On Capitol Hill, Ben S. Bernanke, the chairman of the Federal Reserve, told
senators at a sometimes testy hearing on his confirmation for a second term,
“Jobs are the issue right now.”
“It really is the biggest challenge, the most difficult problem that we face
right now,” Mr. Bernanke added, citing in particular the inability of many
credit-worthy small businesses to get bank loans.
In the House, where lawmakers are particularly sensitive to the employment issue
since they all face re-election next year, Democratic leaders on Thursday were
finishing work on a jobs bill for debate this month. It would extend expiring
federal unemployment benefits for people who have been out of jobs for long
periods, and provide up $70 billion for roads and infrastructure projects and
for aid to small business. House Democrats plan to pay for the plan by drawing
from the $700 billion fund set up last year to bail out financial institutions.
The House also passed legislation on Thursday that would freeze the federal tax
on large estates at its current level. Under current law, the tax would have
disappeared entirely next year, only to reappear at much higher levels in 2011.
The vote highlighted the raft of fiscal issues facing the administration and
Congress and the tension between addressing budget deficits and taking
potentially expensive actions to help the economy.
Mr. Obama’s jobs event captured the political and policy vise now squeezing the
president and his party at the end of his first year. It came on the eve of a
government report that is expected to show unemployment remaining in double
digits, and two days after Mr. Obama emphasized as he ordered 30,000 additional
troops to Afghanistan that he did not want the financial burdens of the war to
overwhelm his domestic agenda.
Both the domestic and the military demands on the administration are raising
costs unanticipated when Mr. Obama took office, even as pressures build to
arrest annual budget deficits now exceeding $1 trillion. Those demands are also
eroding the broad support that swept Mr. Obama into office, especially among
independent voters, and igniting a guns-versus-butter budget debate in his own
party not seen since the Vietnam era.
While liberals are calling for ambitious job-creating measures along the lines
of the New Deal and Republicans want to scale back government spending programs,
Mr. Obama talked at the White House on Thursday of limited programs that he
suggested could provide substantial bang for the buck when it comes to job
creation. Among them was the weatherization program.
Called “cash for caulkers,” it would enlist contractors and home-improvement
companies like Home Depot — whose chief executive was on the panel — to
advertise the benefits, much as car dealers did for the clunkers trade-ins this
Yet that relatively modest proposal underscores the limits of the government’s
ability to affect a jobless recovery with the highest unemployment rate in 26
years — and Mr. Obama acknowledged as much. Just as he said in Tuesday’s
Afghanistan speech that the nation could not afford an open-ended commitment
there, especially when the economy is so weak and deficits so high, Mr. Obama
emphasized at the jobs forum that the government had already done a lot with his
$787 billion economic stimulus package and the $700 billion financial bailout
that he inherited.
“I want to be clear: While I believe the government has a critical role in
creating the conditions for economic growth, ultimately true economic recovery
is only going to come from the private sector,” he told his audience, which
included executives and some critics from American Airlines, Boeing, Nucor,
Google, Walt Disney and FedEx.
Mr. Obama told the chief executives that he wanted to know: “What’s holding back
business investment and how we can increase confidence and spur hiring? And if
there are things that we’re doing here in Washington that are inhibiting you,
then we want to know about it.”
He got a blunt answer from Fred P. Lampropoulos, founder and chief of Merit
Medical Systems Inc., a medical device manufacturer in the Salt Lake City area.
Mr. Lampropoulos said some in his discussion group agreed that businesses were
uncertain about investment because “there’s such an aggressive legislative
agenda that businesspeople don’t really know what they ought to do.” That
uncertainty, he added, “is really what’s holding back the jobs.”
The president acknowledged, “This is a legitimate concern,” one that he and his
advisers had discussed before he took office.
But Mr. Obama said he had decided that “if we keep on putting off tough
decisions about health care, about energy, about education, we’ll never get to
the point where there’s a lot of appetite for that.”
The argument that Democrats’ ambitions are unnerving business is one that
Republicans have been making lately, and it was prominent Thursday when House
Republican leaders held a competing round table on jobs with conservative
“The American people are asking, ‘Where are the jobs?’ but all they are getting
from Washington Democrats is more spending, more debt and more policies that
hurt small businesses,” said Representative John A. Boehner of Ohio, the House
But W. James McNerney Jr., the head of the Boeing Company, said in an interview
after the president’s forum, “If you ask me what creates the uncertainty I’m
dealing with, it’s more the state of the economy.”
The administration’s domestic agenda is a problem only to the extent that it “is
crowding out their attention” to the economy, Mr. McNerney said, adding, “I
think the purpose of today was to convince us that there’s at least a half-pivot
in the other direction.”
Obama Turns to Job
Creation, but Warns of Limited Funds, NYT, 4.12.2009,
Comcast Gets NBC From G.E.
in Deal That Reshapes TV
December 4, 2009
The New York times
By TIM ARANGO
After nearly nine months of negotiations, Comcast, the nation’s
largest cable operator, finally reached an agreement on Thursday to acquire NBC
Universal from the General Electric Company.
The deal valued NBC Universal at about $30 billion.
The agreement will create a joint venture, with Comcast owning 51 percent and
G.E. owning 49 percent. Comcast will contribute to the joint venture its stable
of cable channels, which includes Versus, the Golf Channel and E Entertainment,
worth about $7.25 billion, and will pay G.E. about $6.5 billion in cash, for a
total of $13.75 billion. For now, the network will remain NBC Universal, but
ultimately Comcast could decide to change the name.
Almost immediately, the transaction reshapes the nation’s entertainment
industry, giving a cable provider a huge portfolio of new content, even as it
raises the sector’s anxieties about the future.
In a joint statement announcing the agreement, Brian L. Roberts, the chief
executive of Comcast, said the deal was “a perfect fit for Comcast and will
allow us to become a leader in the development and distribution of multiplatform
‘anytime, anywhere’ media that American consumers are demanding.” The deal’s
genesis lies in frequent flirtations over the last several years between Comcast
and General Electric, although serious talks began in March. For Comcast, the
purchase is the realization of its long-held ambition to be a major producer of
television shows and movies.
News of the negotiations broke in late September, and in the ensuing weeks G.E.
worked to resolve details with Comcast, while simultaneously negotiating to buy
out a 20 percent stake in NBC Universal held by Vivendi, the French
telecommunications conglomerate. It was this last part that proved difficult.
G.E. and Comcast’s part of the transaction has essentially been complete for
weeks, but the final step was held up by the negotiations between G.E. and
Vivendi. Vivendi will receive about $5.8 billion for its stake.
Jeff Zucker, the current head of NBC Universal, will stay on as chief executive
and would report to the chief operating officer of Comcast, Stephen B. Burke. In
a statement released by the companies Thursday morning, Mr. Zucker called the
deal the “start of a new era” for NBC.
The deal could take up to 18 months to pass regulatory muster. Although Comcast
is based in Philadelphia, NBC’s headquarters will remain in New York, the joint
Most of NBC’s value is in its lucrative cable channels — USA, Bravo, SyFy, CNBC
and MSNBC. The NBC network and Universal Studios will comprise only a small
portion of the joint venture’s cash flow.
In some respects, G.E.’s decision to sell reflects the deteriorating state of
the broadcast television industry, and a desire to exit a business that never
quite fit well with its industrial side.
NBC has been mired in fourth place among the major broadcast networks, and the
economics of the broadcast television business has deteriorated in recent years
amid declining overall ratings and a decline in advertising. By contrast, cable
channels have continued to thrive because they rely on a steady stream of
subscriber fees from cable companies, such as Comcast.
Mr. Roberts, the Comcast chief executive, failed in 2004 with a hostile takeover
bid for the Walt Disney Company. Since then, the company has taken a less
ambitious approach to content, buying a stake in MGM and building up smaller
cable channels and regional sports networks.
Shortly after news of the deal leaked in September, G.E. and Comcast signed a
standstill agreement, which effectively blocked other bidders from entering the
fray. Previously, G.E. had sought to entice Time Warner. More recently Rupert
Murdoch, who controls the News Corporation, considered making an offer for NBC
An earlier version of this article mischaracterized a financial
aspect of the deal. The agreement valued NBC Universal at $30 billion, that was
not the value of deal itself.
Comcast Gets NBC From
G.E. in Deal That Reshapes TV, NYT, 4.12.2009,
U.S. Retail Chains
Report a Lackluster November
December 4, 2009
The New York Times
By STEPHANIE ROSENBLOOM
The nation’s retailers on Thursday reported November sales that were an
improvement over last year, yet still well below the highs of two to three years
Over all, the retailing industry posted a 0.5 percent increase in comparable
sales for the month from a year ago, when sales declined 7.8 percent, according
to Thomson Reuters. Analysts had expected a 2.1 percent increase for the month.
The November results were helped by big sales on the day after Thanksgiving, and
the comparison to November 2008, a month when consumers closed their wallets as
the financial crisis unfolded. And consumers continued to watch their spending
last month amid a weak job market and an uncertain economy, forcing stores to
brace themselves for more difficult months ahead.
“Consumers, while not exactly jolly, are prepared to enjoy the season,” analysts
at Standard & Poor’s Equity Research wrote in a recent research report, “not by
overextending themselves with cheap credit or home equity loans, but by dipping
into savings or spending within their means.”
Most industry professionals think consumer spending will not improve in any
meaningful way until late next year.
Not surprisingly, discount chains on Thursday reported the strongest numbers.
Sales at stores open at least a year, a barometer of retail health known as
same-store sales, increased 6 percent at the warehouse club operator Costco.
Value-priced clothing stores also shined. Sales were up 8 percent at both Ross
Stores and TJX Companies, which owns chains like TJ Maxx, Marshall’s and Home
Goods. Sales at Kohl’s rose 3.3 percent.
“Business throughout the Thanksgiving week and weekend was strong and our fourth
quarter is off to a great start,” Carol Meyrowitz, president and chief executive
of TJX said in a statement, adding that “we are confident in our momentum.”
Sales at Target, the most upscale of the discount chains, decreased slightly, to
1.5 percent. The company said that electronics, toys, clothing and beauty
products were among its best-selling categories.
Wal-Mart, the behemoth discounter and the nation’s largest retail chain, no
longer reports monthly same-store sales.
Most department stores turned in lackluster results. Same-store sales declined
at Dillard’s (down 11 percent), Stein-Mart (down 7.2 percent) and Bon-Ton (down
Sales at Macy’s declined 6.1 percent. The chain said in a news release that its
November sales were hurt by a shift in its promotional calendar and unseasonably
warm weather, which kept consumers from snapping up coats and sweaters. Sales at
J. C. Penney declined 5.9 percent.
Upscale department stores were hurt the most. Same-store sales at Saks tumbled
26.1 percent. — a big drop, though it was expected given that the chain was
selling its merchandise at deep discounts this time last year, producing a high
volume of sales. The results were hurt by a shift in the date of a designer
clearance event. Despite the November figure, Saks expects same-store sales to
decline by a single digit for the fourth quarter.
Sales in the specialty retail segment of Neiman Marcus, which includes Neiman
Marcus and Bergdorf Goodman stores, declined 12.7 percent. Nordstrom, which has
a broader range of merchandise and therefore a wider variety of prices than Saks
and Neiman, outperformed its rivals, turning in a 2.2 percent sales increase.
Retailers that sell clothes and accessories for teenagers and children continued
to struggle in November, with several stores reporting double-digit declines.
Same-store sales fell at Abercrombie & Fitch (down 17 percent), Children’s Place
(down 13 percent), Hot Topic (down 11.7 percent), American Apparel (down 11
percent), Zumiez (down 8.5 percent), Wet Seal and Gap (both down 5 percent), and
American Eagle Outfitters (down 2 percent).
The exceptions were Aéropostale (up 7 percent) and Limited Brands (up 3
Analysts with Standard & Poor’s Equity Research are expecting a weak holiday
season, with sales at best about the same as last year and, at worst, down 2
percent. The National Retail Federation, an industry group, predicted a 1
percent decline for the season, while the International Council of Shopping
Centers, another trade group, is more optimistic, expecting a 1 to 2 percent
sales increase. Retail veterans prefer to view November and December sales
together to get an accurate picture of the holiday shopping season.
Even if sales decline slightly this Christmas shopping season, retailers are
nonetheless likely to report better earnings than last year thanks to cost cuts
and much lower inventories.
U.S. Retail Chains
Report a Lackluster November, NYT, 4.12.2009,
Bernanke Defends Fed
in Confirmation Hearing
December 4, 2009
The New York Times
By EDMUND L. ANDREWS
WASHINGTON — Under fire from Democrats and Republicans alike, Ben
S. Bernanke defended his record Thursday as chairman of the Federal Reserve as
well as that of the central bank itself as he began what is likely to be a
contentious hearing on his nomination for another term.
Facing the Senate Banking Committee, Mr. Bernanke said in prepared remarks that
the combined efforts of the Federal Reserve, the Treasury and other government
agencies had prevented the financial crisis from being “markedly worse” than it
“Taken together, the Federal Reserve’s actions have contributed substantially to
the significant improvement in financial conditions and to what now appear to be
the beginnings of a turnaround in both the U.S. and foreign economies,” Mr.
Bernanke said in his written remarks.
That was not enough to satisfy some prominent lawmakers. Senator Richard C.
Shelby of Alabama, the ranking Republican on the banking committee, scathingly
criticized the Fed chairman for his role in keeping interest rates too low for
too long and fueling what became a catastrophic bubble in housing prices. He
also criticized the Fed’s bailouts of giant financial institutions like
Citigroup and the American International Group.
“Not everything that went wrong can be blamed on the system, because the system
also depends upon the people who run it,” Mr. Shelby said in his opening
statement. “It is those individuals who need to account for their actions or
their failure to act.”
Mr. Shelby said he had lost much of his confidence and trust in the Fed, and
made it clear he had not yet decided whether he will support Mr. Bernanke for a
second four-year term.
“Certainly, we are still deep in the woods. The question is whether Chairman
Bernanke is the person best-suited to lead us out and keep us out.”
On Tuesday evening, Senator Bernard Sanders of Vermont declared that he would
try to block Mr. Bernanke’s approval on the Senate floor by placing a “hold” on
his nomination. Senate leaders would need 60 votes, rather than a simple
majority, to override the hold.
The move by Mr. Sanders was just the latest from critics of the Fed on the left
and the right to try to rein in the central bank’s powers and hold Mr. Bernanke
to account for what they consider the institution’s failings in the run-up to
the financial crisis and the economic downturn.
The Fed chairman on Thursday defended the central bank’s many emergency rescue
efforts, including its array of special lending programs aimed at businesses and
But he highlighted the Fed’s efforts to tighten financial regulation, an area
where experts say the Fed and other regulatory agencies failed to assert control
in the run-up to the crisis, as risk-taking in the mortgage industry and
ultimately across Wall Street reached epic levels.
“A financial crisis of the severity we have experienced must prompt financial
institutions and regulators alike to undertake unsparing self-assessments of
their past performance,” Mr. Bernanke acknowledged.
“At the Federal Reserve, we have been actively engaged in identifying and
implementing improvements in our regulation and supervision of financial firms,”
Senator Christopher J. Dodd, chairman of the banking committee, said in his
opening remarks that Mr. Bernanke had done a good job and deserved a second
term, but that changes need to be made for the long-term good. Mr. Dodd has
proposed stripping the Fed of all its bank regulatory powers because it had
“failed terribly” in its supervisory role.
Bernanke Defends Fed in Confirmation Hearing,